Canadian natural gas pipeline joint venture (JV) Coastal GasLink is seeking C$1.2bn ($737m) from one of its lead contractors due to delays in construction of the Coastal GasLink (CGL) project, reported Reuters.
The C$14.5bn CGL project was completed in October this year at more than double its planned cost.
TC Energy started preparing for the project in 2012.
Private equity firm KKR and Alberta pension manager AIMco jointly own 65% of the JV, with TC Energy owning the remaining 35%.
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The 670km gas pipeline, which passes through the Rocky Mountains in British Columbia to the Pacific coast, was delayed due to multiple factors such as mudslides, the Covid pandemic, protests and difficult terrain.
Last year, Coastal GasLink terminated Pacific Atlantic Pipeline Construction’s (PAPC) contract on the grounds of subpar performance.
Now it is seeking C$1.2bn from PAPC to cover the costs associated with hiring new contractors.
The parties have gone to court in Alberta, where Coastal GasLink is claiming that it has the legal right to draw on a C$117m letter of credit that was issued by HSBC as a performance guarantee for PAPC.
In November 2024, the two parties will also take part in arbitration proceedings at the International Chamber of Commerce over whether PAPC failed to deliver or if the contract was terminated wrongfully.
An injunction request from PAPC and its parent company, Bonatti, was granted by an Alberta court in October, requiring Coastal GasLink to rescind its demand for the letter of credit until the hearing on 19 December 2023.
The letter of credit will expire in early 2024.
According to TC Energy, the costs associated with PAPC’s alleged underperformance were way more than the value of the credit letter.
“Coastal GasLink is committed to enforcing its contractual rights and is actively pursuing cost recoveries as it is entitled to,” TC Energy was quoted as saying in a statement.
PAPC claims that design modifications made by Coastal GasLink during construction and the demonstrations affected its work.
In a statement to the publication, PAPC chief operating officer Greg Cano said that TC Energy attempted to pressure PAPC to expedite work, which would have required the contractor to nearly double its personnel and equipment on site, without covering the additional expenses.