Nova Scotia’s government last week issued a 25-year natural gas distribution license for the province on the assumption that the chosen distributor had natural gas supplies line up. However, the province has since learned that the new distributor does not have supply in place for its 4,000 potential customers and is still in the negotiating stages with several suppliers.

Energy Minister Ernie Fage said the cabinet gave approval to Heritage Gas, a consortium of companies led by Sask-Energy, after it received assurance of an agreement with Nova Scotia Power and Emera Energy Inc. to supply it with natural gas (see Daily GPI, Feb. 24).

Nova Scotia Power supplies 95% of the electric generation, transmission and distribution in Nova Scotia. and is a subsidiary of Emera Inc., which also owns Emera Energy and Bangor Hydro-Electric in Maine. Emera also has a 12.5% stake in the Maritimes & Northeast Pipeline and an 8.4% interest in the Sable Offshore Energy Project offshore platforms and sub-sea field gathering lines.

“My understanding [is] that the agreement is still in force, that it has not expired,” Fage said Tuesday during the Offshore/Onshore Technologies Association of Nova Scotia meeting where he had been speaking. Fage added that Heritage Gas officials had “expressed their confidence” that they had contracts, adding “I take their word for it.”

However, Heritage’s supply agreement actually lapsed in December, according to Kathy Peter, a Heritage Gas spokeswoman. “We want to get supply from as many suppliers as possible because in the long term, it is in the interest of customers,” she said.

Heritage Gas received approval to distribute gas in Halifax Regional Municipality, Colchester, Cumberland and Pictou counties, the Municipality of the District of East Hants and the Goldboro area. A conditional franchise was awarded to Strait Area Gas, which will distribute to Inverness, Antigonish and Richmond counties, as well as Guysborough County with the exception of Goldboro.

Critics of Prime Minister John Hamm’s government in Nova Scotia pointed out that the Heritage Gas transaction was the second time the government had not negotiated fully with natural gas distributors. Sempra Energy, headquartered in San Diego, gave up its exclusive gas distribution franchise through subsidiary Sempra Atlantic Gas in 2001 after the government refused to give it the right to lay high-pressure pipes along the province roads (see NGI, Oct. 1, 2001). Since Sempra pulled out, the province has been without a gas distributor.

Fage noted, however, that gas supply was not what was approved by the government in awarding a franchise. The Nova Scotia Utility and Review Board made the initial selection of Heritage Gas; Fage said the government was following the board’s determination.

“What cabinet approved…was the distribution franchise,” Fage said. “It had nothing pertaining to supply.” The energy minister said that Heritage Gas had assured provincial leaders that the contract would be enforced and that it would not have a supply problem.

Nova Scotia Power said Heritage Gas is seeking to purchase about 10 MMcf/d for its operations. A spokeswoman said that Nova Scotia Power and Heritage Gas had been negotiating a deal since the province’s utility board gave its approval. Heritage Gas apparently also wants to buy gas from the producers of the Sable energy project, a deal that Sempra had once put in place when it held the franchise.

As questions surfaced about the soundness of some of the province’s energy-related decisions, the province released a lengthy progress report last Wednesday on its energy strategy, and how far it has progressed since the plan was put in place 14 months ago.

“When we released the energy strategy, we made a commitment to keep in touch with Nova Scotians through regular progress reports and that’s what we’re doing today,” said Fage. “In just a little over a year, we’ve established a strong foundation that will support continued growth, development and benefits from our energy sector.” Fage called the report a “snapshot…a freeze frame of a dynamic, living document. It will continue to evolve as our energy sector, our economy and our province reap the benefits of our resources, our ingenuity and our drive to succeed.”

The progress report highlights the government’s efforts to stimulate exploration and production, as well as improve the efficiency of regulations and approval processes. It also was designed to promote the province’s oil and gas sector and local businesses, as well as address climate change issues and protect the environment.

Nova Scotia’s energy strategy identifies important elements of a competitive energy market and ensures that the environment is improved. It provides guidance on how to encourage cross-industry alliances and partnerships among the fishing industry, energy sector and other communities. It also describes the importance of equitable and competitive taxation, royalty and economic incentives.

Fage added that the strategy confirms the belief that the private sector is the prime engine for developing the province’s natural resources and creating economic benefits and long-term growth. A full copy of the report may be obtained at

Missing from the report was the setback suffered last month by the province, after EnCana Corp. announced it would take a “time out” on its Deep Panuke exploration project, which is located off the coast of Nova Scotia. EnCana said its offshore production has been postponed at least a year because of uncertainty over reserves and markets (see related story).

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