A dispute has erupted in the Canadian courts between affiliatesMobil Oil and the Maritimes & Northeast Pipeline. Maritimes hasfiled a lawsuit with the Nova Scotia Supreme Court against Mobil,seeking C$3.29 million, plus C$100,000 in general damages,interest, legal costs and all out-of-pocket expenses.

Some industry observers probably saw this one coming, but theconsequences of this dispute could be far reaching. The $1.2billion Maritimes pipeline project received authorization tocommence gas transportation services Dec. 1, 1999. However, theSable Offshore Energy Project, which the pipeline was built toserve, wasn’t ready to begin flowing gas until Jan. 1.

Although the companies would not discuss the details of thelawsuit, the dispute concerns a breach of contract in which Mobilfailed to pay pipeline charges between Dec. 1 and Dec. 21.

Mobil signed the agreement in April 1998. It states that uponcommencement of transportation service, Mobil would begin paying amonthly service charge to reserve space on the line.

Mobil has a 12.5% stake in the Maritimes project and is apartner in Duke Energy, which owns a 37.5% stake in the pipeline.Mobil also has a 51% stake in the Sable project and is Maritimes’largest capacity holder. It also has a “backstop” agreement withthe pipeline in which the producer will pick up the tab if acertain amount of capacity goes unused.

Mobil still has not responded to the lawsuit.

The 650-mile Maritimes pipeline was designed to deliver up to530,000 MMBtu/d of gas from the Nova Scotia gas processionfacilities of the Sable project to markets in Canadian Maritimesprovinces and New England.

Rocco Canonica

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