The developer of a Canadian ethanol plant that has been asked to open a C$32 million letter of credit (L/C) by the contractor laying the pipeline to the plant has filed a motion with the Ontario Energy Board (OEB) saying the contractor's request is unlawful.

The motion is part of IGPC Ethanol's efforts to ensure that natural gas will be available to the ethanol plant in time for the summer 2008 commissioning of the facility.

Growing concerns

The move follows growing concerns over the slow progress in the construction of a new 28.5 kilometre pipeline by the local gas utility, Natural Resource Gas Limited (NRG). Its tardiness is jeopardising the timely start-up of the US$140 million plant according to IGPC.

IGPC's appeal for help from the OEB was made more urgent after NRG said the developer must post a L/C of nearly C$32 million before it will proceed with construction of the C$9.1 million pipeline.

Unlawful demand

Under an earlier OEB-approved agreement with NRG, IGPC was to post a L/C of approximately C$5.3 million, in addition to a cash payment of C$3.8 million.

In its request to the OEB, IGPC stated that it believes that "NRG's recent demands lead to the conclusion that NRG is either unwilling or unable to complete the pipeline. IGPC believes that unless it accedes to NRG's unlawful demands, construction of the pipeline will not commence on a timely basis, or at all. IGPC is concerned that NRG's conduct threatens the very viability of the pipeline and the facility."

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