After months of negotiations and two years of wrangling inCanadian courts, Pan-Alberta Gas Ltd. has been taken over by theproducers in its supply pool.

TransCanada PipeLines quietly and gladly parted with Pan-Albertaas an unwanted part of the acquisitions that came from merging withNova Corp.

The previously-announced deal to transfer ownership closed afterthe participants also settled a marathon lawsuit in Alberta Courtof Queen’s Bench. Nine leading gas producers had alleged thatPan-Alberta under the previous ownership of Nova, in bygonerelationships involving the predecessor of Dynegy (NGC Corp.)strayed from commitments to obtain the highest possible prices forthe supply pool as a result of other corporate interests. Damageclaims reached C$150 million (US$105 million). Reports were that inaddition to taking over the marketing company which had sales of$1.6 billion in 1997, producers were to receive a payment of $18million.

Under the new ownership structure, which was approved by 339production companies with 97% of the gas under contract toPan-Alberta, the supply pool will elect Pan-Alberta’s board ofdirectors to make sure management heeds their interests above all.President Rod Pocza described the deal as “an industry solution”for what had become a sore spot in the gas community. “It is atemplate for the potential growth opportunities of the marketingand aggregation business for producers.”

The deal also brings Pan-Alberta, with sales exceeding 1.6 Bcf/dfrom contracted reserves of about 5 Tcf, into line with other majorCanadian supply aggregators. ProGas Ltd.’s name stands forproducers’ gas and it is owned by producers. CanWest Gas Supply, anaggregator and marketer of production from British Columbia, is aco-operative owned by producers with B.C. wells. TransCanada’s ownaggregator TransCanada Gas Services, selling about 5 Bcf/d fromabout 13 Tcf of reserves contracted with 700 producers remainsoutside the tradition but is committed by a spring pact with theproduction community to ensure it has more say in marketingstrategy.

“Pan-Alberta now can provide new services to the producers whilesimplifying the business processes for them,” Pocza said. “Allprofits and costs flow directly to producers.” Pocza sees theemergence of the producer-owned and controlled marketing company asa trend, although it is one U.S. companies have trouble followingbecause of antitrust laws. It provides economies of scale whichproducers cannot achieve marketing their own gas.

Pocza said the deal had cleared the Canadian Competition Bureau.The Pan-Alberta pool has 435 producers under contract includingvery small producers and part of the production of larger companieswho are looking to achieve diversity of sales.

Pan-Alberta holds 750 MMcf/d or half of the existing space onNorthern Border. It also sends gas in through Sumas and Kingsgateto Northwest Pipeline and PGT. Questioned, Pocza said he did notbelieve Canadian producers can fill all the new export pipelinecapacity currently going into service on Northern Border andTransCanada: “It’s a challenge to producers to come up with thesupply. They will have to do a lot more drilling.”

Gordon Jaremko, Calgary, Ellen Beswick, Washington

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