. . .

2. Briefly, the background of the situation is as follows. The Westcoast Transmission Company Limited has obtained an Order from the Board of Transport Commissioners to construct a pipeline from the Northern Alberta and Northern British Columbia area to Vancouver and to the United States boundary, for the transmission and export of gas. The area of the source of this gas is the newly proven field straddling the Alberta-British Columbia boundary, stretching north of the Peace River almost to the Northern borders of the provinces. There is no market in Canada for the gas in this very extensive field as it would be more economical to supply the built-up areas of Alberta as well as other areas in Canada from the Southern Alberta gas fields. Moreover, the oil in the area could not be tapped without allowing the gas to escape in the process. In these circumstances, the gas must either be wasted or exported to the Northwestern United States and to the relatively small market in Vancouver.

3. The difficulty the Federal Power Commission is faced with in licencing the arrangements for importing this gas into the Northwestern United States arises from the provisions of the Electricity and Fluids Exportation Act and regulations which were drafted to meet entirely different situations but which require that export licences be issued on an annual renewable basis and which provide for the levying of an export tax at the discretion of the Minister of Trade and Commerce of up to one-third of the value of the commodity at the border. In these circumstances, it has been argued before the FPC that the Commission cannot be sure that Westcoast will be able to carry gas across the border beyond the end of each fiscal year in which the licence is issued and in view of the possible export tax, Westcoast cannot establish a firm price. The FPC, on the other hand, is required to find that gas will be available in sufficient quantities, for a sufficient period and at a price which will enable the company and the distribution agency to amortize its investment over a 20-year period.

4. It would appear that it is in the national interest of Canada to support Westcoast's application to the FPC and this has already been done to a limited extent when the Embassy in Washington, after discussions with Mr. Howe, sent a note to the State Department stating that the Canadian Government "regards favourably the proposal of the Westcoast Transmission Company" and that an export permit would be issued. However, it now appears that something more than this is required and the attached letter? suggests that we will co-operate with Trade and Commerce in this regard.

E.A. CÔTÉ