Pacific Northern Gas Ltd.
TSX : PNG
TSX : PNG.PR.A

Pacific Northern Gas Ltd.

March 09, 2009 08:30 ET

PNG Grants Option to New Party for Excess Firm Pipeline Capacity on Its Western B.C. System

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 9, 2009) - Pacific Northern Gas Ltd. ("PNG") (TSX:PNG)(TSX:PNG.PR.A) announced today that it has entered into a Letter Agreement with Merrill Lynch Commodities, Inc. ("MLCI") to grant MLCI an extendable option to contract for 75 MMcf per day of firm gas transportation service using existing capacity on PNG's Western B.C. pipeline system.

The $1.5 million non-refundable option fee, already deposited into an escrow account, will be released to PNG upon approval of the Letter Agreement by the B.C. Utilities Commission ("Commission") subject to the conditions, if any, in the Commission approval being satisfactory to both parties. MLCI will have an exclusive option until December 31, 2009 to contract for firm gas transportation capacity for a 2 to 5 year primary term, with a right to renew for an additional 2 to 5 year term. Alternatively, MLCI may extend the initial option period by up to four six month periods, with payment of $1 million for each extension. If MLCI exercises its option, the PNG pipeline system would be at full capacity utilization, generating almost $15 million per year of incremental revenue for the benefit of PNG and its customers. The commencement date for the transportation service is expected to be between January 1, 2012 and January 1, 2013. The Letter Agreement with MLCI is similar to a previous Commission approved arrangement entered into with another party in 2008. The earlier arrangement was recently terminated due to non-payment of the option fee.

PNG is continuing to develop the KSL pipeline project through its interest in Pacific Trail Pipelines Limited Partnership.

PNG can provide no assurances that the Commission will approve the Letter Agreement or that MLCI would exercise their option. Further, PNG can provide no assurances that the KSL pipeline project will proceed given the requirements for regulatory approvals and suitable commercial arrangements.

Headquartered in Vancouver, British Columbia, Pacific Northern Gas Ltd. (TSX:PNG)(TSX:PNG.PR.A) owns and operates natural gas transmission and distribution systems. The Company's western transmission line extends from the Spectra Energy (formerly Duke Energy) gas transmission system north of Prince George to tidewater at Kitimat and Prince Rupert, and provides service to 12 communities and a number of industrial facilities. In the northeast, Pacific Northern's subsidiary Pacific Northern Gas (N.E.) Ltd. provides gas distribution service in the Dawson Creek, Fort St. John and Tumbler Ridge areas. Further information is available on the Company's website at: www.png.ca.

Contact Information

  • Pacific Northern Gas Ltd. - Investor Inquiries
    Kevin Teitge
    Vice President Corporate Development & Treasurer
    (604) 691-5689
    or
    Pacific Northern Gas Ltd. - Media Inquiries
    Greg Weeres P.Eng.
    Vice President Operations & Engineering
    (604) 691-5680
    Website: www.png.ca