Registration

SOR/2008-270 September 5, 2008

NATIONAL ENERGY BOARD ACT

Regulations Amending the National Energy Board Processing Plant Regulations

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 National Energy Board Processing Plant Regulations.

Calgary, August 27, 2008

P.C. 2008-1618 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, hereby approves the annexed Regulations Amending the National Energy Board Processing Plant Regulations, made by the National Energy Board.

REGULATIONS AMENDING THE NATIONAL ENERGY BOARD PROCESSING PLANT REGULATIONS

AMENDMENTS

1. (1) The definitions “exploiter” and “mettre hors service” in section 1 of the French version of the National Energy Board Processing Plant Regulations (see footnote 1) are repealed.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. Sections 42 and 43 of the Regulations are replaced by the following:

42. (1) If a company proposes to deactivate a processing plant or part of one for 12 months or more, has maintained a processing plant or part of one in a deactivated mode for 12 months or more or has not operated a processing plant or part of one for 12 months or more, the company shall notify the Board of that fact.

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

43. (1) If a company proposes to reactivate a processing plant or part of one that has been deactivated for 12 months or more, the company shall notify the Board of that fact before the reactivation.

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

43.1 (1) If a company proposes to decommission a processing plant 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.

COMING INTO FORCE

3. 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 National Energy Board Processing Plant Regulations (PPR) correct a regulatory gap identified by the National Energy Board. Currently there are regulatory processes in place which address the issue of abandoning a processing plant or part of one where there is a discontinuance of service and the issue of temporary removal of a processing plant 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 (which, by definition in the Act includes a processing plant). (see footnote 2) Second, section 42 of the PPR permits a regulated company, on notice to the Board, to deactivate a processing plant where there is a temporary removal from service.

This left a gap where a company permanently removed a processing plant or part of one from operation, but where the removal did not result in a discontinuance of service. Some companies had sought Board approval under section 58 of the Act for this work. However, section 58 (see footnote 3) relates to orders exempting pipelines, including processing plants, 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 processing plant and does not adequately accommodate applications for permanent cessation of operations of a processing plant or part of one where there is no discontinuance of service.

Given that work of this nature was not being captured under current regulatory processes, companies would have been able to remove a processing plant, 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 processing plant).

Regulatory proposal designed to deal with the problem

The Board is adding a new provision to the PPR 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 processing plant, or part of one, but where there will be no resulting discontinuance of service. The Board is also adding similar amendments under the Onshore Pipeline Regulations, 1999 with respect to pipelines.

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 PPR 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 processing plant 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 rather 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 processing plant, 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 processing plant or part of one. No significant financial impacts are anticipated as a result of the amendments.

The benefits are creating regulatory certainty, by eliminating the need for companies to have to decide how to proceed when a processing plant, 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 processing plants 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 processing plant, the assessment can occur well in advance of decommissioning. By including a requirement in the PPR for a company to apply to decommission a processing plant 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 in which these issues would be dealt with ranges from issuing exemption orders to holding hearings in order to address public interest issues.

Consultations

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

Some 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 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 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 PPR were pre-published in the Canada Gazette, Part I, on November 10, 2007. From that date, interested persons had 30 days to make representations regarding those amendments. The Board received one letter of comment dated December 17, 2007, from the Canadian Energy Pipeline Association. The letter indicated that the association did not have any comments or concerns with the proposed changes to the PPR regulatory text.

Explanation of the procedures for enforcement of the proposal

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

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 processing plants during their operating life.

Contact

Jutta Elbe Shaw
Regulations and Policy Specialist
Planning, Policy and Coordination
National Energy Board
444 7th Avenue, SW
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 1
SOR/2003-39

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:
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