Business

Pipe dream

Government bickering threatens to scuttle a long-awaited gas project

BRIAN BERGMAN August 4 1997
Business

Pipe dream

Government bickering threatens to scuttle a long-awaited gas project

BRIAN BERGMAN August 4 1997

Pipe dream

Business

Government bickering threatens to scuttle a long-awaited gas project

BRIAN BERGMAN

Sparsely populated and sprawling over more than 400 square kilometres of eastern Nova Scotia, Guysborough County is one of the most economically depressed regions in Canada. The area’s traditional mainstays—fishing and logging—are in deep decline, and little else has surfaced to take their place. These days, though, the county’s 10,500 residents are setting their sights on a possible economic savior: a $3-billion proposal to develop the Sable Island gas reserves off Nova Scotia’s east coast and to pipe that gas to New Brunswick and on to New England. The project promises millions of dollars in tax revenue and hundreds of jobs to an area where the unemployment rate is now 27 per cent. According to Gordon MacDonald, executive director of the Guysborough County Regional Development Authority, it may also deliver a more precious commodity—hope. “There’s such a pervasive cynicism that nothing good is ever going to happen here,” he says. “This could turn things around.”

Then again, it might not. After more than three months of hear-

ings, a federal-provincial review panel began deliberating last week on whether the Sable gas project should proceed. The hearings boasted more twists and turns than a good summer mystery novel— and the plot continues to thicken. The proceedings began in April with a bid to disband the panel because of what critics described as interference by Prime Minister Jean Chrétien. They ended on July 14 with Nova Scotia’s new Liberal premier, Russell MacLellan, reneging on a three-week-old agreement with New Brunswick on pipeline tolls. That last-minute gambit—a key part of MacLellan’s attempt to distance himself from the unpopular policies of his Liberal predecessor, John Savage—set the two provinces on a collision course that some fear could scuttle the megaproject.

The five-member review panel, which includes three representatives of the National Energy Board, is examining a proposal from a group of oil companies, headed by Mobil Oil Canada, to pump three trillion cubic feet of natural gas from under the ocean floor near Sable Island and to bring that gas ashore at Goldboro, a community of about 130 people in Guysborough County. It must also rule on a plan by the Maritimes and Northeast Pipeline consortium to ship the gas through Nova Scotia and New Brunswick and into New England. From the start, though, the panel’s task was complicated by a late bid by another consortium, TransQuebec and Maritimes Pipeline. It, too, wants to ship the gas to New England—but via a pipeline that first extends to Quebec City.

On the opening day of the hearings, environmental opponents of the gas project charged that the process had been “politically tainted.” They argued that public comments last year by Chrétien—who will have the final say on the Sable gas project—had prejudiced the

proceedings. Chrétien seemed to come out in favor of the TransQuebec bid when he said that both he and Quebec Premier Lucien Bouchard hoped that Sable gas would be used to satisfy that province’s needs before it is shipped to the United States. The panel, chaired by Dalhousie University marine biologist Bob Fournier, declined to step aside. But the spectre of the Quebec route hovered over the hearings, with some critics warning that Sable gas could become a political poker chip in the event that Quebec secedes.

In their own submissions, proponents of both pipeline routes were equally hard-nosed. Lawyers for Mobil Oil and Maritimes and Northeast repeatedly stated that their clients must have a decision by September in order to meet a production deadline of November, 1999. If the ruling is delayed, they warned, the project will die. On the other side, TransQuebec demanded that the panel postpone its ruling until the consortium submits its own application later this summer. Unless the panel agrees to that request, TransQuebec said, it will challenge the process in court. As Raynold Langlois, lawyer for one of TransQuebec’s partners, Gaz Métropolitain, put it: “If that is the only way to deal with issues here—to put the panel before deadlines, threats and ultimatums—then let me join the club.”

¿ The struggle between Nova £ Scotia and New Brunswick over 1 pipeline tolls proved just as conS tentious. The issue is crucial to both governments beS cause cheaper gas rates would help them lure new indus| tries to their jurisdictions. New Brunswick entered the hearings supporting a so-called postage stamp toll, meaning that the fees charged to distributors who buy Sable gas would be the same in each province. Nova Scotia argued that the tolls should be based on the distance between the customer and the point at which the gas comes ashore—a formula that would mean a price break for most Nova Scotians. At Fournier’s urging, the two governments came up with a compromise agreement on June 19. It called for a postage stamp toll, but said that Nova Scotia distributors should receive a 10-per-cent discount over the first eight years of the project, with New Brunswick getting a four-per-cent discount over the first three years. Enter the MacLellan factor. The veteran Liberal MP was embroiled in a bit-

terly fought leadership campaign when the toll agreement was signed. In contrast to the Savage government—which was widely criticized for its dogged pursuit of unpopular fiscal cuts—MacLellan had promised to listen and respond to the public will. And what many Nova Scotians were saying about the toll agreement was that it looked like another example of New Brunswick Premier Frank McKenna—renowned for scooping up new business for his province—getting his own way.

Less than 48 hours after winning the leadership contest, MacLellan strode into the Sable gas hearings in Halifax on their final day. Swarmed by television cameras, he listened as the province’s lawyer, Terry Hughes, unveiled a new toll offer that MacLellan and his advisers had hammered together just hours earlier. Once again, the province argued for a toll rate based largely on distance from the source of the gas—and one that would give Nova Scotians a 20-per-cent price advantage over New Brunswick users for the entire 25-year life of the project.

MacLellan’s initiative drew a sharp rebuke from McKenna, who insisted that the original agreement must stand and warned that there would be “no more accommodation.” McKenna’s energy minister, Alan Graham, went even further. If MacLellan gets his way, Graham said, New Brunswick will “have to play hardball” by attempting to block the pipeline from entering the province. “We don’t want to be seen as holding up a project,” Graham said in an interview with Maclean ’s last week, “but neither do we want to be seen as a prostitute and selling ourselves off for nothing.” MacLellan makes a similar argument. While his stance on the pipeline tolls clearly has a lot to do with a provincial election that must be called by next May, the new premier also has his eyes on the history books. He compares the current deal to the the 1969 Churchill Falls contract—under which Newfoundland was obligated to sell hydroelectricity to Quebec at bargain rates for 65 years. “I don’t want the Nova Scotia Liberal party to be remembered for the next 100 years,” MacLellan told Maclean’s, “as the one that gave away the natural gas for a bag of colored beans.” How all the political machinations will affect the review panel’s deliberations is a matter of some conjecture. Significantly, MacLellan did not ask the panel to set aside the original toll agreement. That leaves the panel free to adopt that position, to accept MacLellan’s alternative or to propose a solution of its own. But its first order of business is to deal with TransQuebec’s motion for a delay. If the motion is denied, a final ruling on the Maritimes and Northeast pipeline is expected in September.

That means several tense weeks of waiting for the rival pipeline groups. Arthur Willms, president of Vancouverbased Westcoast Energy Inc., one of the major shareholders in the Maritimes pipeline consortium, said last week he remained confident there would be no more delays and that the panel would reach a decision satisfactory to all concerned. In the end, Willms added, the politicians will recognize that the project is just too important to risk losing. The anxious and increasingly cynical residents of Guysborough County can only hope he is right. □