Western Canada’s natural gas just got a whole lot more competitive in Ontario

The Dawn natural gas storage hub. Image: Enbridge

Just in time for the winter heating season, TransCanada says that additional natural gas volumes secured through a new lower-priced shipping agreement are now flowing on its Mainline from Empress, Alta. to Dawn, Ont.

It is the successful conclusion of a proposed reduced toll agreement to get Western Canadian volumes to their large legacy market in Eastern Canada; high transportation costs had left the system operating under capacity and the area increasingly saturated by growing US production from the Marcellus and Utica plays.

Previously it cost about $2.00/GJ to transport natural gas on TransCanada’s system from Alberta to Ontario. In October 2016, TransCanada proposed to drop tolls to a range of $0.75/GJ to $0.82/GJ, but that didn’t get enough support from producers to move forward. The company then proposed a simplified single toll rate of $0.77/GJ in February 2017, which was accepted by shippers.

The National Energy Board approved the toll agreement in September following a hearing where the Canadian Association of Petroleum Producers argued that without the deal, the future of Western Canada’s natural gas industry would be in jeopardy.

Shippers under the deal have agreed to long-term contracts that will transport 1.5 billion cubic feet per day, which is enough natural gas to heat more than six million North American homes daily, TransCanada noted in a statement.

“With the growth of natural gas production in the WCSB, TransCanada is [also] working closely with our partners to continue to expand pipeline capacity to get their natural gas to market. Helping our customers secure natural gas markets will support capital investment and further spending, including hiring in the oil and gas industry…by 2020 we expect to facilitate the additional delivery of approximately one billion cubic feet of natural gas per day to key markets.”