Section 335 Applications – Guiding Principles for Cost Apportionment
Regulatory Approach for Section 335 Cost Apportionment - Update
Under the Canadian Energy Regulator Act (CER Act), the CER has the authority, with the approval of Governor in Council, to make regulations that address the apportionment of costs gained directly by parties working near CER-regulated pipelines (these could be related to construction or ground disturbances). The CER Act also provides the authority for the Commission to give this direction through an order.
Municipal governments and associations have expressed concern to the CER about extra costs when municipal work occurs near federally-regulated pipelines, and inadequate mechanisms to address and resolve who is responsible to pay these costs. The CER engaged impacted stakeholders and Indigenous communities to understand these concerns and perspectives. The CER undertook engagement between February and May 2019 with municipalities, landowners, regulated companies and Indigenous communities.
Through these engagement activities we learned all groups supported implementing a regulatory approach that:
- allows for flexibility and consideration of specific circumstances;
- is consistent with regulatory approaches in other jurisdictions (provincial regulatory approaches or those that apply to other underground infrastructure);
- does not have unintended consequences for existing land use agreements; and
- considers and addresses related issues such as municipal taxes.
Addressing cost apportionment is new for the CER and each situation will be site specific and unique to the parties impacted by the apportionment of costs. Given this, the CER has determined that the most appropriate way to resolve cost apportionment disputes is through an adjudication process. Therefore, the CER will not pursue the development of regulations at this time.
Future section 335 applications the CER receives will provide valuable insight, information and context, which will inform process improvements, including the establishment of service standards, and whether a regulation on cost apportionment is needed.
For more background on the 2019 engagement for this initiative, or other questions specific to the CER’s regulatory approach for resolving cost apportionment disputes, please contact the CER staff person below.
Canada Energy Regulator contact information
Director, Public Participation
Telephone: (403) 605-6480
Toll Free: 1-800-899-1265
Fax: (403) 292-5503
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
- 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, also called the safety zone, 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.
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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