TransCanada’s Big Gamble on Shale Gas

C: shannonpatrick17

TransCanada, the company that tried in vain to build the hugely controversial Keystone XL pipeline (KXL), which would have transported tar sands oil from Canada to the US, is now betting big on fracking gas instead.

The company has agreed a deal to buy the Columbia Pipeline Group for $13 billion in cash; which is by far its biggest ever deal.

TransCanada currently receives just under half of its revenue from shipping gas, and that will now substantially increase.

Whereas TransCanada wanted to move dirty tar sands with KXL, the company has also long wanted to increase its share of the market for shipping shale gas. This deal means this will now happen, and TransCanada will have a “strategic position in the Marcellus and Utica shales of Pennsylvania, Ohio and West Virginia”, according to the Financial Times.

What will have attracted TransCanada to the Marcellus and Utica shales of the Appalachian basin is that they are among the largest reserves of gas in the US.

The potential for production growth in this basin is likely the biggest in the US, if not the world, with some analysts predicting at least a doubling of production with the next decade. If this occurs, the Appalachian Basin alone would be producing around 40 percent of US gas.

The acquisition therefore opens the door to huge expansion for TransCanada in the US, where previously its options for growth looked limited after the KXL rejection.

The deal will put TransCanada in control of a network of pipelines that ships Appalachian Basin gas in all directions, particularly to the US North-East and to the Gulf Coast.

It will acquire some 15,000 miles of gas pipelines, as well as 286 billion cubic feet of underground storage and processing facilities. It means that the combined group will have 57,000 miles of pipelines, making it the largest gas transmission company in North America.

Russ Girling, TransCanada’s chief executive, said the “The acquisition represents a rare opportunity to invest in an extensive, competitively-positioned, growing network of regulated natural gas pipeline and storage assets in the Marcellus and Utica shale gas regions.”

Indeed one Canadian columnist argues that “TransCanada’s move makes sense on many levels, starting with the fact it plays to the company’s strengths … At its roots, TransCanada is a natural gas pipeline company.”

They add that:

“This merger sends a broad message to many, including Canadians who oppose Energy East, the market, shareholders and yes, even the U.S. government: TransCanada is not about to be discouraged by delays or opposition. Its objective is to grow and add value for shareholders, as this deal will do.”

So the company lost on KXL, and its Energy East tar sands pipeline also faces massive opposition, but is betting big on fracked gas.

The Colombia Pipeline Group has several expansion projects on its books that seek to increase gas transport out of the Marcellus. Many similar projects are facing opposition from landowners as well as the larger environmental community, which is growing increasingly concerned about the climate impact of this massive expansion of natural gas production as well as the local impacts of fracking.

With one major victory against TransCanada’s pipeline expansion plans under its belt, and another in the making, will the environmental movement now face off against the company over its shale gas expansions?

It seems likely.