TransCanada Corp. is suing the gas distribution business of rival Enbridge Inc. over its decision to end an agreement that would see the two firms co-operate on a 23-kilometre stretch natural gas pipeline in the Greater Toronto Area.

"TransCanada will suffer irreparable harm if Enbridge does not abide by the terms of the (memorandum of understanding)," TransCanada said in a statement of claim filed in the Ontario Superior Court of Justice last week.

To accommodate growing energy demand in the GTA, Enbridge proposed in late 2012 to expand its gas distribution system in the region. Around the same time and in the same area, TransCanada was also expanding its own natural gas infrastructure.

The Ontario Energy Board has encouraged natural gas shippers in the province to consult and co-ordinate with one another to make sure the work is done in the most efficient way possible.

As part of those efforts, Enbridge and TransCanada signed a memorandum of understanding in January to build one section of pipeline that would be used by both companies — called "Section A."

Enbridge backed away

However, Enbridge terminated its MOU with TransCanada last month.

Guy Jarvis, president of Enbridge's gas business, said that was because TransCanada was doling out space on its share of the GTA pipeline in a manner Enbridge believed was against the law.

Under Ontario Energy Board regulations, pipeline capacity must be offered to the market in "an open and non-discriminatory manner," he said.

Jarvis said TransCanada failed to do so because it didn't offer all of the capacity that was made available to it and it gave some customers toll discounts.

"In Ontario, those regulatory requirements are a law, so we were in a position where in order for us to continue forth and fulfil the MOU would have created a situation where we would be breaching a law . . . and as a result, we terminated the memorandum of understanding," said Jarvis.

A TransCanada spokesman declined to offer further comment, as the issue is now before the courts.

In its statement of claim, TransCanada accuses Enbridge of terminating the MOU "for its own convenience."

Seeking $4.5B in damages

It wants the court to order Enbridge to "continue to operate under and abide by all the terms of the MOU."

Alternatively, TransCanada is seeking damages for financial harm — estimated at $4.5 billion "or such further amount as may be determined at trial.

Enbridge's Jarvis said: "We plan to defend ourselves against this claim."

"We're going to continue to make sure that the actions that are necessary are taken to ensure that open access for this capacity is available to customers on our franchise and elsewhere in Ontario."