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Westcoast Energy Inc. Application for Review of Decision re Toll Treatment of the Tower Lake Section (NEB Decision GH-003-2015)

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Review Application – Tolling Methodology – System Expansion/Extension


In October 2016, the NEB issued its decision (the “Decision”) regarding NOVA Gas Transmission Limited’s (“NGTL”) application for the Towerbirch Expansion Project (the “Project”) located in northwest Alberta and northeast British Columbia (“BC”).

In the Decision, the original NEB panel recommended approval of the Project, consisting of a mainline expansion and an extension known as the Tower Lake Section (the “TLS”). The original panel also approved, in a 2-1 split decision, NGTL’s applied-for rolled-in tolling treatment on the TLS, subject to the condition that NGTL reapply for approval if the TLS used ships gas to alternate delivery markets in the future (including LNG export facilities).

Member Parrish dissented, stating that he would deny the applied-for tolling methodology on the TLS and require NGTL to re-apply for an alternative tolling methodology that respects both the user-pay principle and allows for fair competition to access supply and the NGTL System.

On November 10, 2016, Westcoast filed an application pursuant to subsection 21(1) of the National Energy Board Act (the “NEB Act”) for a review of the TLS Tolling Decision (“Review Application”). Section 21(1) NEB Act states:

21 (1) …the Board may review, vary or rescind any decision or order made by it or rehear any application before deciding it.

Section 45(1)(a(i) of the National Energy Board Rules of Practice and Procedure, 1995 (the “NEB Rules”) provides that the NEB may dismiss an application for review if “the applicant has not … raised a doubt as to the correctness of the Board’s decision or order.”

The NEB review panel denied Westcoast’s Review Application, holding that Westcoast failed to present grounds that raised a doubt as to the correctness of the original panel’s decision.

Standard of Review

The review panel stated that at the first stage of the review, it must determine whether a doubt has been raised as to the correctness of the TLS Tolling Decision.

The panel referenced Trans Mountain Pipe Line Co. v. Canada (NEB), where the Federal Court of Appeal held: “…[w]hether or not tolls are just and reasonable is clearly a question of opinion…”.

The review panel found that while the standard of review is correctness, what is being reviewed for correctness is largely a matter of informed judgment and opinion. The NEB confirmed that there is a high threshold for reviews of its decisions, its decision to grant review is discretionary, and that “this discretion must be exercised sparingly and with caution.”

User-pay Principle and Cross Subsidization

The review panel rejected submissions of Westcoast and its supporters that in the Tolling TLS Decision, the original panel’s majority reasons failed to consider evidence that the revenue from the FT-R tolls would not fully cover the costs of both the TLS and the existing NGTL System. Rather, in the review panel’s opinion, the original panel appropriately found that NGTL System shippers bear financial responsibility for some of the costs of the TLS.

The review panel also found that the original panel appropriately based its review of this issue, not on a narrow view, but in the context of the entire NGTL System. The review panel explained that in these circumstances, it is not an error for the Board to have found that:

• the user-pay principle does not require actual use, or

• by using the NGTL System, shippers use the TLS as well as other integrated laterals.

Having found no departure from the cost-causation or user-pay principle, the review panel concluded that the original panel did not err in finding that there was no cross-subsidization.

Economic Efficiency

The review panel noted that it is not required to consider the tolling principle of economic efficiency under the legislation. However, the review panel acknowledged that all members of the original panel did consider economic efficiency.

Further, the review panel noted that the original panel was not required to address each issue or sub-issue in its reasons, nor was it required to give economic efficiency any particular weight among its various considerations, regardless of the weight assigned by previous NEB panels.

The review panel concluded that Westcoast had not raised a doubt as to the correctness of the Decision on economic efficiency grounds.

Unjust Discrimination

Sections 62 and 63 of the NEB Act required that the same toll be charged for service “under substantially similar circumstances and conditions with respect to all traffic of the same description carried over the same route”.

The review panel found that such determinations of the original panel are questions of fact. Specifically, the review panel found that the original panel’s findings that there was no unjust discrimination were findings of fact, based on the evidence before it.

The review panel concluded that that Westcoast had not raised a doubt as to the correctness of the TLS Tolling Decision on these grounds.

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