PetroChina Canada Ltd. has run into obstacles because it seeks to take full ownership of an Alberta pipeline system.
The Canadian arm of the Chinese state-owned energy giant has a half-interest within the Grand Rapids Pipeline, with Calgary-based South Bow Corp. holding the remainder.
Grand Rapids runs 460 kilometres between the oilsands region in northeastern Alberta and the Edmonton area.
PetroChina was in search of to accumulate South Bow’s interest under an option contained of their agreement that features a 30-day deadline, said an Alberta Court of King’s Bench written decision posted online last week.
“The proverbial fly-in-the-ointment is the requirement of two governmental authorizations,” wrote Justice Douglas Mah, who rendered his oral decision in December.
The Calgary Courts Centre pictured in Calgary, Monday, May 6, 2024.
THE CANADIAN PRESS/Jeff McIntosh
“First, due to the scale and nature of the transaction, dispensation is required under the Competition Act,” wrote Mah.
“Second, because PetroChina is a Chinese state-owned enterprise, its acquisition of South Bow’s interest within the pipeline must undergo a net profit review under the Investment Canada Act. Each of those authorizations take time to get,” Mah added.
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PetroChina served South Bow formal notice to exercise the buyout option on Nov. 21 and tendered a draft purchase and sale agreement.
It also asked that the timeline be prolonged from 30 days to the actual date of getting the federal government authorizations or that the closing be made conditional upon the approvals being in place.
Three days later, South Bow responded by saying it will not change its agreement with PetroChina and that its partner’s notice to exercise its option was “non-compliant because authorizations had not been obtained,” Mah wrote.
That may have put the expiration date for exercising the choice at Dec. 24.
As it will have been unimaginable to have approvals in-hand by Christmas Eve, PetroChina turned to a dispute resolution process under its agreement with South Bow.
PetroChina asked Mah for an injunction to maintain the choice period from expiring while the 2 corporations attempt to resolve the dispute through arbitration, “which is able to likely be some months down the road,” the judge wrote.
Mah denied PetroChina’s application, saying he’s not convinced the corporate would have suffered “irreparable harm” absent an injunction.
“PetroChina says that its irreparable harm is lack of the choice, but that may be restored by the tribunal and that is precisely what PetroChina is asking for within the arbitration,” Mah wrote.
“In my opinion, harm can’t be irreparable if the applicant may be put in the precise place it desires to be by the decision-maker making the ultimate decision. South Bow opposes that end result but concedes that the arbitration tribunal has jurisdiction to make that call.”
PetroChina reached its deal to construct Grand Rapids in 2012 with TransCanada Corp., now generally known as TC Energy Corp. (TC spun off its oil pipeline business into South Bow in late 2024) and it’s been in operation since 2017.
The development price tag on the time was $3 billion. The recent court decision didn’t include an updated valuation.
Neither South Bow nor PetroChina Canada immediately responded to a request for comment.
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