Pacific Northern Gas has agreed to pay $500,000 to avoid what might have become a costly court battle tied to the sale of its ownership stake in a northwestern pipeline expansion.
The money will help reduce what the company charges to deliver gas to its northwestern customers.
The payment follows a dispute between the company and its regulator, the BC Utilities Commission, over the role company officials played in selling the company’s 50 per cent stake in the planned Pacific Trails Pipeline project.
PNG earned $50 million from the sale to multi-national energy giants Apache and EOG Resources earlier this year, giving the two companies full control of the pipeline needed to provide the gas for their planned liquefied natural gas plant at Kitimat.
PNG has received $30 million already and will receive the remainder once Apache and EOG officially announce they are going ahead with the pipeline and plant.
From the start, PNG said the proceeds, once taxes and other expenses are accounted for, would go to its shareholders, arguing the Pacific Trails Pipeline project was separate from its regular distribution business in the region.
Shareholders received $3 a share in March and are to receive another $3 a share this month, part of the $22 million in net proceeds from the $30 million payment.
But in negotiations this spring to decide what PNG would charge its northwestern customers to deliver gas this year, the BC Utilities Commission questioned the decision not to use some of the sale proceeds to lower delivery charges.
The commission believed PNG should reimburse its customers the value of employee time and other expenses spent on the Pacific Trails Pipeline project.
“No resolution was reached and all parties indicated they were prepared to have this issue addressed through litigation,” indicated an appendix attached to PNG’s rate application filed with the commission this spring.
But PNG then agreed to the $500,000 sum and have it applied as a revenue item toward its distribution costs.
“The parties acknowledge this was a reasonable resolution to avoid incurring the significant costs that would ensue from protracted litigation over the issue,” the filing continued.
PNG official Craig Donohue was reluctant to equate the arrangement with an out of court settlement, but did note the resolution is called the “PTP [Pacific Trails Pipeline] Settlement Allowance.”
“We did recognize that rather than litigate our disagreement, where the money, as you well know, goes to other people, we would do this,” Donohue.
He said PNG officials working on the Pacific Trails project did so “off the side of their desks” without incurring expenses that the company’s customers pay for in their rates.
The $500,000 settlement will be reflected in the new delivery rates being charged to PNG’s customers, expected to be announced shortly.