PROPERTY ISSUES | PIPELINE ABANDONMENT
The Evidence
It is better to be “pro-actively safe than reactively sorry”. It is better to have too many funds to cover abandonment than not enough. The landowner should carry absolutely no risk concerning pipelines or their abandonment.
On January 17, 2008 the National Energy Board (NEB) released its proposed approach for its Land Matters Consultation Initiative (LMCI), created in response to CAEPLA’s success in raising awareness of property owner’s legitimate concerns. Part of this process included two streams or processes in relation to abandonment; one to address Financial Issues (Stream 3 - creation of an Abandonment Fund) and the other to address Physical Issues (Stream 4 - the determination of how the pipeline is to be abandoned).
The NEB stated in that letter; “Two key principles the Board believes are fundamental to its future decisions with respect to the financial matters related to pipeline abandonment are:
- Abandonment costs are a legitimate cost of providing service and are recoverable upon Board approval from users of the system.
- "Landowners will not be liable for costs of pipeline abandonment.”
In its wisdom, the Board chose to address the financial issues first, in a full quasi-judicial hearing that would cost hundreds of thousands of dollars to take part in, something landowners and CAEPLA could not afford. Being the captured “bureaucratic mess it is”, the NEB proceeded down this path.
Any sensible person would have designed the abandonment plan (Stream 4) before trying to determine the cost and how much funding to set aside. To meet the principle of protecting landowners from risk, you must first determine the risks to landowners and how to avoid them. Much like building a house, you cannot determine the cost of construction without first obtaining a drafted plan. But that is not how the NEB does things.
As Canada’s only national landowner organization, with support across the country and many years of experience, CAEPLA requested funding to hire experts and legal counsel to determine how to fulfill the NEB principle of property owners bearing “no cost of pipeline abandonment”.
Pipelines are imposed on property owners and they receive no financial benefit from the imposition. The pipeline is not an asset on the landowner’s balance sheet, it is a liability. As such, it is unreasonable to expect a landowner organization or landowners in general to cover these costs.
The NEB refused to provide funding or cost recovery. In the best interests of property owners, CAEPLA had no choice but to hire its own experts, at its own cost, to provide evidence on what the companies needed to do to leave landowners with no risk. (Participation in the LMCI process has cost CAEPLA hundreds of thousands of dollars for which it continues to invoice the NEB to this day.)
CAEPLA’s conclusion: “Future liability concerns of landowners must be removed through establishment of a “legacy fund” sufficient not only to ensure perpetual maintenance but also pipeline removal should maintenance be terminated”. That is, either maintain the pipe into perpetuity or completely remove it.
The NEB’s conclusion was that the companies could base the collection of funds on only 20% removal of the facilities or the companies could propose their own plan; a conclusion in complete opposition to its principle of no liability to landowners for costs of pipeline abandonment.
On January 20, 2012, CAEPLA received notification from the NEB that shows Enbridge proposes that it collect funds based on a .7% overall removal rate with 0% removal on cultivated and pasture land. This proposal is far below the 20% baseline the NEB had set and totally betrays the NEB’s principle of no liability to landowners for abandonment costs.
Posted below is the evidence that CAEPLA provided at the hearing that determined that the only way landowners would be left with no risk is to maintain the pipe into perpetuity or completely remove it (100 % removal).
(Note: At the NEB hearing, the companies provided no evidence on the NEB’s second fundamental principle, even though the NEB states there is a “burden of proof” required in its regulatory processes.)
Read the hearing transcripts, evidence, appendices and decision
Canadian Alliance of Pipeline Landowner Associations (CAPLA) - CAPLA Response to Stream 3 and 4Discussion Papers
A. IntroductionIn the Board’s letter of January 17, 2008 concerning its approach to the Land Matters Consultation Initiative (see Appendix 1), the Board established “two key principles the Board believes are fundamental to its future decisions with respect to the financial matters related to pipeline abandonment.” These two principles are:
- Abandonment costs are a legitimate cost of providing service and are recoverable upon Board approval from users of the system.
- Landowners will not be liable for costs of pipeline abandonment.
The Board defined the key issue in Stream 3 to be: “What is the optimal way to ensure that funds
are available when abandonment costs are incurred?” The purpose of Stream 4 is to define “the
desired end-state of land post-abandonment” and to determine “the optimal way of ensuring the
desired end-state is achieved”. However, the Board reiterated that “a potential starting point for
determining the desired end-state after a pipeline is abandoned is that NEB’s goals 1 and 2
continue to be met … ”.
Canadian Alliance of Pipeline Landowner Associations (CAPLA) - LMCI Stream 3 Opening Statement
In accordance with directions provided by the Board upon the establishment of LMCI, this hearing is to determine “the optimal way to ensure that funds are available when abandonment costs are incurred” to fulfill the Board’s fundamental principle that “landowners will not be liable for costs of pipeline abandonment.” Outcomes to be achieved by the Board in this proceeding include “identification of technical abandonment assumptions to be used to estimate abandonment costs” to relieve landowners of this potential liability.
Canadian Alliance of Pipeline Landowner Associations (CAPLA) - LMCI Stream 3 Second Evidence Filing
A. Introduction
A fundamental principle identified by the Board in the establishment of LMCI Stream 3 is that “landowners will not be liable for the costs of pipeline abandonment”. To accomplish this objective, the Board’s defined issues include:
- Issue 1(a) – “What are the implications on … landowners … of requiring or of not requiring pipeline companies to set aside funds to cover future abandonment costs?”; and
- Issue 2(a) – “If companies are required to set aside funds … what technical and financial assumptions should be used to create preliminary cost estimates?”
Canadian Alliance of Pipeline Landowner Associations (CAPLA) Reply Evidence Re: Stream 3
A. Introduction
CAPLA’s initial Prefiled Evidence in this proceeding establishes the technical necessity and regulatory viability of its proposed removal/perpetual maintenance default option as the technical assumption which the Board must adopt to ensure that “landowners will not be liable for the costs of pipeline abandonment”. CAPLA’s Second Evidence filing demonstrates how this “default option” is consistent with the Board’s Streams 3 and 4 Discussion Paper analysis and why the positions adopted by industry proponents leave landowners at risk for abandonment liabilities and costs contrary to the Board’s stated objective.
Hearing Order MH-001-2012. Group 1 Abandonment Cost Estimates
Rural Municipalities and Landowners Left on the Hook for Abandoned Pipelines
The National Energy Board (NEB) says one of its fundamental principles in its Land Matters Consultation Initiative (LMCI) is that: “Landowners will not be liable for costs of pipeline abandonment.”
The Facts: Regulatory Change has transferred and is transferring the risks of pipeline abandonment to rural municipalities and agricultural property owners. The evidence is posted at the NEB Website at the following links after Gerry’s letter.
The landowner should carry absolutely no risk concerning pipelines or their abandonmenet.
Pipelines are imposed on property owners and they receive no financial benefit from the imposition. The pipeline is not an asset on the landowner’s balance sheet, it is a liability. As such, it is unreasonable to expect a landowner organization or landowners in general to cover these costs.
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