Nalcor bringing $14M fight over gas storage costs to court

A multi-million-dollar dispute between Crown-owned Nalcor Energy and two oil giants over the cost of storing natural gas extracted from the White Rose field has now reached the Supreme Court of Newfoundland and Labrador.

The dispute pits Nalcor​'s oil and gas division against Husky Oil and Suncor Energy.

Nalcor Oil and Gas​ is asking the court to order Husky to return nearly $2.4 million that the Crown corporation paid over an eight-month period in 2012 and 2013, and to clear the ledger of more than $11.5 million that Husky alleges is past-due from Nalcor as of March.

The complex dispute relates to gas from the White Rose expansion fields, including North Amethyst, South White Rose and West White Rose.

Nalcor has long argued that its stake in the project is limited to oil production in the expansion fields, and that it is not responsible for any costs or liabilities related to natural gas production and storage.

Husky and Suncor, however, have argued that Nalcor must pay a proportionate share of the capital costs associated with gas storage.

In October, an arbitrator ruled in favour of the Nalcor's position.

But Nalcor alleges the companies have ignored the ruling and continue to insist that Nalcor is liable for gas storage costs.

The court document says Husky has "refused" to return the amount paid by Nalcor, or to credit that amount to "properly payable" costs.

An equity stake in the 'growth project'

Production at White Rose, located some 350 kilometres southeast of St. John's, began in 2005, using a floating, production, storage and offloading (FPSO) vessel called SeaRose.

Husky is the majority owner and operator of the project. Suncor is a minority owner.

In 2007, an agreement was reached to develop the expansion fields, referred in the court document as the "growth project."

Nalcor acquired a five per cent equity stake in this growth project, meaning it must pay its share of the costs, and receive a share of the profits.

But Nalcor says in court documents the agreement expressly states that Husky and Suncor can construct facilities and store gas "at no cost or liability to the plaintiff (Nalcor), and also provides a broad indemnity in favour of the plaintiff for any costs, expenses or charges associated with the storage of gas."

Nalcor is asking the court to issue a declaration that it is not required to pay any capital costs associate with gas storage, and to sort out all matters relating to payments and outstanding charges.

A spokesperson for Husky said the company does not comment on matters that are before the courts.

Jim Keating, vice-president of Nalcor's oil and gas division, said in a statement Thursday that the corporation's partners are acting in contravention of an agreement.

"Nalcor Oil and Gas will enforce its contracts and protect its investment in offshore Newfoundland and Labrador's oil and gas developments," Keating said