Nova Scotia Knocks Sempra Atlantic Gas Pipe Route

The Nova Scotia government's decision to not allow high-pressure natural gas pipelines under the shoulders of provincial highways is forcing Sempra Atlantic Gas to re-examine its business plan for the province. Earlier this month, Sempra Atlantic Gas released a 36-page report detailing the benefits it was bringing to the region, which last year totaled C$17.3 million.

The company, a unit of Sempra Energy International, was awarded the first franchise to develop, build and distribute natural gas in the province in 1999 (see NGI, Dec. 20, 1999). After several delays, it finally began construction last October, employing a mostly Scotian workforce and using Scotian supplies.

However, last week, the Nova Scotia Transportation and Public Works Department turned down a request by the company to build high-pressure lines along the roadways, and that decision is expected to cost Sempra Atlantic Gas more money in redesign and obtaining land.

"We are disappointed with the province's decision," said Hal Snyder, president of Sempra Atlantic Gas. "But we recognize that we must move on and develop revised plans in cooperation with the province for natural gas distribution across Nova Scotia."

Already on the chopping block this year is the pipeline construction that had been planned for Truro, Amherst and New Glasgow. Other pipeline engineering and planning for other communities outside the Halifax Regional Municipality also have been placed on hold as the design to deliver gas to those communities was based mostly on installing pipes on road shoulders.

Snyder said that moving construction from the road shoulder will add "tens of millions of dollars" to overall project costs, and the increased costs, in areas such as design, construction, land acquisition and new regulatory approvals will be considered in evaluating the overall distribution plan. He had no information on how long the delay would add to the project.

Nova Scotia's Transportation and Public Works Minister Ron Russell said the decision was based on months of study and consultation with other provinces.

"We've taken a very careful look at this issue and concluded that it would be impractical, both from an operational and financial perspective, to allow high-pressure pipes in highway road shoulders," said Russell. "It just doesn't make sense to put pipelines in such locations when less disruptive alternatives are possible."

The province plans to work with Sempra Atlantic Gas to find solutions to help it proceed with its distribution plan, and has agreed to allow low-pressure pipes in the shoulders.

"Current market prices are making plans to expand natural gas distribution difficult all across North America," said Nova Scotia Petroleum Directorate Minister Gordon Baker. "We understand the challenges facing Sempra, but we believe the market conditions are temporary and the long-term prospects for natural gas use in Nova Scotia remain positive."

Snyder said he has asked his staff to "develop quality solutions to present to the government very soon." The North American energy market, said Snyder, also has placed pressure on his company's business plan because "rising energy prices squeeze the company's margin" and its ability to pay for expanded distribution. To support the system's building, Snyder said customer revenues are needed --- and those are still down the road.

"Our construction has been delayed by two years, and as a result we have lost a significant opportunity to engage customers through that period," said Snyder. "Acquiring customers in those two years would have helped support construction of the distribution system." However, he added, "we want to distribute natural gas."

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