TransCanada (TSX:TRP) is proposing a new pipeline tolling system it says will allow western Canadian natural gas to be shipped to Ontario at lower rates to better compete with growing American supplies.
The Calgary-based energy transport company is inviting shippers to sign long-term binding commitments by March 9 to move gas on its underutilized Canadian Mainline system from a shipping centre in Alberta to a hub in southern Ontario.
Financial analysts say they expect the deal will garner enough support from shippers to convince TransCanada to proceed with seeking regulatory approval from the National Energy Board, despite the shippers’ rejection of a similar attempt last year.
Analyst Robert Kwan of RBC Dominion Securities points out in a report that the proposed toll of 77 cents per gigajoule of natural gas, starting as early as November, would represent a big saving over current Mainline tolls of about $1.42 per gigajoule.
He adds it would be much simpler than last year’s proposal of a range of tolls between 75 and 82 cents per gigajoule depending on contracted volumes.
TransCanada senior vice-president Stephen Clark says the new toll agreements would allow gas from Western Canada to better compete with emerging supplies of natural gas from the Marcellus and Utica shale gas producing areas in the U.S. Northeast.
He says the company has had “extensive discussions” with customers about the offer and is optimistic it will be accepted, adding it won’t affect long-term contracts already in place on the pipeline system.
Analyst Justin Bouchard of Desjardins Capital Markets says TransCanada hopes to win approval for the new tolls before the fourth quarter of this year.
That’s when the competing Rover pipeline proposed by Energy Transfer Partners is expected to give American natural gas another access point to the Ontario market.