Regulations Amending the Pipeline Financial Requirements Regulations: SOR/2021-134
Canada Gazette, Part II, Volume 155, Number 13
Registration
SOR/2021-134 June 10, 2021
CANADIAN ENERGY REGULATOR ACT
P.C. 2021-531 June 10, 2021
His Excellency the Administrator of the Government of Canada in Council, on the recommendation of the Minister of Natural Resources, pursuant to subsections 137(6), 138(7) and 139(3) of the Canadian Energy Regulator Act footnote a, makes the annexed Regulations Amending the Pipeline Financial Requirements Regulations.
Regulations Amending the Pipeline Financial Requirements Regulations
Amendments
1 (1) The definition Act in section 1 of the Pipeline Financial Requirements Regulations footnote 1 is replaced by the following:
- Act
- means the Canadian Energy Regulator Act. (Loi)
(2) Paragraphs (b) and (c) of the definition authorized in section 1 of the Regulations are replaced by the following:
- (b) a pipeline that, by order of the Commission, has been deactivated or decommissioned; or
- (c) a pipeline that, with leave of the Commission, has been abandoned. (autorisé)
2 (1) The portion of subsection 2(1) of the Regulations before paragraph (a) is replaced by the following:
Limits for classes of company
2 (1) The following amounts are prescribed for the purposes of paragraph 137(5)(b) of the Act:
(2) Subsections 2(3) to (5) of the Regulations are replaced by the following:
Multiple commodities
(3) If a company operates an authorized pipeline that transports two or more commodities, and the limits of liability in respect of those commodities are not the same, the limit of liability applicable to the company is determined in accordance with paragraph 137(5)(a) of the Act and subsection (1) as if the company were transporting only the commodity that results in the highest limit of liability.
Multiple varieties — same commodity
(4) If a company operates an authorized pipeline that transports two or more varieties of the same commodity, the limit of liability applicable to the company is determined in accordance with paragraph 137(5)(a) of the Act and subsection (1) as if the company were transporting only the variety that results in the highest limit of liability.
Multiple unconnected pipelines — different commodities
(5) If a company operates two or more authorized pipelines that are unconnected and transport different commodities, the limit of liability applicable to the company is determined in accordance with paragraph 137(5)(a) of the Act and subsections (1) to (4) as if the company were operating only the pipeline that results in the highest limit of liability.
3 (1) The portion of section 3 of the Regulations before paragraph (a) is replaced by the following:
Financial resources
3 For the purposes of subsection 138(2) of the Act, the Commission must choose from among the following types of financial resources:
(2) Paragraph 3(e) of the Regulations is replaced by the following:
- (e) participation in a pooled fund referred to in subsection 139(1) of the Act;
4 (1) Subsections 4(1) and (2) of the Regulations are replaced by the following:
Readily accessible financial resources — 5%
4 (1) A company that operates one or more authorized pipelines referred to in paragraph 137(5)(a) of the Act or paragraphs 2(1)(a) to (d) must maintain at least 5% of the amount of financial resources referred to in subsection 138(1) of the Act in types that are readily accessible.
Readily accessible financial resources — 2.5%
(2) A company that operates one or more authorized pipelines referred to in paragraphs 2(1)(e) to (i) must maintain at least 2.5% of the amount of financial resources referred to in subsection 138(1) of the Act in types that are readily accessible.
(2) The portion of subsection 4(3) of the Regulations before paragraph (a) is replaced by the following:
Financial resources
(3) If the Commission specifies the types of financial resources that must be readily accessible to a company, it must choose from among the following types:
(3) Paragraph 4(3)(c) of the Regulations is replaced by the following:
- (c) participation in a pooled fund referred to in subsection 139(1) of the Act;
5 (1) The portion of subsection 5(1) of the Regulations before paragraph (a) is replaced by the following:
Requirements of pooled fund
5 (1) For the purposes of subsection 139(1) of the Act,
(2) Paragraphs 5(1)(b) and (c) of the Regulations are replaced by the following:
- (b) a pooled fund must be administered by a representative of the participants that has been approved by the Commission;
- (c) the terms on which a pooled fund is to be administered, and any changes to those terms, must be approved by the Commission;
(3) Paragraph 5(2)(a) of the Regulations is replaced by the following:
- (a) no later than April 30 of each year, provide the Commission with audited financial statements and evidence demonstrating that readily accessible financial resources in the fund have been maintained in accordance with paragraphs (1)(d) and (e);
(4) The portion of paragraph 5(2)(b) of the Regulations before subparagraph (i) is replaced by the following:
- (b) notify the Commission within one business day after the day on which any of the following changes occurs:
(5) Paragraph 5(2)(c) of the Regulations is replaced by the following:
- (c) provide the Commission with the telephone number, email address and mailing address of a contact person.
Coming into Force
6 These Regulations come into force on the day on which they are registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
Issues
On August 28, 2019, the Canadian Energy Regulator Act (CERA) received royal assent and replaced the National Energy Board Act (NEB Act). The CERA modernized the governance structure of the regulator to improve accountability. The CERA separates the regulator's adjudicative function from its day-to-day operations. Under the NEB Act, the Board was responsible for both functions; whereas under the CERA, an independent Commission is responsible for the adjudicative function, the CEO is responsible for daily operations, and a Board of Directors is responsible for providing strategic advice and direction. It is important to clarify that the former references to the “Board,” should now reference the “Commission,” given that they pertain to the adjudicative function. In addition, although many of the authorities under the NEB Act were transferred without change into the CERA, they are under different numbered subsections.
The Pipeline Financial Requirements Regulations (the Regulations) were originally made under the NEB Act to ensure that, in the event of a spill, pipeline operators have sufficient financial resources on hand to pay for losses, damages and costs of clean-up. The Regulations make references to the NEB Act, its relevant sections, and the former adjudicative arm — the Board — of the National Energy Board, which no longer exist. As a result of the coming-into-force of the CERA, these references are no longer appropriate.
In addition, due to an administrative oversight when the Regulations were finalized in 2016, the requirement for oil pipeline operators transporting at least 250 000 barrels per day of oil in individual pipelines or in aggregate (class 1 oil pipeline operators) to hold at least 5% of their financial liability resources in a readily accessible form was not made explicit.
Amendments to the Regulations are necessary to reflect the appropriate references to the CERA and its applicable provisions as well as the intent of the Regulations regarding class 1 oil pipeline operators.
Objective
The objectives of these amendments are to
- ensure alignment between the Regulations and the CERA by updating the regulatory references to the terms and provisions of the CERA following the repeal of the NEB Act; and
- reflect the original intent of the Regulations with respect to class 1 oil pipeline operators' financial resource requirement by addressing an oversight in the regulatory text when the Regulations were finalized.
Description and rationale
The amendments replace all references to the “National Energy Board Act” with references to the “Canadian Energy Regulator Act.” In addition, all references to sections or Parts of the NEB Act are amended to reflect the corresponding sections or Parts of the CERA. Finally, all references to “Board” in the Regulations made in respect of the adjudicative body are amended to refer to the “Commission.” These modifications improve consistency and alignment with the CERA.
When the Regulations were published in 2018, the readily accessible financial resources requirements were made explicit for all classes of pipelines except Class 1 companies. Class 1 companies are those federally regulated pipeline companies that operate one or more pipelines that individually or in the aggregate have the capacity to transport at least 250 000 barrels of oil per day.
Subsection 4(1) of the Regulations is amended to explicitly require class 1 oil pipeline operators to maintain 5% of their financial liability obligations in a form (type) that is readily accessible. This is done by including a reference to paragraph 137(5)(a) of the CERA which defines the impacted companies. Paragraph 137(5)(a) of the CERA also sets the liability limit for class 1 oil pipeline operators at a minimum of $1 billion. The Regulations therefore require class 1 oil pipeline operators to hold a minimum of $50 million in readily accessible form. All class 1 oil pipeline operators already meet or exceed this requirement.
The Commission retains the power to require companies to maintain financial resource requirements in readily accessible form at a level higher than specified in the Regulations.
Consultation
The amendments were not prepublished in the Canada Gazette, Part I, as they are non-substantive in nature. Prior to finalizing the amendments, class 1 oil pipeline operators were consulted on the proposal to make explicit the 5% liability requirement in the Regulations. No concerns were raised by these companies.
One-for-one rule and small business lens
The one-for-one rule does not apply to these amendments, as there is no change in administrative costs or burden to business.
The small business lens does not apply to these amendments, as there are no costs to small business.
Contacts
Ian Fall
Director
CER Regulatory Policy
Petroleum Resources Branch
Strategic Petroleum Policy and Investment Office
Natural Resources Canada
Telephone: 343‑543‑7361
Email: Ian.Fall@canada.ca
George Mackay
Policy Analyst
CER Regulatory Policy
Petroleum Resources Branch
Strategic Petroleum Policy and Investment Office
Natural Resources Canada
Telephone: 613‑292‑3043
Email: George.Mackay@canada.ca