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ALBERTA'S DISPUTE WITH CALIFORNIA MOVES UP A NOTCH

Feb. 24, 1992

A dispute between Alberta producers and California regulators over Canadian natural gas exports is heating up once again with new moves by both sides. The crux of the dispute is an order by the California Public Utilities Commission (CPUC) that the Alberta-California pipeline system be opened to all shippers in November. An Alberta producer supply pool says that would violate contracts that new reserve 75% of pipeline capacity to them. CPUC wants to open the system to more gas sold on the spot

A dispute between Alberta producers and California regulators over Canadian natural gas exports is heating up once again with new moves by both sides.

The crux of the dispute is an order by the California Public Utilities Commission (CPUC) that the Alberta-California pipeline system be opened to all shippers in November.

An Alberta producer supply pool says that would violate contracts that new reserve 75% of pipeline capacity to them.

CPUC wants to open the system to more gas sold on the spot market at lower prices.

CPUC has now formally rejected appeals for it to reconsider its order to open the pipeline in November. The California agency also has filed a brief with Canada's National Energy Board rejecting claims by producers and the Canadian Petroleum Association that its order will abrogate contracts.

NEB has scheduled a hearing on California export contracts and moved earlier this month to place controls on new spot sales to that market (OGJ, Feb. 17, p. 28).

CPUC'S POSITION

In its NEB submission, CPUC said the CPA argument on the sanctity of contracts is without foundation in law or business practice and contrary to the spirit of a negotiated settlement.

"Long standing principles in contract law and business practice recognize that contractual agreements must often be amended, modified, reformed, and renegotiated in response to changing market conditions," CPUC said.

The California agency said Canadians' insistence that California cannot demand changes in contracts before they expire in 2005 is "ironic" in light of the history of long term contracts.

It charged that Alberta and Ottawa broke previous contracts during 197586 by regularly and unilaterally raising oil prices to match price increases by the Organization of Petroleum Exporting Countries.

On the other side of the dispute, CPA has asked NEB to serve subpoenas on senior executives of Pacific Gas & Electric Co. of San Francisco, the major California importer, to require them to testify at hearings beginning Feb. 24.