Transcanada & Union Sign Gas Sales Contract. 300 Billion Cu Ft, 20 Yrs, $100,000,000 Deal.

TRANSCANADA PIPELINES LTD has signed its first Canadian gas sales contract, an agreement made with UNION GAS COMPANY OF CANADA LTD. The announcement of that signing was made jointly yesterday by N.E. TANNER, president of TransCanada, and DAVID P. ROGERS, president of Union.

Trans-Canada proposes to construct a 2,250mile Alberta Montreal pipeline. Plan is to start that line this spring, with Alberta gas, as scheduled to reach Toronto in November 1956.

Although the company has signed its first sales contract, it is understood that no gas purchase contracts of any consequence have as yet been completed. That is, the only purchase contracts that may be completed is with TransCanada's affiliate CANADIAN DELHI OIL LTD and partners with Delhi in some of its gas holdings. However, signatures on contracts for the major as supply from southern Alberta that are necessary to make the TransCanada line a reality, are still lacking. The gas producers are not as yet satisfied with the offerings made by the pipe line company.

Although no price was released for the contract with Union, the announcement stated that the contract calls for 20 year delivery of Alberta gas to Union's system in Southwestern Ontario, and that over that period Union will purchase in excess of 300 billion cubic feet of natural gas from TransCanada at an estimated total amount of more than $100,000,000. Delivery of that gas is to start soon after the TransCanada line reaches Toronto.

In the meantime, Union is making every effort to expand its present system, particularly in the HAMILTON area where there is a large industrial, commercial, and domestic market for natural gas. Union now imports some American gas from the Panhandle line to DETROIT to augment local supplies. The company is presently seeking approval of the Federal Power Commission of the United States to increase the import for market development until it can obtain Alberta gas from TransCanada. The announcement said that it is hoped that the United States permit will be granted soon enough to allow expansion construction to start this spring so that natural gas can reach Hamilton by the fall of 1955.

With a network of more than 1,700 miles of pipelines, Union Gas serves over 70 municipalities in the counties of ESSEX, KENT, LAMBTON, and MIDDLESEX in southwestern Ontario. Through its 85,000 customers the company brings gas service to 350,000 people. The additional supply of gas brought from the United States would permit extension of natural gas service to the Hamilton area including DUNDAS, BURLINGTON and OAKVILLE, to the cities of STRATFORD, KITCHENER, WATERLOO, GUELPH, and to other municipalities. The new large diameter pipeline costing in excess of 14 million dollars will be constructed from the DAWN underground storage field near Sarnia, to a point just north of Hamilton. When Alberta gas arrives, a connecting line will be built from Hamilton to Sheridan, an area terminus of the TransCanada line.

Because of the underground storage available in Dawn township, Union will take delivery of larger volumes of gas in summer than in winter, thus helping the level of TransCanada's load factor. The excess volume will be held in storage to meet the higher winter demands throughout the whole of Union distribution and transmission system.

Mr. Rogers said: ''We are embarking upon an extensive expansion program which will involve heavy capital expenditure. Within the 5 years after receipt of sufficient gas to service the area we will be delivering approximately 3 times the volume, of gas being handled in our present system. This will result in benefits of natural gas being made available to many thousands of citizens in southwestern Ontario for the first time."

Mr. Tanner said that the policy decisions arrived at in the negotiations of the Union contract will be helpful in TransCanada's negotiations with other distributors.

"The contract followed lengthy negotiations", he stated. "A lot of money was involved and our capital requirements necessitate longterm contracts. We are very pleased about this contract, not only because it is the first we have concluded in Canada, but because it is one which will help greatly to maintain a high year round load factor in our system. It is very important that offseason markets have our gas. By taking much of the gas for which it has contracted in the summer months and storing it underground, Union will be able to maintain a substantial reserve for peak winter requirements and TransCanada will have additional winter capacity for its line for other customers."