Pipeline Abandonment

When a company that owns a pipeline wants to stop operating part or all of it, the company must inform the Commission. The company might apply to deactivate, decommission, or abandon the pipeline.

Regulatory Process

When a company applies for approval to abandon a section of pipeline or an entire pipeline, it must include certain information in its application which is found in Guide B of the CER’s Filing Manual.

Under the Canadian Energy Regulator Act (CER Act), the company must provide notice to owners that the abandonment application has been filed:

CER Act section 241 (2): If a company has submitted to the Regulator an application to abandon a pipeline, the company must, in the form and manner specified by the Commission,

  • (a) serve a notice on all owners of lands through which the pipeline passes, insofar as they can be ascertained; and
  • (b) publish a notice in at least one issue of a publication, if any, in general circulation within the area in which the lands are situated.

The Commission of the Canada Energy Regulator expects companies to use the form of notice specified by the Commission [Notice of Proposed Abandonment: English, WORD 719 KB]; [Notice of Proposed Abandonment: French, WORD 720 KB].

When publishing notices, consider the availability of English and French newspapers and their respective regional coverage. In the event that newspapers in the region are published in only one official language, publish both the French and English versions side by side in compliance with the Official Languages Act.

The Commission expects companies to serve notice that an abandonment application has been filed on potentially impacted Indigenous Peoples. Companies must also provide to Indigenous Peoples the letter from the CER’s Chief Executive Officer outlining the CER’s approach to Crown consultation for which the CER, through its Commission, is the final decision-maker. The company must file with the CER, at the earliest practical date, a letter indicating the date when the notice of proposed abandonment has been served on each person or group and the publication date(s).

If you have a concern about a proposed abandonment project, you can submit a Statement of Opposition to an Abandonment Application to the CER within 30 days of being notified about the abandonment application. The Commission of the CER will consider your statement of opposition when it makes its decision on the project.

The Commission takes safety seriously and will take all available actions to protect Canadians and the environment. A company must demonstrate that it will abandon the pipeline in a way that protects the environment and the public and that the company will anticipate, prevent, manage and mitigate any potentially dangerous conditions associated with its pipeline.

If the Commission allows abandonment of a pipeline or a section of it, it issues an Order that usually includes conditions that must be met before abandonment is complete. The Commission verifies that conditions or other legal requirements are met through its review of submissions, site-inspections, and audits.

Financial Aspects of Abandonment

In May 2009, the National Energy Board (NEB) set out guiding principles and an Action Plan to address the monetary costs of abandonment in the RH-2-2008 Reasons for Decision [REGDOCS filing A21835]. By 2014, the NEB had approved initial estimates of abandonment costs for each regulated company and companies began setting aside funds. Since that time, the NEB and the Commission have conducted periodic reviews to update and refine Abandonment Cost Estimates (ACE) and the funding for these costs through Set-Aside and Collection Mechanisms (SAM-COM). The Commission will continue to conduct such reviews.

  • What is an Abandonment Cost Estimate?

    An ACE is an estimate of the costs that will be incurred by a company in abandoning its pipeline system, including the monitoring of, and addressing any unforeseen events associated with, those pipelines assumed to be abandoned in place rather than removed. A company’s ACE determines the amount of money the CER requires a company to set aside to help ensure that sufficient funds will be available for the abandonment of that company’s pipeline system. An ACE is calculated with assumptions to estimate the anticipated costs to abandon the pipeline.

    • What is not an Abandonment Cost Estimate?

    As an estimate relating to activities that may take place well into the future, an ACE cannot reflect, with 100 per cent accuracy, the future abandonment cost that will actually be incurred by companies.

    An ACE does not dictate future abandonment methods or costs. Nor does it override land acquisition and crossing agreements. Prior to an abandonment, a company must file an application for abandonment with the CER.

    The actual costs to conduct the abandonment activities may differ from the estimated costs in a company’s ACE.

    The total actual abandonment costs of a pipeline may be higher or lower than the total ACE for that pipeline. If actual costs are higher (either for a particular ACE cost category or in total), the company is responsible to pay the full costs. An ACE does not limit company liability for any costs to appropriately abandon the pipeline.

  • What is a set-aside mechanism (SAM)?

    A set-aside mechanism refers to how a company will set aside funds to cover its ACE so that funds will be available at the time of pipeline abandonment. A company can use a letter of credit, surety bond, or trust. These mechanisms protect the funds from being used for purposes not associated with abandonment and from a pipeline company’s creditors.

    Only the CER can draw down letters of credit and demand surety bonds. Funds can only be released from trust with the Commission’s approval.

  • What is a collection mechanism (COM)?

    A collection mechanism refers to how the company will collect funds associated with its set-aside mechanism. Letters of credit and surety bonds put the funds in place all at once and have been self-funded by the pipeline company. Trusts are generally funded over time, with the Annual Contribution Amount reflecting the amount to be contributed annually. They are sometimes self-funded, but often the funds are collected from shippers through tolls.

The ACEs approved by the Commission during the 2021 ACE and SAM-COM Review were in 2023 dollars. For companies using letters of credit or surety bonds, the value of those instruments is required to be future-proofed to cover an amount equal to 1.104 times the approved value of the ACE to account for expected inflation to 2028.

The value of companies’ ACEs, as approved by the Commission during the 2021 ACE and SAM-COM Review, are listed in Appendix 1 of the Commission’s 15 June 2023 decision (C24949-5).

The Annual Report of the Commission of the CER includes abandonment funding information in Appendix I, which reflects the status as of 31 December each year. For companies using letters of credit or surety bonds, Appendix I lists the value of each company’s future-proofed ACE and financial instrument. For companies using trusts, Appendix I also shows the ACE, approved collection period end date, and the balance of the trust. In limited circumstances the Commission has exempted companies from providing a set-aside mechanism, or a company may not currently have funds set-aside with the CER. Those companies are listed in Appendix I, along with an explanation.

The value of some companies’ ACEs, as shown in the Annual Report, may be different than those approved by the Commission during the 2021 ACE and SAM-COM Review due to subsequent Commission decisions. Updated ACEs that have been issued by the Commission because of an application can be found in the relevant company application folders in REGDOCS.

Abandonment Cost Estimate Calculation Method

In June 2023, the Commission released a report setting out a new geographic information system-based method to be used by the CER to calculate companies’ ACEs [REGDOCS filing C24949]. The 2021 ACE Calculation Method ensures ACEs are transparent, consistent for all companies, and can be updated efficiently.

Learn more about the 2021 ACE Calculation Method

Abandonment Cost Estimate Geospatial Filing Requirements

For certain applications (e.g., purchase or sale of pipeline assets), the Commission may request a company submit new or updated geospatial data describing its pipeline system to support calculation of either a new ACE or re-calculation of its approved ACE, to reflect the Commission’s decision regarding that application.

For companies with an approved ACE, the submitted geospatial data should be the same as what was previously filed with only the affected assets removed or added, or attributes changed. If a company has multiple approved ACEs, companies should only provide updated geospatial data for the affected ACE(s).

When submitting geospatial data for the calculation of an ACE, companies should refer to the filing requirements document linked below and provide the information in the format outlined.

When preparing submissions, companies have the option to use the following templates:

The CER validates all geospatial data submitted by companies to ensure that it meets each requirement in the ACE Geospatial Data Filing Requirements and will be correctly processed by the 2021 ACE Calculation Method. If issues are detected, the company will be notified regarding the specific issues found and requested to file corrected geospatial data.

Abandonment Funding Documents

As part of the CER’s regulation of pipeline abandonment funding, all CER-regulated pipeline companies have certain requirements. Regulatory decisions and reports have introduced certain model documents, reporting forms, and tables for companies to use, and these are updated occasionally as required.

Links to the latest updated versions of these documents are provided below. These relate to matters such as annual reporting, the calculation of a company’s annual contribution amount, the information required in abandonment funding plans, and the reporting of actual abandonment costs.

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