Shares of Canexus (TSE:CUS) tanked on Wednesday after the maker of sodium chlorate and chlor-alkali products said that MEG Energy has refused to allow the company to tie in the Cold Lake pipeline system into the MEG pipeline, and as a result is taking legal action to enforce its rights.
The news came as the company updated investors on the progress made at its unit train facility at its North American Terminal Operations in Bruderheim, Alberta, saying that since the shutdown in June, it has completed construction of the 120,000 barrel Cold Lake Blend tank and it is ready for commissioning and start up.
Canexus said it also completed the pipeline from Lamont Station to the connection point into the MEG Energy pipeline, and anticpated being able to meet its schedule of commissioning and start up prior to September 1.
But MEG Energy in late August refused to permit Canexus to perform the coldtap/cut work into the MEG pipeline to tie in the Cold Lake system, Canexus said.
This work is required for commissioning and start-up of the pipeline system for CLB product delivery to the Canexus unit train terminal.
Canexus said that MEG has "no legal justification for its refusal" and is seeking to enforce the terms and provisions of its pipeline agreement to allow it to immediately complete and commission the tie-in.
Legal action is being taken to protect its NATO business, it added.
"While we are disappointed with MEG's actions that have caused an unavoidable delay in the tie-in to the Cold Lake pipeline system and start-up of the unit train facility, we believe we are on a very strong legal footing and will be successful in completing the tie-in, in the coming weeks," said president and chief executive, Doug Wonnacott.
"We are working with our terminal customers to minimize the impact of this delay."
Investors were not convinced, sending the stock down more than 10 percent to C$4.81 in Toronto, stretching year-to-date losses to nearly 33 percent.