Registration

SOR/2008-269 September 5, 2008

NATIONAL ENERGY BOARD ACT

Regulations Amending the Onshore Pipeline Regulations, 1999

The National Energy Board, pursuant to subsection 48(2) (see footnote a) of the National Energy Board Act (see footnote b), hereby makes the annexed Regulations Amending the Onshore Pipeline Regulations, 1999.

Calgary, August 27, 2008

P.C. 2008-1617 September 5, 2008

Her Excellency the Governor General in Council, on the recommendation of the Minister of Natural Resources, pursuant to subsection 48(2) (see footnote c) of the National Energy Board Act(see footnote d), hereby approves the annexed Regulations Amending the Onshore Pipeline Regulations, 1999, made by the National Energy Board.

REGULATIONS AMENDING THE ONSHORE PIPELINE REGULATIONS, 1999

AMENDMENTS

1. (1) The definitions “exploiter” and “mettre hors service” in section 1 of the French version of the Onshore Pipeline Regulations, 1999 (see footnote 1) are repealed.

(2) The definition “abandon” in section 1 of the Regulations is replaced by the following:

“abandon” means to permanently cease operation such that the cessation results in the discontinuance of service. (cessation d’exploitation)

(3) The definition “operate” in section 1 of the English version of the Regulations is replaced by the following:

“operate” includes repair, maintain, deactivate, reactivate and decommission. (exploitation)

(4) The expression “(mettre hors service)” at the end of the definition “deactivate” in section 1 of the English version of the Regulations is replaced by the expression “(désactivation)”.

(5) Section 1 of the Regulations is amended by adding the following in alphabetical order:

“decommission” means to permanently cease operation such that the cessation does not result in the discontinuance of service. (désaffectation)

(6) Section 1 of the French version of the Regulations is amended by adding the following in alphabetical order:

« désactivation » Mise hors service temporaire. (deactivate)

« exploitation » S’entend notamment de la réparation, de l’entretien, de la désactivation, de la réactivation et de la désaffectation. (operate)

2. The heading before section 44 and sections 44 and 45 of the Regulations are replaced by the following:

DEACTIVATION AND REACTIVATION

44. (1) If a company proposes to deactivate a pipeline or part of one for 12 months or more, has maintained a pipeline or part of one in a deactivated mode for 12 months or more or has not operated a pipeline or part of one for 12 months or more, the company shall submit an application for deactivation to the Board.

(2) The company shall include in the application the reasons, and the procedures that were or are to be used, for the activity that is the subject of the application.

45. (1) If a company proposes to reactivate a pipeline or part of one that has been deactivated for 12 months or more, the company shall submit an application for the reactivation to the Board.

(2) The company shall include in the application the reasons, and the procedures that are to be used, for the reactivation.

DECOMMISSIONING

45.1 (1) If a company proposes to decommission a pipeline or part of one, the company shall submit an application for the decommissioning to the Board.

(2) The company shall include in the application the reasons, and the procedures that are to be used, for the decommissioning.

3. Section 50 of the Regulations is replaced by the following:

50. A company shall include in an application made under section 74 of the Act for leave to abandon a pipeline or part of one the reasons, and the procedures that are to be used, for the abandonment.

4. (1) Paragraph 56(c) of the Regulations is replaced by the following:

(c) for at least one year after a pipeline or part of one is placed into service, any information with respect to the quality assurance program developed under section 15;

(2) The portion of paragraph 56(g) of the Regulations before subparagraph (ii) is replaced by the following:

(g) for at least two years after the operation of a pipeline or part of one has been duly abandoned in accordance with all applicable requirements

(i) all records available to the company in respect of the procedures used in each stage of the construction of the pipeline or part,

COMING INTO FORCE

5. These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

These amendments to the Onshore Pipeline Regulations, 1999 (OPR) correct a regulatory gap identified by the National Energy Board. Currently there are regulatory processes in place which address the issue of abandoning a pipeline or part of one where there is a discontinuance of service and the issue of temporary removal of a pipeline or part of one from service. First, paragraph 74(1)(d) of the National Energy Board Act (the Act) sets out the regulatory process where a company seeks to abandon its pipeline or part of one. (see footnote 2) Second, section 44 of the OPR permits a regulated company to apply for an order permitting a pipeline, or part of one, to be deactivated where there is a temporary removal from service.

This left a gap where a company was permanently removing a pipeline or part of one from operation, but where it did not result in a discontinuance of service. Some regulated companies, when seeking to permanently cease the operation of a pipeline or part of one where there was no discontinuance of service, had sought Board approval under section 58 of the Act. However, section 58 (see footnote 3) relates to orders exempting pipelines from any or all of the provisions of sections 29 to 33 and 47 of the Act, the effect of which is to allow the construction and operation of a pipeline, and does not adequately accommodate applications for permanent cessation of operations of a pipeline or part of one where there is no discontinuance of service.

Given that work of this nature was not being captured under existing regulatory processes, companies would have been able to remove a pipeline or part of one from operation without applying to or notifying the Board. As a result, the Board would not have been given the chance to consider possible ramifications associated with the work, including engineering, environmental effects, effect on service and safety (both for the work being done and the continued safe operation of the pipeline).

Regulatory proposal designed to deal with the problem

The Board is adding a new provision to the OPR which requires companies to apply to the Board for approval whenever those companies undertake work which will result in the permanent cessation of the operation of a pipeline or part of one, but where there will be no resulting discontinuance of service. The Board is adding similar amendments under the National Energy Board Processing Plant Regulations with respect to processing plants.

In addition to the definition “decommission” and the provision requiring application to the Board, there are minor consequential amendments to both of these Regulations.

Alternatives

The Board considered defining “decommission” in the OPR and requiring an application under section 58 of the Act. The Board also considered defining “decommission” in a Board letter to all companies under its jurisdiction and requiring an application under section 58 of the Act. However, a requirement to apply to decommission a pipeline or part of one would not properly fit within section 58 of the Act, as that provision is intended for applications which are exempt from certain requirements of the Act.

The Board could have also decided not to change the regulatory scheme, but to deal with such applications only when they are filed, and consider them under whichever section of the Act or regulations companies chose to file them. However, companies would have been able to remove a pipeline or part of one from operation without applying to or notifying the Board, which would then not have been given the chance to consider possible ramifications associated with the work, including engineering, environmental effects, effect on service and safety.

Benefits and costs

The cost associated with the Regulations arises from the requirement for pipeline companies to make an application to the Board prior to decommissioning a pipeline or part of one. No significant financial impacts are anticipated as a result of these amendments.

The benefits are creating regulatory certainty, by eliminating the need for companies to have to decide how to proceed when a pipeline or part of one is being permanently removed from operation where there is no resulting discontinuance of service, and providing for the Board to be able to consider possible ramifications associated with the work.

Potential environmental effects related to decommissioning are assessed for new pipelines which are subject to either the Canadian Environmental Assessment Act or the Mackenzie Valley Resource Management Act. This assessment is also conducted pursuant to the Act. Depending on the planned lifespan of a pipeline, the assessment can occur well in advance of decommissioning. By including a requirement in the OPR for a company to apply to decommission a pipeline or part of one, the Board is able to provide appropriate and timely regulatory oversight. This oversight allows the Board to consider environmental, safety and public interest issues based on current conditions and standards. The manner by which these issues will be dealt considered ranges from issuing exemption orders through to holding hearings in order to address public interest issues.

Consultation

On February 5, 2003, the Board issued a letter to all pipeline companies regarding the proposed amendments to the OPR. The Board, in its letter, invited comments from companies and associations.

Some groups who responded suggested changing the definition “pipeline” to match the definition set out in CSA Z662. However, “pipeline” is a term defined in the Act and cannot, therefore, be changed in the OPR, which are subordinate to the Act. Other groups who responded suggested changing the definition “decommission” so as to explicitly limit the decommissioning provision and thereby to avoid including work of a minor nature.

In order to ensure that only the appropriate circumstances are caught under the proposed provision, the Board is issuing an exemption order which grants a blanket exemption from this provision for projects meeting certain criteria and so long as certain terms and conditions are met. The proposed exemption order applies where there are no engineering, environmental or public interest issues and is intended to exempt companies where the work performed is routine and of a minor nature.

The proposed amendments to the OPR were pre-published in the Canada Gazette Part I on November 10, 2007. Interested persons were requested to make representations with respect to the proposed amendments within 30 days after the date of pre-publication. The Board received two letters of comment. One, dated December 17, 2007, was received from the Canadian Energy Pipeline Association and indicated that the association did not have any comments or concerns with the proposed changes to the OPR regulatory text. The other, dated December 7, 2007, was a letter from David Core, President of the Canadian Alliance of Pipeline Landowners’ Associations, on December 7, 2007. Mr. Core did not raise any new issues or concerns in his letter and as a result no changes have been made to the amendments, but he did refer to landowner concerns that he had previously raised with the Board.

In October 2007, the Board launched the Land Matters Consultation Initiative (LMCI), to provide a forum for interested parties and the Board to discuss and generate options for the Board’s consideration of lands issues. Mr. Core wrote his letter of comment on the proposed amendments to the OPR during the commencement of the LMCI. He expressed reservations about the decommissioning amendments generally because he thought they could be better discussed in the LMCI forum. However, he also suggested that it would be appropriate for the Board to proceed with the amendments if they were needed as a “stop gap” to “protect [landowners] from negative consequences.”

As previously mentioned, the amendments allow the Board to consider ramifications associated with the decommissioning of a pipeline or part of one, including engineering, environmental effects, effect on service and safety (both for the work being done and the continued safe operation of the pipeline). Without these amendments, companies could have removed a pipeline or part of one from operation without applying to or notifying the Board and without Board oversight.

Explanation of the procedures for enforcement of the proposal

In order for a company to decommission a pipeline or part of one which is under the Board’s jurisdiction, an applicant must prepare and submit for Board approval an application pursuant to the Regulations.

The Board intends to monitor compliance with the Regulations by reviewing specifications and procedures to be used by the regulated companies, by auditing their records and activities to determine their adequacy and effectiveness, and by performing inspections of onshore pipelines during their operating life.

Contact

Jutta Elbe Shaw
Regulations and Policy Specialist
Planning, Policy and Coordination
National Energy Board
444 — 7th Avenue South West
Calgary, Alberta
T2P 0X8
Telephone: 403-299-3308
Fax: 403-292-5503
Email: Jutta.Shaw@neb-one.gc.ca

Footnote a
S.C. 2004, c. 15, s. 84(2)

Footnote b
R.S., c. N-7

Footnote c
S.C. 2004, c. 15, s. 84(2)

Footnote d
R.S., c. N-7

Footnote 1
SOR/99-294

Footnote 2
The Board has interpreted this provision regarding abandonment of a pipeline to apply only to situations where there is a discontinuance of service. To interpret it more broadly would mean that companies would have to apply under section 74 of the Act for the many maintenance and routine repair projects they undertake. Furthermore, section 24 of the Act requires a public hearing before leave to abandon may be granted. This requirement is very onerous for routine “abandonments.”

Footnote 3
Section 58 of the Act empowers the Board to issue orders exempting pipelines less than 40 kilometres in length from the requirements to obtain a certificate under section 52 of the Act, to file a plan, profile and book of reference, and to obtain a leave to open order.

NOTICE:
The format of the electronic version of this issue of the Canada Gazette was modified in order to be compatible with extensible hypertext markup language (XHTML 1.0 Strict).