CER sets the benchmark with a new process for calculating pipeline abandonment cost estimates

Changes ensure companies have enough money saved for future pipeline abandonment

CALGARY, AB, June 15, 2023 /CNW/ - The Canada Energy Regulator (CER) has improved the methodology for how companies fund future pipeline abandonment. This will enhance our ability to ensure that pipelines are safely abandoned while safeguarding the environment and surrounding communities.

Pipeline abandonment cost estimates and set-aside and collection mechanisms are reviewed every five years to include new information and enhance accuracy over time. 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. These 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. 

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.

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.

Quote:  

"For us, it's always safety first. Taking a data-driven approach and requiring companies to set aside money for pipeline abandonment ensures that even when pipelines are out of service, they stay safe." 

Paula Futoransky, Executive Vice President, Regulatory 

Associated Links: 

• Decision in Brief 
• Five-Year Review of Abandonment Cost Estimates and Set-Aside and Collection Mechanisms: Report of the Commission of the Canada Energy Regulator
• Previous abandonment cost estimates for CER-regulated companies

The Canada Energy Regulator (CER) works to keep energy moving safely across the country. We review energy development projects and share energy information, all while enforcing some of the strictest safety and environmental standards in the world. To find out how the CER is working for you, visit us online or connect on social media. 

SOURCE Canada Energy Regulator

Ruth Anne Beck, Communications Officer, Canada Energy Regulator, Email: [email protected], Telephone: [phone], Telephone (toll-free): 1-800-899-1265