A dispute between Alberta gas producers and California buyers and regulators is escalating as a July 31 expiration date for current purchase contracts approaches.
Alberta producers sell about 1 bcfd of gas to California. Alberta & Southern Gas Ltd., Calgary, a unit of Pacific Gas & Electric Co., San Francisco, is the buyer.
The California Public Utilities Commission (CPUC) and PG&E are seeking contract changes, including lower prices, for Alberta supplies. The Alberta government has introduced legislation to maintain the current status in contracts.
ORMAN BILL
Alberta Energy Minister Rick Orman introduced Bill 41, an amendment to the Alberta Natural Gas Marketing Act, which would extend an existing price agreement between producers and buyers. He said the bill will not be proclaimed into law while negotiations continue with California interests.
The bill is designed to preserve existing procedures that give Alberta producers the right to decide whether to accept terms, conditions, and price for gas they have committed to shippers. Under current contracts half of about 190 producers in a supply pool must approve contract terms in a vote.
Orman said without the voting mechanism small producers could be left out by California buyers using their buying power. Current prices are set at a level competitive with California gas prices less transportation costs.
Alberta & Southern has sent a proposal to supply pool producers seeking approval in principle for new contract terms and reduced prices after the current contract expires. PG&E says contract changes are necessary because of regulatory changes in California.
Dan Gibson, PG&E vice-president of gas supply, said the supply arrangement must be changed because the original format depended on the company serving an integrated market. He said a lot of customers will now buy gas on their own.
Gibson said changes will allow Alberta & Southern and producers to continue to serve the PG&E market and sell gas to other markets.
Don McMorland, Alberta & Southern president, said PG&E might eventually sell his company as part of a restructuring. An independent Alberta & Southern could then market excess gas that PG&E would no longer take.
EXPORT LICENSES
Meanwhile, Canada's National Energy Board likely will decide in July whether to reexamine two export licenses covering gas sales to California. A hearing to reexamine the licenses has been requested by the Canadian Petroleum Association.
The CPA said several initiatives by CPUC amount to a concerted attack on market based principle and Canadian energy policy. It said the CPUC moves would break long term supply contracts between Alberta producers and PG&E and its Canadian unit.
Canadian Energy Minister Jake Epp said Canada could use the Free Trade Agreement to challenge efforts by California to substantially cut prices paid for Alberta gas. He said the authority of federal regulatory agencies in Canada and the U.S. would be undermined if California succeeds with its plans.
The California plan would allow consumers to buy more gas directly on the spot market instead of paying higher prices under long term contracts.
California currently pays about $1.85 (U.S.)/Mcf for Alberta gas.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.
