[FREDERICTON, NB] — Enbridge Gas New Brunswick has launched a lawsuit against the provincial government seeking at least $650 million, alleging it has breached conditions of an agreement and in so doing, has harmed the company's bottom line.
In a statement of claim filed with the Court of Queen's Bench last Thursday, Enbridge Gas New Brunswick alleges the government is not abiding by the terms of a general franchise agreement signed in 1999.
The agreement said Enbridge would be the only natural gas distributor in the province until 2020 and allowed the company to recover costs to build a pipeline system.
The statement of claim says the government failed to create a regulatory regime that would ensure that elements of the agreement would not be changed by the province's Energy and Utilities Board and without the prior consent of Enbridge Gas New Brunswick.
"There are commitments that we saw within the agreement that weren't being lived up to by the province, and we believe that because of those breaches it put the value of our assets and our future revenues at risk," Dave Charleson, general manager of Enbridge Gas New Brunswick, said in an interview Monday. "There are breaches within the agreement and those are breaches that continue today. That's why we've moved forward with legal action."
One example cited by the company is an original return on equity of 13 per cent that the Energy and Utilities Board has since set at 10.9 per cent.
The suit seeks $569 million in special damages for the fair market value of assets, and $81 million in special damages for loss of earnings. It also seeks general damages for breach of contract, legal costs and interest.
None of the allegations has been proven in court and the government has not filed a statement of defence.
An Energy Department spokesman said the government won't comment while the matter is before the courts.
Charleson said the lawsuit is not in connection with legislation passed in December that will allow other companies to ship natural gas to the northern half of the province.
"Bill 18 contains clauses where they can't be sued related to that, so these are other issues related to the general franchise agreement and we believe the province has been in breach of that agreement," Charleson said.
After that legislation was passed in December, Bud Bird — a director of Calgary-based parent company Enbridge (TSX:ENB) — said it was "the most oppressive legislation in the history of New Brunswick".
The government defended the legislation, saying it would lower distribution rates and provide greater incentives for customers to join the system.
Enbridge's pipeline network in New Brunswick has a capacity for 30,000 homes and businesses, but so far there are only 11,000 customers.
The company says it has spent hundreds of million of dollars on that system and installed more than 800 kilometres of pipeline.