Giant Gas Pipeline Owner, Contractor in $900M Payment Battle
Completion of 670-km Coastal Gas Link natural gas pipeline in northern British Columbia has included work in steep terrain
Photo courtesy of TC Energy
A Canadian partnership including energy developer TC Energy that is building the $10.6-billion Coastal GasLink pipeline, and a key project contractor, are disputing more than $900 million in project costs in court and in upcoming arbitration. The 670-kilometer line in British Columbia that announced mechanical completion last year is set to carry liquefied natural gas to the LNG Canada export terminal under construction on the province’s Pacific Coast—the country’s first such facility.
Coastal GasLink sued Calgary-based contractor Pacific Atlantic Pipeline Construction in a British Columbia court for costs it incurred to find replacement builders after terminating the firm in 2022, alleging poor performance.
The lump-sum value of contracts awarded Pacific Atlantic Pipeline Construction to build three of the pipeline’s eight sections was $701.6 million, according to court documents. The firm is the Canadian unit of Bonatti Group, an Italy-based energy sector contractor that ranks at No. 96 on ENR’s Top 225 International Contractors list, reporting about $738 million in 2022 global construction revenue.
Pipeline testing is under way before pressurized gas is
introduced, with reclamation and other
environmental steps to continue in 2024, said TC Energy, which owns 35% of the pipeline. Two investment firms own the rest.
Disputed Issues
In an October hearing, Bevin Wirzba, TC Energy executive vice president and Coastal Gas Link president, testified that in flying over pipeline work sites in 2022, he said they looked like “a game of pick-up sticks with pipe joints scattered across the right-of-way and incomplete sections, equipment not working.” Wirzba added: “My observation was that the project was not advancing in a way consistent with my expectations.”
Pacific Atlantic Pipeline Construction had previously claimed in court filings that site delays began in 2019 after Coastal GasLink attempted “a complete overhaul” of the original pipeline design, which the contractor had depended on to bid the work. Project work also was delayed by mudslides and steep terrain that required use of ski lifts to transport pipe, according to Reuters. Pipeline cost is more than double its original estimate.
On Dec. 22, the Alberta court lifted a temporary injunction that had prevented developers from drawing down on an $88-million letter of credit obtained as a performance guarantee.
Looking for quick answers on construction and engineering topics?
Try Ask ENR, our new smart AI search tool.
Ask ENR →
But set for this November is an International Chamber of Commerce arbitration hearing requested by Pacific Atlantic Pipeline Construction that will determine if the contractor defaulted on its contracts or was wrongfully terminated, according to a firm filing. It also pointed to project disruptions from protesters in 2020 and from COVID 19 work stoppages and to efforts by the project developer to accelerate construction, which would have required the contractor to almost double site staffing and equipment, without extra cost payment. The firm seeks more than $750 million in the proceeding, Reuters said.
In a joint statement expressing “disappointment,” Pacific Atlantic Pipeline Construction and Bonatti SpA said they have appealed the decision to the Court of Appeal of Alberta, and “look forward to presenting our case in arbitration.”
In a statement, TC Energy said it is "committed to enforcing its contractual rights and is actively pursuing cost recoveries as it is entitled to.”
Four project subcontractors also have filed civil cost claims in the B.C. Supreme Court against Coastal GasLink and Pacific Atlantic Pipeline Construction to recover costs, media reported last year.
