October 31, 2016 / 4:11 PM / a year ago

UPDATE 2-Canada approves C$1.3 billion western gas pipeline expansion

(Adds TransCanada comment)

By Nia Williams

CALGARY, Alberta, Oct 31 (Reuters) - The Canadian government on Monday approved the C$1.3 billion ($968.78 million) expansion of a natural gas gathering pipeline in western Canada belonging to a wholly owned subsidiary of TransCanada Corp, with 36 conditions attached.

The NOVA Gas Transmission Ltd (NGTL) expansion project will create up to 3,000 jobs during construction and involve building and operating new gas pipelines facilities, the Natural Resources Canada ministry said in a statement.

TransCanada said the entire project is expected to be finished by the second quarter of 2018.

Key conditions include offering jobs to individuals in the indigenous communities and developing a caribou habitat restoration plan.

Dirk Lever, an analyst with AltaCorp Capital in Calgary, said the approval was “absolutely expected” as natural gas gathering pipelines attract far less scrutiny and controversy than major crude oil export pipelines.

The NGTL System is one of the largest in North America and gathers natural gas from the fast-growing Montney and Duvernay shale plays in northern Alberta and northeastern British Columbia.

The system gathers 75 per cent of the natural gas produced in western Canada, transporting approximately 11.3 billion cubic feet a day, according to TransCanada.

The Canadian government is in the middle of reforming its regulatory process for major energy projects, and in January announced a set of interim principles to guide decisions on projects already under review, including the NGTL expansion.

“The twin imperatives of economic prosperity and environmental protection guided us in our decision-making,” Jim Carr, Canada’s minister of natural resources, said, adding he was confident the project supported the principles of sustainable development.

TransCanada’s Keystone XL oil pipeline to the United States was rejected by the U.S. administration last year, while its Energy East crude pipeline to Canada’s Atlantic coast is facing fierce opposition from environmentalists.

TransCanada Chief Executive Officer Russ Girling said the NGTL expansion is an important part of its C$25-billion near-term capital program.

Western Canadian natural gas tends to trade at a discount to U.S. benchmark prices because of the distance to East Coast markets and congestion on the current NGTL system.

“That’s where all the growth has been in the Montney and Duvernay, and that’s why it needed to be expanded,” AltaCorp’s Lever said, adding that once completed the NGTL project should help support gas prices.

“Eventually it will allow more gas that is produced in the field to find a home.” ($1 = 1.3419 Canadian dollars) (Editing by Jeffrey Benkoe and Alistair Bell)

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