Steelhead LNG is expanding a civil claim against Cedar LNG to more of its industry partners in what is essentially an intellectual property infringement claim.
On Dec. 23, Steelhead LNG announced it was filing a civil claim against Cedar LNG Partners LP, Pembina Pipeline Corp. (NYSE:PBA) and ARC Resources (TSX:ARX).
This follows an earlier civil claim filed last year against Cedar LNG in Canada and Samsung Heavy Industries in South Korea.
Cedar LNG is a $5.5-billion floating LNG project being built in Kitimat in partnership between the Haisla First Nation and Pembina Pipelines, with ARC Resources supplying the natural gas for the project.
In its more recent claim, Steelhead is asking the courts for a “permanent injunction restraining ARC from executing or supplying natural gas to the Cedar LNG project under the ARC-Cedar Liquefaction Agreement, or selling any LNG related thereto.”
It also seeks damages "for the unauthorized use and exploitation of Steelhead LNG's information.”
Steelhead argues that Seven Generations Energy – acquired by ARC Resources in 2021 – acquired valuable research and other intellectual property when it worked with Steelhead on other LNG proposals – information that ARC later used in its partnership with Cedar LNG without compensating Steelhead.
“Despite spending over 140 million dollars and many years developing its proprietary assets and solutions for Canadian LNG export, Steelhead’s efforts were undermined by ARC’s conduct in systematically taking and using Steelhead’s confidential information for its own benefit,” Steelhead says in its claim.
“Its actions over the course of years amounted to corporate espionage of Steelhead’s valuable assets—particularly its confidential information, trade secrets and intellectual property.”
In arguing its case, Steelhead’s claim reveals financial arrangements for Cedar LNG and the value of LNG exports.
For example, it estimates the value of the LNG to be sold under an agreement between Cedar LNG and ARC to be worth an estimated $1.55 billion per year, or $31.5 billion over the length of a 20-year contract, based on Japan-Korea Marker LNG prices of US$15 per MMBtu.
It estimates the value to Pembina Pipeline to be US$200 million to US$260 million annually.
Steelhead LNG was the first to propose a floating LNG design for a B.C. project, but despite attempts to advance LNG projects on Vancouver Island, the company was unsuccessful.
Steelhead had worked with First Nations on a number of proposals on Vancouver Island, including the Malahat and Huy-Ay-Aht First Nations. The latest project, Kwispaa LNG, was shelved in 2019.
Meanwhile, the Haisla First Nation succeeded in getting approval and financing for its floating LNG project in Kitimat, with Samsung Heavy Industries and Black and Veatch providing the engineering, procurement and construction.
Steelhead argues that Cedar LNG has only succeeded in advancing as far and as quickly as it has because so much proprietary intellectual property and research on things like markets and LNG facility design was carried over by one of Steelhead’s erstwhile industry partners (Seven Generations, now ARC Resources) to the Cedar LNG project.
“For years, Steelhead shared its confidential information … in good faith with 7G in what Steelhead understood to be their collective effort to advance one or more of Steelhead’s LNG projects,” the claim states. “7G learned an enormous amount about the economics, engineering, and structure of LNG projects, the LNG market and the players involved.”
ARC would have acquired that information when it acquired Seven Generations. Steelhead argues that ARC was only able to successfully ink an agreement with Cedar LNG on gas supply because of all the information it inherited.
“ARC was only able to conclude the ARC-Cedar Liquefaction Agreement with Cedar by unlawfully leveraging, exploiting and using the information and knowledge that it had mined from Steelhead,” the company alleges.
The company also suggests the defendants have not been open to compensating Steelhead for using its proprietary information.
"It is evident to Steelhead that, without relying on ARC Resources' capacity commitment -- enabled by what Steelhead believes to be a pattern of wilful and wrongful conduct – Cedar LNG and Pembina would not have been able to secure the substantial financial commitments necessary to reach a positive final investment decision," Steelhead LNG president Victor Ojeda said in a press release.
"While Steelhead remains open to pursuing an amicable resolution, ARC, Pembina, and Cedar have shown little interest in doing so. As a result, Steelhead has no choice but to seek judicial intervention."
BIV has reached out to Cedar LNG and ARC Resources for comment on the claim, but has not yet received a response.
