TransCanada to Conditionally Cut Gas Pipeline Toll by 42 Percent

Rising competition has caused TransCanada to offer a cut in toll price on its natural gas mainline from C$1.41 per gigajoule to C$0.82, a 42 percent decrease, if enough producers sign up for long-term contracts, the company said Friday.

According to Stephen Clark, TransCanada’s senior vice president for Canadian natural gas pipelines, cheaper tolls are necessary for companies in Western Canada shale plays in order to compete with the U.S. gas producers in eastern markets.

The toll cut would affect the shipping of oil that moves from Alberta and British Columbia to Ontario so long as customers sign a 10-year contract that requires a shipment of at least two petajoules of natural gas in total on the pipeline.

The shale boom in the U.S. Marcellus play, in particular, is bringing natural gas to the southern Ontario market, displacing traditional western Canadian supply, according to Clark.

TransCanada hopes to launch an open season to gauge interest in the new toll cuts, but the company is waiting to see sufficient interest from shippers in long-term contracts before a proposed launch in September.

Clark said some producers are hesitant about the new system because of the 10-year commitment while others are not familiar with selling in the Ontario market.