Canada’s Pipeline Transportation System 2016

Foreword and Executive Summary

Foreword

The National Energy Board (NEB or the Board) is an independent federal regulator of pipelines, energy development, and trade. The Board’s purpose is to promote safety and security, environmental protection, and efficient infrastructure and markets in the Canadian public interest within the mandate set by Parliament.

The Board’s main responsibilities include regulating: the construction, operation, and abandonment of pipelines that cross international borders or provincial/territorial boundaries, as well as the associated pipeline tolls and tariffs; the construction and operation of international power lines and designated interprovincial power lines; and imports of natural gas and exports of crude oil, natural gas, oil, natural gas liquids, refined petroleum products, and electricity.

In support of its regulatory role, the Board actively monitors energy markets and produces neutral, independent, fact-based energy information for Canadians. These products increase the transparency of Canadian energy markets and support Canadian energy literacy. This report, Canada’s Pipeline Transportation System, provides information about major pipelines regulated by the Board.

This report does not indicate whether any application filed with the Board will be approved or denied. The Board takes decisions on specific applications based on the evidence before it at that time. If a party wishes to rely on this report in any regulatory proceeding before the Board, it may submit the material, just as it may submit any public document. Under these circumstances, the submitting party would adopt the material and could be required to answer questions about it.

Contributors to this report include: Kiran Hundal (pipeline tolls), Darcy Johnson (financial integrity, crude oil), Amanda McCoy (document coordination), Andrea Oslanski (natural gas), Christian Rankin (crude oil), Jesus Rios (crude oil, NGLs), Margaret Skwara (natural gas), Michael Van Appelen (financial integrity), and Cassandra Wilde (natural gas, pipeline tolls).

Executive Summary

Canadians depend on pipelines to deliver natural gas, natural gas liquids, crude oil, and petroleum products across Canada. These pipelines deliver energy safely, reliably, and efficiently to Canadian end-users, connect North American markets and transport energy to ports for sales overseas.

This report, Canada’s Pipeline Transportation System, provides information about the economic functioning of major pipelines regulated by the Board. In 2015, $99.7 billion worth of energy products were shipped in these pipelines at an estimated transportation cost of $7.3 billion.

The economic environment surrounding the energy sector has changed dramatically since 2014. Significantly lower oil and natural gas prices have led to deep cuts in industry spending and many delayed or cancelled projects. Despite price declines, Canadian oil and natural gas production increased in 2015, as did supply in the United States (U.S.). These and other market factors continue to present opportunities and challenges for Canadian energy pipeline systems.

A well-functioning pipeline transportation system responds effectively to changing market conditions. Some adjustments happen quickly, like changes to pipeline service offerings. Others take time, like seeking regulatory approval for, and potentially constructing, new pipeline facilities.

Key observations for NEB-Regulated Pipelines in 2015:

  1. Oil export capacity remained tight. This is being driven by increases in crude oil supply in western Canada, primarily from the oil sands, while pipeline capacity additions have not kept pace. Several major pipeline projects have been proposed to expand market options for western Canadian oil supply growth, particularly to access tidewater and international markets. None of these projects are currently under construction. Crude oil transportation by rail has been required to supplement pipelines in moving growing oil supply to market.
  2. There was adequate capacity on most natural gas pipelines.Production from the Western Canadian Sedimentary Basin (WCSB) remained steady. As a result the Alliance pipeline and portions of the Westcoast and NOVA Gas Transmission Ltd. (NGTL) systems generally operated at full capacity. Capacity was constrained in growing production areas of the WCSB, such as the Montney basin. On the other hand, competition from supply basins in the U.S. northeast resulted in reduced flows on pipelines transporting gas from Alberta to markets in the east. This dynamic has been accompanied by the reversal of some TransCanada Mainline segments to the Canada-U.S. border, allowing additional U.S. northeast gas imports into Ontario and Quebec.
  3. Pipeline companies and shippers were generally able to resolve the majority of their tolls and tariff issues through the negotiated settlement process. The Board adjudicated some toll applications and shipper complaints that the independent parties were not able to resolve otherwise.
  4. NEB-regulated pipeline companies were financially sound. Credit ratings continued to be investment grade, and key financial ratios were stable.
Photos: left: A pump jack silhouetted against the setting sun; centre: The grey valves and wheels of a pump station on clear day; right: Folded hands hold a pen on a board room table in a large meeting room.
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