A corporate battle between two chemical giants that co-own an Alberta production facility considered one of the largest of its kind, has resulted in one of the owners being ordered to pay the other over a billion dollars for breach of contract.
The dispute saw Dow Chemical Canada ULC and NOVA Chemicals Corporation claim and counterclaim damages against one another between 2001 and 2012 over E3, an ethylene-production facility near Joffre, Alta.
Ethylene is a flammable, gaseous, unsaturated hydrocarbon that can be used in the process of manufacturing polyethylene, a type of plastic.
A summary of the case says Dow Canada alleged breach of contract, claiming Nova “took part of the ethylene and other products produced at E3 that belonged to Dow Canada under the terms of the joint venture for its own use.” It also claimed Nova failed to follow through on other obligations, resulting in a loss of production.
For its part, Nova defended itself against the claim, arguing “an ethane shortage justified its development and use of ethane allocation among the three ethylene production facilities at the Joffre site, and that Dow Canada knew about this allocation as it was occurring and failed to object to it,” the summary reads. Nova also said it operated E3 “to its productive capability, subject to mechanical issues that constrained production.”
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“Nova relied on a limitation of liability clause in the joint venture agreements, and limitations of actions principles,” the summary reads.
In a counterclaim, Nova alleged that Dow Canada “breached the joint venture agreements by acquiring ethane in Western Canada, contrary to a provision that… permitted only Nova to acquire ethane in that area.” Dow Canada rejected the claim.
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A judge with Alberta Court of Queen’s Bench ruled in Dow Canada’s favour, assessing about USD $1.06 billion in damages against Nova, including interest.
Nova’s counterclaim against Dow Canada was dismissed.
“Dow has established these facts and has proved on a balance of probabilities that Nova has breached the joint venture agreements both as operator and as co-owner and has converted some of the ethane that Dow was entitled to from E3,” Justice Barbara Romaine in a 334-page ruling issued on Wednesday.
“I also grant Dow a declaration that the conduct of Nova as operator constitutes wilful misconduct and gross negligence.”
Romaine accepted Dow’s argument that Nova always had sufficient ethane to fill E3 and to get additional ethane and that Nova failed to operate E3 to maximize production.
The E3 facility began operations in Joffre in 2000. Joffre is located about 145 kilometres south of Edmonton.
–With files from The Canadian Press
Below you can read the judge’s ruling on a dispute involving the co-owners of the E3 ethylene plant in Alberta. Some parts of the ruling have been redacted for the purpose of protecting confidential information.
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