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Section 335 Applications – Guiding Principles for Cost Apportionment

Under the Canadian Energy Regulator Act (CER Act), the Canada Energy Regulator (CER) is responsible for making decisions concerning the apportionment of costs related to authorized construction or disturbance near federally-regulated pipelines (referred to as activity or activities throughout). This guidance outlines the guiding principles and potential considerations for cost apportionment decisions.

Since cost apportionment is a new authority under the CER Act, the guiding principles included in this document have been informed by early engagement that took place from February-May 2019. The CER welcomes additional feedback on this guidance document at any time. In addition, the CER is currently consulting on the long term regulatory approach for cost apportionment. To learn more and to provide input, visit: Forward Regulatory Plan – Section 335 Cost Apportionment Regulatory Tool.

Background

The CER’s damage prevention framework requires that those who plan to conduct activities near federally-regulated pipelinesFootnote 1 obtain authorization with written consent from the pipeline company prior to undertaking the activity. The authorization will include the safety requirements needed to work safely near the pipeline. For costs directly incurred as a result of authorized construction or disturbance, the CER encourages pipeline companies and those planning to conduct these activities to reach agreements regarding the apportionment of the costs. In circumstances where parties are experiencing difficulty negotiating the terms of the work, or who pays for the associated costs, they can apply to the CER for assistance. This is done through a section 335 application.

Guiding Principles for Cost Apportionment

Balancing Impacts

  • Once a certificate has been granted, a pipeline company has the obligation to manage all threats to safety whether a pipeline right of way exists or not. At the same time, activities near pipelines should only be restricted as necessary to protect people, the environment and the pipeline.
  • Under the CER’s damage prevention framework anyone planning to undertake activities within the prescribed areaFootnote 2 or to cross the pipeline, the pipeline company, and the CER, each have a role in helping to ensure activities near federally-regulated pipelines are safe.
  • The prescribed area is an area where precautions must be taken and authorization (written consent of the pipeline company or an Order issued by the Commission) is required for some activities. In some circumstances, additional measures may be required by a pipeline company, or the Commission, for anyone planning to undertake activities near a pipeline, in order to protect people, the environment and the pipeline. It is recognized that these additional measures may come with costs that would not have existed, but for the presence of the pipeline.

Reaching Timely Agreements

  • Pipeline companies and anyone planning to conduct an activity within the prescribed area for a pipeline, or to cross a pipeline, should strive to reach agreements regarding these activities and the apportionment of costs related to authorized construction or disturbance prior to applying to the CER for a decision.
  • The CER recognizes that undue delays in reaching an agreement can lead to significant cost implications for those planning to conduct work near pipelines. As such, the CER expects that the vast majority of activity requests made to pipeline companies will result in a timely issuance of written consent for the proposed activity to occur. When applicable, the agreement should include information on how the costs related to authorized construction or disturbance will be apportioned amongst parties.

Accessible, Timely Mechanism for Resolving Disputes

  • The CER recognizes that certain cost apportionment decisions are complex and that parties may not be able to reach an agreement independently. In these circumstances parties can seek assistance from the CER through a section 335 application.
  • The CER is committed to providing a process that is accessible, timely, and transparent.

Relevant Considerations

The CER Act does not expressly provide factors that the Commission must consider in making a determination on apportionment of costs. The Commission will determine each section 335 application on a case by case basis and will consider the facts and issues raised by the parties, in evidence and argument, to determine which factors are relevant in making its decision. Depending on the circumstances, relevant considerations may include:

  • The nature of the costs;
  • Existing agreements, and whether or not these agreements include the apportionment of costs related to authorized construction or disturbance (i.e., easement agreements, proximity agreements, crossing agreements);
  • Whether the pipeline occupies a right of way with an associated easement agreement or public land without a right of way, such as a roadway;
  • Compensation that has been paid by the pipeline company;
  • The nature of the activity or work that is being requested, including:
    • which party is initiating the activity/work and the purpose of the activity/work;
    • how land use has changed over time;
    • what land use planning approach has been taken by the parties;
  • Any other factors that the Commission considers appropriate in the circumstance.
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