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Enbridge Pipelines Inc. and Westover Express Pipeline Limited Joint Application for Sale and Purchase of Line 10 (NEB Letter Decision)

Link to decision summarized

Leave to Sell – Leave to Purchase


In this decision, the NEB considered a joint application (the “Application”) for sale and purchase of the Line 10 pipeline (the “Pipeline”) by Enbridge Pipelines Inc. (“Enbridge”) and Westover Express Pipeline Limited (“Westover Express”) pursuant to paragraphs 74(1)(a) and (b) of the National Energy Board Act (“NEB Act”).

The NEB approved the Application, granting Enbridge leave to sell, and Westover Express leave to purchase, the Canadian portion of the Pipeline.

Line 10 Pipeline

Together, the Canadian and American portions of the Pipeline comprise approximately 143 km of NPS 12 (324 mm) and NPS 20 (308 mm) pipe that transport crude oil from Enbridge’s terminal in Westover, Ontario to United’s Kiantone Pipeline in West Seneca, New York to supply United’s approximately 70,000 barrel-per-day (“bpd”) refinery in Warren, Pennsylvania.

At issue in this Application was the Canadian portion of the Pipeline. It is approximately 105.41 km in length within Ontario. It crosses under the Niagara River and terminates at the international border.

Operations Matters

The NEB noted that the Pipeline was already regulated by the NEB and was previously determined to have been constructed and operated in a safe and environmentally sound manner, and was required for the present and future public convenience and necessity. Similarly, the NEB previously made a determination to allow the decommissioning of certain Line 10 segments in place.

The NEB further noted that Line 10 would continue to be regulated by the NEB, and lifecycle oversight over the Pipeline would continue. Conditions previously imposed by the NEB on Enbridge regarding the Pipeline would continue to apply to Westover Express. Westover Express would be subject to the NEB’s regulatory framework, including abandonment funding and financial resource requirements. Westover Express would be responsible for the decommissioned portions of Line 10, and the future abandonment of the facilities.

The NEB found that operating conditions or circumstances would not change as a result of the transaction. Line 10 would remain in operation subsequent to the transaction. The NEB indicated that the safety and environmental risks associated with excavating and removing the decommissioned Pipeline from the ground remained.

Consultation and Socio-Economic Matters

The NEB found that the public and landowner consultation activities undertaken by Enbridge for the purposes of the sale were adequate. The NEB was satisfied with the design and implementation of Enbridge’s consultation activities, as well as its commitment to continued consultation activities.

Westover Express’ Ability to Finance the Pipeline

As a lifecycle regulator, the NEB assesses the ability of a prospective pipeline owner to finance the Pipeline over its entire life. This includes the day-today operations of the Pipeline, financial resources to address a possible incident on the Pipeline, and its ability to finance the eventual abandonment of the Pipeline.

The NEB Act and its regulations include financial resource requirements for companies, to cover the costs of an unintended or uncontrolled release from their pipelines.

NEB-regulated pipeline companies must have a mechanism in place that will provide adequate funds to pay for pipeline abandonment. Companies are required to file an Abandonment Cost Estimate for NEB approval. The NEB regularly reviews company abandonment mechanisms to verify that material changes to a pipeline are reflected in the Abandonment Cost Estimate and an appropriate level of funds is set aside.

The NEB found that the regulatory requirements for financial resources and abandonment funding addressed the concerns related to Westover Express’ ability to finance costs associated with the Pipeline. Westover Express would be required to comply with the NEB’s requirements for setting aside funds for abandonment and for demonstrating sufficient financial resources.

The NEB approved the applicants’ proposed method for the establishment of the Line 10 trust to be established initially with Enbridge as the contributor and beneficiary. The NEB authorized the transfer of funds between trusts as described in the Application. Westover Express would be responsible for discharging the beneficiary’s reclamation obligations related to Line 10 upon closing of the sale and the issuance of the amending orders.

The NEB also noted Westover Express’ commitment to file tolls prior to the effective date of the transfer. The NEB Act requires that a company must not charge any tolls except tolls that are specified in a tariff that has been filed with the NEB and is in effect.

Ongoing Financial Regulation

Pipeline companies regulated by the NEB are divided into two groups, Group 1 or Group 2 companies, for financial regulation purposes. Group 1 companies are generally those with extensive systems under the NEB’s jurisdiction. Any pipeline company regulated by the NEB, which is not a Group 1 company is a Group 2 company.

The NEB decided to regulate Westover Express as a Group 2 company on a complaint basis for financial regulatory purposes.

The NEB advised that it is the responsibility of a Group 2 company to provide its shippers and interested parties with sufficient information to enable them to determine whether the tolls and transportation requirements were reasonable or whether a complaint was warranted.

Summary

The NEB issued Order MO-014-2019, which required Enbridge and Westover Express to file confirmation with the NEB once the sale and purchase of Line 10 are complete. On receipt of this notification, the NEB will take the appropriate steps to vary the Certificates and Orders.

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