The Canada Energy Regulator (CER) says it has improved the methodology for how companies fund future pipeline abandonment.
According to the CER, the new system will enhance its ability to ensure that pipelines are safely abandoned while safeguarding the environment and surrounding communities.
The CER’s preliminary estimate indicates that $18.6 billion may be needed for future pipeline abandonment. This amount represents a significant increase compared to the final 2019 number of $10.4 billion. The final amount will be confirmed in the second part of the review.
Pipeline abandonment cost estimates and set-aside and collection mechanisms are reviewed every five years to include new information and enhance accuracy over time. The regulator says this year’s increased cost estimates are due to inflation, changes to company-owned infrastructure, and updated abandonment assumptions and costs.
Pipeline abandonment involves cleaning the pipe and emptying it of any fluids. It could also include conducting inline inspections and cutting, capping, and filling pipelines with materials such as concrete when necessary, especially at water, road and railway crossings. Such actions would ensure the pipeline remains safe and poses no potential hazards to the surrounding environment and communities.
The CER has standardized how it calculates abandonment cost estimates using company-owned and publicly available Geographic Information System (GIS) data. Company-owned GIS data includes details on their pipelines’ location, size, commodity type, and associated infrastructure. Publicly available GIS data provides information on roads, railways, vegetation, water bodies and other physical features.
During Part 1 of the review, 93 companies with CER-regulated pipeline systems were automatically made participants in their review. Other participants in the review included Indigenous Peoples from 12 First Nations, three landowner associations, two provincial governments, two companies with no CER-regulated pipeline systems, and the Canadian Association of Petroleum Producers.
In the second part of the review, companies, Indigenous Peoples, landowners and others will have the opportunity to ask for changes to the preliminary CER cost estimates for a particular pipeline. Proposed changes would be considered based on the unique circumstances of that pipeline.
Companies must gradually accumulate funds in a dedicated trust or post a financial guarantee (agreements from a third party to cover the cost of abandonment if the company can’t pay) with the CER for the total estimated cost of abandoning a pipeline. The latest date they must set aside the total funds in a trust is the end of 2054 or earlier, depending on the company. The money set aside will be used to maintain the pipeline’s ongoing safety after it is permanently removed from service and can only be accessed by the CER.
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