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Exchange of Notes between the Government of Canada and the Government of the United States of America constituting an Agreement on Procedures Governing the Procurement in Canada and the United States of America of certain designated items for the Alaska Highway Gas Pipeline [1980] CATSer 3 (10 June 1980)

E101886 - CTS 1980 No. 8

EXCHANGE OF NOTES BETWEEN THE GOVERNMENT OF CANADA AND THE GOVERNMENT OF THE UNITED STATES OF AMERICA CONSTITUTING AN AGREEMENT ON PROCEDURES GOVERNING THE PROCUREMENT IN CANADA AND THE UNITED STATES OF AMERICA OF CERTAIN DESIGNATED ITEMS FOR THE ALASKA HIGHWAY GAS PIPELINE

I

The Secretary of State of the United States of America to the Ambassador of Canada

June 10, 1980

His Excellency Peter Howe,
Ambassador of Canada

Excellency:

I have the honor to refer to Paragraph 7 of the Agreement between Canada and the United States on the Principles Applicable to a Northern Natural Gas Pipeline (Pipeline Agreement) and the recent discussions between representatives of the Government of the United States of America and representatives of the Government of Canada regarding procedures to ensure procurement on a generally competitive basis for the Alaskan Natural Gas Transportation System.

As a result of these discussions, the Government of the United States agrees to enter into an agreement with the Government of Canada permitting the mutual and reciprocal implementation of procedures governing the purchase of specified items for the Alaskan Natural Gas Transportation System.

In fulfillment of this agreement, the United States agrees to adopt the procurement procedures contained in the Annex to this note. It is understood that the procedures in the Annex are subject to regulatory approval in the United States, specifically the amendment of the conditional certificates of the Alaskan Northwest Natural Gas Transportation Company, of the Pacific Gas Transmission Company, and of the Northern Border Pipeline Company by the Federal Energy Regulatory Commission of the United States. It is further understood that Canada will also adopt the procurement procedures contained in the Annex to this note, and bring them into force with Canadian regulatory process.

In the event of disputes regarding implementation of the procurement procedure in the United States of America or in Canada, either country may request consultations in accordance with paragraphs 7(b) and 8 of the Pipeline Agreement.

If the foregoing is acceptable to the Government of Canada, this note and its Annex, together with your note in reply, shall constitute an agreement between the two Governments with effect from the date of your reply.

Accept, Excellency, the renewed assurances of my highest consideration.

Dean R. Hinton

For the Secretary of State

Enclosure:

Annex: Procurement Procedures for the Alaskan Natural Gas Transportation System

PROCEDURES GOVERNING THE PROCUREMENT IN CANADA AND THE UNITED STATES OF AMERICA OF CERTAIN DESIGNATED ITEMS FOR THE ALASKA HIGHWAY GAS PIPELINE

INTRODUCTION

The Agreement between Canada and the United States of America on Principles Applicable to a Northern Natural Gas Pipeline, which was signed in Ottawa on September 20, 1977, states in its preamble that one of the principal objectives of the project is to "maximize related industrial benefits of each country." It further states in Clause 7(a) that "having regard to the objectives of this Agreement, each Government will endeavor to ensure that the supply of goods and services to the Pipeline will be on generally competitive terms." The same clause stipulates that the elements to be taken into account in weighing competitiveness will include price, reliability, servicing capacity and delivery schedules. Clauses 7(b) and 8 provide for coordination and consultation between the two governments with respect to the achievement of the objectives of the Agreement with respect to procurement.

In order to implement these principles, the Governments of Canada and the United States of America agree that the following procedures with respect to the procurement of certain designated items of supply for the Alaska Highway Gas Pipeline will be adopted on a reciprocal basis by the appropriate regulatory authority in each country, namely the Northern Pipeline Agency in Canada (NPA) and the Office of the Federal Inspector in the United States (OFI).

1. Qualification of Bidders

The project companies in each country will submit a list of qualified bidders they propose to invite to tender on any of the items designated in Schedule I to the appropriate domestic regulatory authority, which will expeditiously convey copies of any such lists to the regulatory authority of the other country both directly and through normal diplomatic channels. The regulatory authority of the other country will have 14 calendar days following its receipt in which to review the bidders' list and to propose to its counterpart the addition of any firm or firms which it considers should also be invited to tender. If any such modification is proposed, it is to be communicated to the originating project sponsor by the responsible regulatory authority in that country. Should the project sponsor not be prepared to accept the additional bidder or bidders proposed by the regulatory authority of the other country, the reasons for its position shall be communicated to that authority by the responsible domestic authority.

The project sponsors may, but are not required to, place advertisements inviting interested suppliers to prequalify as bidders for particular supplies. In the event that such advertisements are decided on for designated items, they shall be placed in appropriate trade journals or other publications in both Canada and the United States.

2. Technical Specifications and Tendering Documents

Prior to the actual solicitation of bids on designated items listed in Schedule I, the project sponsors in each country will submit technical specifications and tendering documents to the appropriate domestic regulatory authority, which will first expeditiously review the solicitation information for possibly restrictive language that would prohibit open competition and then expeditiously convey prohibit open competition and then expeditiously convey copies of such information on a confidential basis to the regulatory authority of the other country both directly and through normal diplomatic channels. The regulatory authority of the other country will have 14 calendar days following its receipt to review such information and to submit any proposed modifications in the technical specifications or tender document to the responsible regulatory authority, which in turn will communicate such representations to the originating project sponsor. Should the project sponsor not be prepared to accept the modification of the technical specifications or tender document proposed by the regulatory authority of the other country, the reasons for its position shall be communicated to that authority by the responsible domestic authority.

3. Recommended Decisions to Purchase or Negotiate

Following the receipt and evaluation of bids on designated items listed in Schedule I, the project sponsor will submit its conclusions in a report satisfactory to the domestic regulatory authority with respect to the purchase of supply, or of entering into negotiation with one or more firms for the purpose of reaching contract agreement, to the responsible domestic regulatory authority. After expeditiously reviewing these submissions for general competitiveness, the domestic regulatory authority shall prepare and submit to the regulatory authority of the other country a meaningful summary of the report and of its conclusions. Such information shall include an outline of the factors which were taken into account by the project sponsor in arriving at its conclusions, and, in cases where consideration of industrial benefit were involved, demonstrate that they came within the framework of general competitiveness. While maintaining the confidentiality of proprietory commercial information, including the tender prices of individual bidders, such summaries should be designed to make possible an assessment of the extent to which the proposed procurement conforms with the stated objectives of the Canada-United States Agreement. In cases where bids submitted by either Canadian or United States firm on tenders called by sponsoring companies in the other country have been rejected or accepted only in part, the conclusions of the project sponsor and the reasons for them as outlined in the project sponsor's report will be communicated by the responsible domestic regulatory authority to the regulatory authority of the other country as part of the meaningful summary.

In the event the regulatory authority in the other country wishes to raise questions with respect to the conclusions or the summary containing the factors which led to those conclusions, or wishes to initiate formal consultations as provided for under Clause 7(b) of the Canada-United States Agreement on Principles, it will be required to provide notification to the responsible domestic regulatory authority within a period of 14 calendar days.

Should consultations as provided for under the Agreement be invoked with respect to any aspect of the procurement process, it is recognized by the Governments of both Canada and the United States that they should proceed expeditiously so as to avoid causing any undue delay in the timely completion of the project.

4. Award of Contract

Although no specific requirement for consultation should be necessary at this time in view of the extensive provisions at earlier stages, a short delay may be required to advise the other country's regulatory authority of any significant changes that resulted during negotiations with the selected vendor(s).

SCHEDULE I

Designated Items:

1. Line Pipe - Main Line Pipe 36 inches and over.

2. Gas Turbine/Compressor Packages.

3. Valves - 20 inches interior diameter and over (both block valves and station valves).

4. Pipe Fittings - 20 inches interior diameter and over.

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The Ambassador of Canada to the Secretary of State of the United States of America

June 10, 1980

The Secretary of State
Washington, D.C.

Sir,

I have the honour to refer to your Note of today's date concerning procurement procedures designed to implement the provisions of the Agreement between Canada and the United States of America on Principles Applicable to a Northern Natural Gas Pipeline, signed at Ottawa on September 20, 1977.

I have the honour to inform you that these proposals are acceptable to the Government of Canada, and to confirm that your Excellency's Note, together with the attached statement on Procedures Governing the Procurement in Canada and the United States of America of Certain Designated Items for the Alaska Highway Gas Pipeline, and this reply, which is equally authentic in English and French, shall constitute an agreement between our two governments which shall enter into force on the date of this reply.

Accept, Sir, the renewed assurances of my highest consideration.

Peter Towe

Ambassador of Canada