TransCanada Corp. is no longer just California dreamin.’

In a $2.2-billion deal for two U.S. pipelines, Canada’s largest pipeline company now has a tighter toehold on the giant natural gas market than a surfer on a board in a big wave.

The shrewd acquisition opens the Pacific Northwest, Nevada and California gas-fired power markets to Canadian gas.

The purchase includes Gas Transmission Northwest Corp.’s (GTN) 2,174- kilometre pipeline from Kingsgate in southern B.C. to Malin, Ore., on the northern California border. TransCanada’s Canadian pipeline system already ties into this line, which can ship 2.9 billion cubic feet of gas a day.

GTN is a unit of Maryland-based National Energy & Gas Transmission Inc., which is in court-ordered bankruptcy proceedings in the U.S.

TransCanada would also acquire the 128-km North Baja line, which currently carries 500 million cubic feet a day from Ehrenberg, Ariz., to the California-Mexico border.

The deal is still subject to U.S. and anti-trust and bankruptcy court approvals and other conditions.

A separate deal announced last week further underscores the insatiable American demand for Canadian energy.

California-based Pacific Energy Partners LP is buying BP Canada’s Rangeland oil pipeline system in Alberta for $156 million, and also plans to pick up Imperial Oil Ltd.’s Mid-Alberta pipeline.

Pacific Energy is positioning itself to tap the expected increase in production from Alberta’s oilsands.

TransCanada is looking toward the future with its new acquisition, too. Last year, the company signed a deal to give it a stake in the planned $5-billion Mackenzie Valley gas pipeline project, which would ship Arctic gas south to U.S. markets.

Both pipeline deals show that in an energy market that’s fast becoming continent-wide, it’s not that far anymore from the frozen tundra to the California surf.

MONEY IN THE PIPES

Vancouver-based pipeline company Terasen Inc. is also spending big money to link the crude from Alberta’s oilsands with U.S. markets.

John Reid, Terasen’s president and CEO, says increased production from the oilsands – forecast to grow three-fold over the next 20 years to 2.5 million barrels a day – plays a huge part in his company’s future.

“The additional supply coming on line from the oilsands and the increasing demand for petroleum products in the U.S. is creating some exciting opportunities . . .,” Reid says.

To ship oilsands crude, Terasen is expanding both its Express pipeline (which runs from Alberta to Wyoming) and Trans Mountain pipeline (from Alberta to the B.C. coast and Washington state refineries).

The company has also proposed constructing its $1-billion Bison pipeline to deliver 320,000 barrels a day from the oilsands to Edmonton refineries.

Terasen also wants to deliver more natural gas to power-hungry Vancouver Island. The company is integrating its Vancouver Island and mainland operations this year, and working with Island communities to support gas-fired power generation.

WATER INTO OIL

The water tap is already tight for the oilpatch. But it could get tighter, depending on the outcome of a watershed hearing – literally – in Red Deer.

The Alberta Environmental Appeal Board, for the first time in its history, heard arguments last week about whether an oil company can inject fresh water into aging oil wells to flush out more oil.

Alberta Environment has already approved Calgary-based Capstone Energy Ltd.’s licence to pump up to 328.5 million litres a year from the Red Deer River, for injection into oil wells near Innisfail.

That’s about the same amount of water that a town of about 2,500 people would use in a year.

The mayors of nine central Alberta communities – Red Deer, Ponoka, Lacombe, Innisfail, Olds, Didsbury, Bowden, Carstairs and Crossfield – all lined up to tell the EAB that pumping fresh water down oil wells, where it’s essentially lost forever, is a colossal waste of an increasingly scarce resource.

But as the water disappears down the hole, a lot of money comes flowing back out.

In 2001, Alberta collected $700 million in royalties from oil recovered using water, both in the oilsands and in oilfield injection, says David Pryce, vice-president of Western Canadian operations for the Canadian Association of Petroleum Producers.

That’s a pretty good return on the oil and gas sector’s use, in enhanced oil-recovery operations, of less than half of one per cent – or about 37 billion litres – of the total water allocated in the province.

Alberta Environment Minister Lorne Taylor points out that Capstone Energy requires less than one per cent of the minimum monthly flow of the Red Deer River.

The government, as part of its long-range water-management strategy, has formed a multi-stakeholder advisory committee to study the oil and gas industry’s use of water and make recommendations by the end of March.

Taylor, who has the final say on whether Capstone should get its licence, should have that report in hand when he decides whether to uphold or overturn the EAB’s decision.

This column predicts that Capstone will get its water licence, especially since the provincial Water Act doesn’t allow the government to reject a licence based on a particular use if there’s sufficient water available.

But watch for more cases like this as opposition grows among rural communities and landowner groups to the oilpatch’s fresh-water use – especially if this summer turns out to be long, hot and dry.

CHOPPER POWER

B.C. residents are going to be seeing more helicopters and big trucks with ‘softer’ tires in the near future.

The B.C. Oil and Gas Commission (OGC) will now consider applications to use helicopter-supported or heliportable drilling technology in parts of northern B.C.’s 63,000-square-kilometre Muskwa-Kechika wilderness area that are open for oil and gas exploration.

Heliportable drilling won’t be allowed where safe ground access exists, forestry operations are imminent, risk to workers is increased, or the environment will be harmed.

But helicopters ferrying drilling rig equipment and workers will be considered in areas where potential oil and gas reserves are untested and environmental values are high, the OGC says.

In another step to accommodate B.C.’s burgeoning oil and gas business and the forestry sector, the provincial government has approved the use of automated tire pressure-control systems to allow hauling on back roads during the spring thaw season.

The onboard computerized systems, which allow truckers to automatically reduce and increase tire pressures, have been shown to significantly reduce road damage while still maintaining safe driving standards.

ENCANA PUMPS PROFIT

EnCana Corp. had a stellar profit in 2003 – and the jingle of loonies can be heard all the way to the Alberta legislature.

EnCana, which reports its financial results in U.S. dollars, had 2003 earnings of $2.36 billion US in 2003, up 183 per cent from the previous year.

The company’s annual sales of oil, natural gas and natural gas liquids jumped by more than nine per cent to 650,200 barrels of oil equivalent a day. Fuelled by the strong sales growth and high commodity prices, EnCana’s 2003 cash flow also rose 67 per cent to $4.46 billion compared with 2002.

Provincial royalties earned on those same high commodity prices have boosted the province’s third-quarter report forecast oil and gas revenues to $7.4 billion. That’s $2.7 billion higher than projected in last spring’s budget and contributes the lion’s share to Alberta’s projected surplus of $3.3 billion.

But with a provincial election anticipated in 2005, no one expects those loonies will stay cooped up in the legislature for long.