CANADIAN GAS PURCHASES SPAWN LAWSUIT

The Alberta-California natural gas war has escalated a notch with a $70 million lawsuit filed in an Alberta court against the province's biggest California buyer. Shell Canada Ltd. filed the suit in Alberta Court of Queen's Bench against Alberta & Southern Gas Ltd., Calgary. It also named A&S parent, Pacific Gas & Electric Co., San Francisco, and its pipeline division, Pacific Gas Transmission Co.

Dec. 23, 1991

2 min read

The Alberta-California natural gas war has escalated a notch with a $70 million lawsuit filed in an Alberta court against the province's biggest California buyer.

Shell Canada Ltd. filed the suit in Alberta Court of Queen's Bench against Alberta & Southern Gas Ltd., Calgary. It also named A&S parent, Pacific Gas & Electric Co., San Francisco, and its pipeline division, Pacific Gas Transmission Co.

Shell alleges that gas purchases by A&S from its Waterton gas complex in Southeast Alberta were about 24 MMcfd less than contract volume during July 1, 1990-June 30, 1991. It figures that represents $23.4 million in lost revenue and it expects another $16.5 million in lost revenue this year.

Shell also asked the court for a restraining order to prevent A&S from buying gas from other sources until it has met contract obligations to Shell.

Amoco Canada Ltd. also is suing A&S for $62.8 million in a suit filed earlier this year. It alleges gas contracted for was not taken.

Several other major producers said they are examining legal action as an option for alleged failure to honor contracts.

A&S, which has not yet filed a statement of defense in the suits, had no comment.

The lawsuits are an indirect spinoff of a larger, unresolved dispute between the Alberta government, producers that supply A&S, and the California Public Utilities Commission.

CPUC recently ruled that the Alberta-California pipeline operated by Pacific Gas Transmission must be opened to all shippers next October. The Alberta government and 192 producers in the A&S supply pool say that would abrogate contracts scheduled to run for 3 more years. About 25% of the pipeline capacity is now allocated for spot sales.

Alberta said it will enact legislation to ensure that all gas under contract is taken before removal permits are approved for additional spot gas sales. The Canadian government is considering taking the dispute for resolution under the Canada-U.S. Free Trade Agreement.