Lower natural gas rates hinge on pipeline plan

  • Feb. 21, 2011 12:00 p.m.

PACIFIC NORTHERN Gas (PNG) customers won’t benefit directly from a $50 million deal selling its stake in a project that would expand its northwest pipeline capacity.

The money, paid by major energy companies Apache and EOG Resources for PNG’s 50 per cent ownership of the planned Pacific Trails Pipeline, will stay with the company and its shareholders, says PNG official Greg Weeres.

“I want to make it quite clear that all of the cost and the risk was undertaken by our shareholders,” said Weeres, adding that no money from customer utility payments was used to develop the pipeline project.

PNG has spent $7.5 million over the past five years on the Pacific Trails project. It will be deducted from the Apache/EOG proceeds, leaving the rest to be paid out in shareholder dividends or, perhaps, invested in other projects. And because the Pacific Trails project was handled outside of PNG’s function as a delivery utility, the sales deal is not subject to scrutiny by the BC Utilities Commission.

PNG’s board is now deciding what to do with the sale money. A first payment of $30 million is coming right away and the second payment of $20 million will only come when Apache and EOG announce they are proceeding with construction of a liquefied natural gas plant at Kitimat.

Apache and EOG had owned half of Pacific Trails already and now with full control of the pipeline and of the gas plant plan there’s a growing expectation they will announce a construction start this year leading to operations in 2015.

But while PNG’s customers won’t benefit from the sales deal, they will from an agreement the company has to operate and maintain the line and to charge for delivering gas when it does go into operation, said Weeres.

“Let me tell you that has always been our view and that was a factor in our negotiations that there would be benefits flowing to our customers from this,” he said.

Weeres said the company is well aware of the price shocks its northwest customers have endured to cover losing large gas users such as Methanex, Eurocan Pulp and Paper and Skeena Cellulose.

Weeres said it is still too early to outline the dollar value the Pacific Trails operations agreement will mean to customers, but said it would be “very, very, significant.”