Gas Transmission Northwest expansion offers limited environmental risk: FERC

Federal Energy Regulatory Commission staff do not plan to stand in the way of a plan to expand the Gas Transmission Northwest pipeline capacity between Idaho and Oregon on environmental grounds, which could bring more Western Canadian natural gas to the Pacific Northwest by late 2023.

FERC published June 30 a favorable draft environmental assessment of a proposed expansion of TC Energy's GTN, finding that the project would result mostly in a "minor, temporary, and localized" impact on the environment. The project, proposed in 2021, would expand GTN's gas transmission system by about 150 MMcf/d between Idaho and Oregon, which could open the door to higher flows of Western Canadian gas passing through the Kingsgate hub in northern Idaho to the Pacific Northwest.

The $335 million expansion will include horsepower replacement, reliability work, and incremental compression capability at existing sites along the 1,377-mile GTN pipeline, seeking to increase access by the US to rising natural gas production in Western Canada.

West Canada production

Expanding US market access to robust Western Canada gas production adds additional appeal to the proposed expansion. Rising natural gas production in Alberta has helped widen regional basis spreads to Henry Hub this year compared with last year. S&P Global Commodity Insights data shows Alberta gas production averaged 12.9 Bcf/d in 2022, up 8% compared with a year prior.

AECO spot gas has averaged a $1.30 discount to Henry Hub thus far in 2022, compared with a 70-cent discount the Alberta pricing location averaged for the same period in 2021. Westcoast Station 2 has seen a similar impact on its discount to the US national benchmark, averaging a $1.46 discount so far this year, compared with a 76-cent discount in the first six months of 2021.

Brownfield expansions

Midstream natural gas developers have recently shown growing enthusiasm for expanding existing interstate pipeline infrastructure, partly because of legal and regulatory challenges that often meet attempts to launch greenfield pipeline projects.

TC Energy, which owns the TransCanada pipeline system, is steering a few expansion projects seeking to offtake growing supply from the Western Canadian Sedimentary Basin production region. The company plans later this year to finish the Alberta XPress pipeline expansion, which will add 165 MMcf/d in transportation capacity on its Great Lakes Gas Transmission and ANR Pipeline systems stretching from the Emerson receipt point in Manitoba to delivery locations in the US Midcontinent and the Southeast.

TC Energy's expanding focus on brownfield projects comes after last year's termination of its Keystone XL Pipeline Project, a proposed 1,200 miles of pipeline between Alberta and Nebraska as an addition to its Keystone Pipeline system. Construction on that project had ceased early last year following an executive order from US President Joe Biden revoking permits for the project on the first day of his administration in January 2021, leading the company to seek $15 billion in damages from the government under claims that the order violated the North American Free Trade Agreement.

The company's GTN expansion project in the Pacific Northwest is targeted for completion in 2023 but is currently pending final certification from FERC and various state approvals in Idaho, Washington, and Oregon. FERC will take public comments on its draft environmental impact report published July 1 until August 22, before officials make a final decision on certification.