A10 - The Terrace Standard, Wednesday, August 23, 2000

Methanex cranks up heat
in bid for lower gas rates

METHANEX IS upping the stakes in its cam-
paign for lower operating casts so it can re-
open its Kitimat methanol plant.

Company official Brad Boyd said last week
Methanex is asking the provincial body which
regulates natural gas transmission costs for a
lawer rate than what Pacific Northern Gas
(PNG) charges to provide natural gas to the
Kitimat methanol plant. ~ 7

In effect, Methanex is asking the B.C. Utili-_
ties Commission (BCUC) to seltle an on-going
dispute it has over costs with PNG. —

Methanex says it needs lower transmission
cosls to re-open its plant bul it and PNG have
failed so far to come to an agreement as to
what it should pay.

At risk are several hundred jobs and mil-
lions of dollars of economic activity in the
northwest should Methanex mothball ils Kiti-
mat methanol plant. ;

“We're asking the BCUC to be the impar-
tial adjudicator on this,” said Boyd.

There are significant implications in this
because for every dollar PNG loses from Mc-
ithanex it will want to make up the difference
from its other industrial and residential custo-

mers.

In fact, this will be the second rate applica-
tion BCUC will have to decide upon resulting
from the Methanex/PNG dispute.

PNG itself is filing for a rale increase Sept.
1 in which it will ask its other customers to
pay more in anticipation of losing some or all
of its Methanex revenue. —

The Methanex filing follows an intense

public relations campaign for lower costs.

It’s not only targeted PNG but wants a
lower property tax rate from the District of Ki-
limat and it wants to pay lower royalties to the
provincial government for the natural gas it
buys to produce methanol.

In return for lower costs, Methanex says it
will share the profils when the price of metha-
nol rises.

Both sides have been distributing duelling
press releases, each containing figures to bois-
ter their respective positions.

But bath sides have also declined to release
all of the financial information surrounding
their respective cases,

When PNG, for example, issued a press re-
lease Aug, 11 containing what it said was a

counter offer to Methanex’s proposal for a
lower rate, it failed to mention thal it also
wanted a loan from Methanex in return.

That loan would amount to tens of millions
of dollars, said Methanex in a release of its
own,

PNG officials have so far declined to dis-
cuss their loan plan.

For its part, Methanex so far isn’t saying
exactly how much it wants to pay PNG to
transport its gas.

“We'd rather not get into specific numbers
and details,” said Boyd.

“We're working with PNG on a solution and
we'd rather focus on that,” he said.

Boyd was also reluctant to characterize its
own BCUC application as a rejection of any
attempt at working out a cost compromise with
PNG.

“It’s all part of the process,” he said of the
ongoing talks between the two companies.

In the language of the BCUC process, Me-
thanex’s application is for a “load retention
rate.” Translated, it means Methanex wants a
low enough rate to keep it as a customer of
PNG,

Deal sought to cool things down

A PROVINCIAL official wants

its Kitimat munici-

the provincial government.

ones will be paying more

but I don’t think

achievable,”

it’s

hopes to broker a deal so
Methanex can get a low
enough natural gas trans-
portation cost fram Pacific
Northern Gas (PNG) to re-
open its Kitimat methanol
plant. .

The two companies
have so far failed to reach
a deal on their own and
both are now headed to the
B.C. Utilities Commission
{BCUC) to file separate
rate application requests.

But what provincial job
protection commissioner
Eric van Soeren wants is
for the two to reach a deal
so he can appear with
them before the BCUC for
a joint application.

The result may not be
as low a price as Metha-
nex wants or a high as one
as PNG wants, but at least
the plant in Kitimat would
re-open, saving hundreds
of jobs and generating mil-
lions of dollars, he said.

“The alternative is that
Methanex closes its plant
and that would have an ef-
fect on everyone,” van
Soeren added.

He’s also working on
studying additional cost
cuts Methanex wants in
order to re-open its Kitimat
methanol plant.

One of those is a reduc-
tion in the royalties to the
province Methanex now
pays for the natural gas it

buys.
The company also
From front

October
gas hikes
looming

“We have no control
over the price of natural
gas,” said Weeres in
pointing out that is the lar-
Best cost factor facing Me-
thanex.

Methanex last week re-
jected the PNG counterof-
fer, saying it still isn’t low
enough.

“We feel PNG may still
have to find other ways to
reduce its casts,” said Me-
thanex official Brad Boyd.

It’s still too early to say
how the BCUC will handle
PNG's tate increase appli-
cation.

It can order public hear-
ings and those hearings
can be held in the commu-
nities and areas to be af-
fected by possible rate in-
creases,

The task facing the
BCUC is to decide what
rate increase, if any,
northwesterners will have
to pay.

That’s because PNG
will want to charge its
other customers more re-
gardless if it loses Metha-
nex as a customer forever
or even if Methanex works
out a deal to pay a lower
gas transmission fee.

Safe Kids

CANADA

a fohmson af futon.

pal property taxes reduced
and to pay lower hydro
bills.

In return for reduced
costs, Methanex says it
will split the profits when
the price of methanol hits
certain, pre-set levels.

When it comes to roy-
alty cuts in return for pro-
fits later on, van Soeren
said he’s looking for an
acceptable level of risk for

“Over time, if we guess
correctly, it would not cost
the province anything,” he
said,

Such a deal is similar
to other ones negotiated by
van Soeren elsewhere
which involved a_ profit
sharing component.

He did concede that no
matter what happens,
PNG’s other industrial cus~
tomers and its residential

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to make up the difference
for Methanex paying less.

Methanex’s royalty re-
duction proposal calls for
it not to pay any to the
province when methanol
prices are low and a pre-
mium when the price does
tise.

“At no point does Me-
thanex want to be losing
money,” said van Sceren.

“That’s a laudable goal

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In the end, van Soeren
says he wants an arrange-
ment which may not make
everybody happy but is
one with which everybody
can live.

“IF everybody goes for
it, there will still be times
in the [methanol price]
cycle where Methanex
will suffer negative cash
flow,” said van Soeren.

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