Five months after its plan to lay natural gas pipeline for its distribution system under the shoulders of Nova Scotia’s provincial highways was denied, Sempra Energy’s Sempra Atlantic Gas unit has notified the Nova Scotia government and the Nova Scotia Utility and Review Board (UARB) that the company intends to surrender its natural gas distribution franchise in the province.

The company made the decision after months of detailed consideration of whether, under the current regulatory environment, a viable business case can be made for moving forward in Nova Scotia, company officials said.

In June, Sempra Atlantic advised the UARB that actions beyond the control of the company have had a substantial negative impact on the its proposed plans. Under the terms and conditions of Sempra Atlantic’s franchise agreement, this entitles the company to surrender its franchise. A spokeswoman for Sempra said the company would be making a filing early next week that will go into more detail on its grounds for surrendering the franchise.

As for the future of Sempra Atlantic Gas, a local Nova Scotia subsidiary, the spokeswoman said it was unclear what its fate would be. She said in the near term, the company intends to work with the utility, the review board and the government to help “ensure an orderly surrender of the franchise.”

The company was awarded the first franchise to develop, build and distribute natural gas in the province in 1999 (see Daily GPI, Nov. 18, 1999). After several delays, it finally began construction last October (see Daily GPI, Oct. 16, 2000), employing a mostly Scotian workforce and using Scotian supplies.

Earlier this year, Sempra Atlantic scrapped plans to construct pipelines that had been planned for Truro, Amherst and New Glasgow (see Daily GPI, April 11). At that time, other pipeline engineering and planning for other communities outside the Halifax Regional Municipality were placed on hold, since the design to deliver gas to those communities was based mostly on installing pipes on road shoulders. Moving construction from the road shoulder would add “tens of millions of dollars” to overall project costs, the company stated.

After two years of continued construction delays, the company said it now has no option but to surrender its franchise.

To date, Sempra Energy has already invested approximately $35 million in the natural gas distribution project. The company said it expects to recover a portion of the investment. Even with a third-quarter charge for costs expected to be unrecovered, Sempra Energy continues to project earnings per share for 2001 of approximately $2.50.

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