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Construction site of the Mississauga gas-fired generating station on Loreland Ave., Mississauga, November 21 2011. The Liberal government cancelled this gas-fired electrical generating station. Construction was well underway on the Greenfield South generation station in Mississauga when the Liberal government cancelled the plant, and work continued on the site for weeks after the Oct. 6 vote. It finally stopped Nov. 18, 2011.Fernando Morales/The Globe and Mail

Ontario has given a company at the centre of the gas plant scandal a special permit to buy gas more cheaply – even though it will have an "adverse impact" on other gas customers.

The Ontario Energy Board (OEB) ruled that Greenfield South, a subsidiary of Eastern Power Ltd., can buy natural gas from the Vector Pipeline for a hydro generating station it is building near Sarnia. Connecting to Vector will allow Greenfield South to bypass Union Gas, which holds the franchise for the area and would normally have the right to supply gas to the project.

(What is the Ontario Liberals' gas-plants scandal? Read the Globe's easy explanation)

The OEB is still investigating Greenfield South over allegations that it built a pipeline to connect with Vector before getting the board's permission.

According to Greenfield South's application to the OEB, getting gas from Vector rather than Union will save the company $12-million over 20 years.

In its ruling, the OEB conceded that allowing the company to bypass Union would deprive other gas customers in the area, who must buy from Union, of the benefit of having Greenfield South take on part of the costs of the system. But it said this was justifiable because Vector's services are better suited to Greenfield's needs.

"As a result of granting the Certificate to Greenfield, the indirect adverse impact on other ratepayers is balanced by a direct benefit to Greenfield," board members Ken Quesnelle and Cathy Spoel wrote in their decision.

The ruling came down hours after The Globe reported the dispute two weeks ago. Eastern and Union made their submissions to the OEB on Jan. 16. The Globe published its story April 2. Later that morning in the legislature, Energy Minister Bob Chiarelli announced the board would issue its ruling that day.

Mr. Chiarelli's office said the minister did not interfere in the decision.

"The officials in the Ministry of Energy routinely liaise with their counterparts at the OEB on decision timelines. During the course of that regular business the OEB informed Ministry officials a decision on the Greenfield pipeline was imminent," the Energy Minister's spokeswoman, Jennifer Beaudry, wrote in an e-mail. "At no time did the Minister or anyone in the Minister's office engage the OEB to influence their independent decision making process."

Reached at Eastern's Toronto offices, company president Gregory Vogt said he needed to check whether he "had time" to talk about the case. Mr. Vogt did not subsequently return The Globe's request for comment.

Eastern was contracted to build a gas-powered hydro generating station in the Toronto suburb of Mississauga in 2005. The company, run by Mr. Vogt and his brother Hubert Vogt, had never built anything that size and struggled to get the project off the ground. In the meantime, local opposition to the plant grew, and then-premier Dalton McGuinty cancelled it during the 2011 election campaign.

The Vogts drove a hard bargain with the government, the Auditor-General said, receiving $36-million for sunk costs and a new contract for the plant near Sarnia. The government also provided Eastern with a $45-million interest-free loan, and paid off the company's $149-million construction debt. The Auditor-General has said the cost of cancelling the Mississauga plant and a facility in nearby Oakville could add up to as much as $1.1-billion.

Eastern has landed in hot water at the Sarnia project.

During the OEB hearings, Union alleged that Greenfield South had built a pipeline to connect to Vector without waiting for board approval. Photographs taken by Union employees and filed with the OEB show pieces of yellow pipe half covered by snow on what Union says is Greenfield's property. One photo appears to show a valve for the pipe sticking out of the ground. The board referred the allegation to its compliance department; an OEB spokeswoman confirmed the investigation continues even though the board ruled in Greenfield South's favour on the gas dispute.

Eastern has also faced two disputes at the Ontario Labour Relations Board. Carpenters accused the company of making a foreman put workers in "unsafe positions" and "complete tasks without regard to proper safety procedures." In another case, a construction union accused Eastern of breaking a collective agreement by hiring a non-union contractor. The first dispute appears to have been resolved; it is unclear what happened in the second.

Mr. Chiarelli has brushed off Eastern's problems.

"It sounds like the sky is falling down over this dispute and this contract," he said when the Progressive Conservatives and New Democrats grilled him on the situation in Question Period. "They're making a mountain out of a molehill."

That explanation did not satisfy the opposition.

"You can't cut a tree down in Ontario without a permit. How did you allow your buddies to build a pipeline without one?" Tory MPP Vic Fedeli asked in the legislature.

NDP Leader Andrea Horwath said Mr. Chiarelli was not taking any of this seriously enough.

"He is in way over his head when it comes to what's happening on this file," she told reporters. "[He's] basically saying to everybody: 'You can be scofflaws in the province of Ontario and it really doesn't matter.'"

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