Sempra's Fractured Fairy Tale

The two-year-old fairy tale that 78 per cent of Nova Scotia homescould have access to natural gas within four years won't come true.The wonder is that anyone - the provincial government, the Utilitiesand Review Board (URB), or the citizens they so ineptly served - everthought it would.

Last week saw much wringing of hands and gnashing of teeth over thegallant knight's failure to rescue the fairy princess from the wickedwitch of the west. How could a gas-distribution deal the URB spentseven months reviewing fall apart in just two years?

Is it, as Sempra Atlantic Gas claims, the province's refusal to let itlay high-pressure gas lines in the shoulder of Nova Scotia highways,where road crews would have to use shovels instead of backhoes everytime a culvert plugged or a sign needed replacing?

The road-shoulder issue has the whiff of a handy, but lame, excuse.Two months before the URB began the marathon 1999 hearings that gaveSempra the distribution franchise, a letter went to all the applicants- including Sempra - spelling out provincial policy on the issue: nolines within 30 metres of the right-of-way on 100-series highways, norwithin five metres of the right-of-way on lesser roads.

Is it that the recent spike in natural-gas prices has left consumerslittle incentive to switch from oil to gas? After all, prices got sohigh this winter, Nova Scotia Power opted to continue befouling theair over metro by burning bunker C in its Tufts Cove generator, whilepocketing windfall profits from U.S. sales of clean Sable gas it couldhave burned.

Nova Scotia officials, embarrassed by Sempra's imminent pull-out,point to New Brunswick, where retail and commercial customers havebeen slow to convert, even though the distribution network is muchfurther advanced in that province.

Nope, this isn't a plausible explanation either. Price fluctuationsare a normal feature of energy markets, and there is no reason tothink gas has permanently lost its traditional price advantage. EvenNSP has finally begun burning Sable gas at Tufts Cove (something aprovince that cared about air quality would have forced it to domonths ago).

No, the real cause of this month's showdown between Sempra and theHamm government goes back to the fall of 1998, when Maritimes andNortheast Pipelines Ltd. (M&NE), builder of the main gas line from Goldboroto New England, was allowed to sell directly to major industrialcustomers such as the Stora Enso pulp mill and the Sable OffshoreEnergy Project fractionation plant at Point Tupper, or the NSPgenerator at Tufts Cove.

Industrial plants such as pulp mills and power generating stationsconsume gas on a scale that dwarfs residential and commercialcustomers. By letting M&NE cherry pick the handful of large industrialcustomers in the province, the government deprived would-bedistributors of anchor clients that could have helped finance thesprawling web of distribution lines required to service households inour sparsely settled province.

By December, 1998, in the face of that decision, two of the fourfranchise bidders withdrew their applications. Among the dropouts wasthe most experienced bidder, SaskEnergy, which has successfullybrought gas to homeowners throughout rural Alberta and Saskatchewan.

Of the remaining bidders, one, Irving Oil, submitted a proposal thatfell short of the MacLellan government's fairy-tale requirements.Instead of reaching 75 per cent of households in all 18 countieswithin four years, Irving promised only 64 per cent in 14 counties.

That left Sempra, which solemnly promised the sun, the moon, thestars, and 78 percent of households in all of Never-Neverland's 18counties.

To find enough pixie dust to pull this off, Sempra hired one of theprovince's most political lawyers, John Young, former president of theLiberal Party of Nova Scotia. Young successfully shepherded Sempra'sbid past a credulous URB.

Suddenly - whoops! - the 1999 election thrust Hamm's Tories to power.No problem. Young simply passed the glass slippers to his partner atBoyne Clark, Jim Connors, whose Tory pedigree rivals Young's Liberalcredentials. What the strategy lacked in subtlety, it made up inchutzpah.

Sempra now wants to serve only five counties, and it won't put eventhat anemic proposition to the URB without prior approval from theprovincial government. Absent the demanded rubber stamp, it will exitthe Nova Scotia, leaving only a battalion of Boyne Clark lawyers topress a $50-million damage claim against the province.

From the peanut gallery, Manning MacDonald, a minister in the deposedLiberal governments that sold our petroleum resources for a mess ofpottage, urges Hamm to knuckle under. The Hamm government isn'tbuying, as it should not. All of which leaves Nova Scotians in theposition of the unkissed frog: still hopping around the swamp, stilldreaming of the palace.

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