Alberta Court orders recalculation of $1.4B in damages, supports Dow in Nova lawsuit

Both sides are welcoming an Alberta Court of Appeal ruling that supports a trial judge decision in favour of Dow Chemical Canada over Nova Chemicals Corp. but orders a recalculation of its award of $1.4 billion in damages.

The appeal court agreed with the original judge who ruled in 2018 that Dow was correct in asserting that a jointly owned ethane cracker at the Joffre petrochemical complex in central Alberta had been operated by Nova at less-than-agreed-upon volumes for a 10-year period until 2012.

The ethylene-production facility east of Red Deer is considered to be one of the largest facilities of its kind.

Read more: Appeal filed after judge orders Nova to pay $1B to Dow Canada over production dispute

The cracker, dubbed “E3” because it was the third at the complex, was built by Nova and Union Carbide through a 1997 joint-venture agreement and designed to supply ethylene feedstock for a new polyethylene plant being built by Union Carbide.

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However, Dow — a direct competitor to Nova in the Alberta ethane market — merged with Union Carbide in 2001 and took over its half ownership of the ethane cracker.

NOVA Chemicals plant, Joffre, Alberta, Aug. 29, 2016.
NOVA Chemicals plant, Joffre, Alberta, Aug. 29, 2016.THE CANADIAN PRESS IMAGES/Larry MacDougal

When a shortage of ethane developed, Nova split the supply between its two crackers and the one shared with Dow, a strategy that Dow argued was in violation of Nova’s obligation to keep its ethane cracker running at capacity.

“The Court of Appeal of Alberta affirmed the trial court’s ruling that E3 must be run to its full productive capability, and that Nova committed gross negligence and wilful misconduct in failing to do so,” said Dow spokeswoman Ashley Mendoza in an email.

“The trial court’s finding in Dow’s favour on Nova’s liability has been affirmed, as has its ruling on the great majority of Dow’s damages through 2012.”

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She said Dow has the right to recover “significant additional damages” for the period after 2012.

The appeal court found that the trial judge’s inclusion of lost polyethylene profits from the lack of ethylene production was improper and Dow should only be compensated for direct damages, to be calculated by the trial court.

“We are pleased with the appellate court’s decision on our appeal, and we look forward to continuing to improve the ongoing operations and relationships at our world-class Joffre facility,” said Nova spokeswoman Jennifer Nanz in an emailed statement.

Read more: Nova Chemicals HQ in Calgary evacuation over as RCMP investigate threat to ‘multiple locations’

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