Leave to Appeal – Decommissioning – Pipelines – Jurisdiction
In this decision, the City of Coquitlam (“City”) obtained leave to appeal a reconsideration decision (the “Reconsideration Decision”) of the British Columbia Utilities Commission (“BCUC”). The Reconsideration Decision affirmed an order authorizing FortisBC Energy Inc. (”Fortis”) to abandon a decommissioned pipeline in place on City lands, and directing the parties to share removal costs equally in the event that the City requests the pipeline’s removal to accommodate municipal infrastructure.
Leave was granted to consider what regulatory principles apply at the end of infrastructures’ life in comparison to when it went into service, given the number of pipelines which are approaching the end of their usefulness.
In 1955 the Public Utilities Commission of British Columbia approved by way of a “certificate of public convenience and necessity” (”CPCN”) the construction of a Nominal Pipe Size 20 (”NPS 20”) intermediate pressure gas line by the British Columbia Electric Company Ltd. (”BCEC”), 5.5 kilometres of which was to be located along Como Lake Avenue in the municipality of Coquitlam. In 1957 the company and the City concluded an operating agreement that required the company to obtain City approval before proceeding with new pipeline construction within its jurisdiction. The pipeline was built in 1958.
In 2015, the BCUC approved the construction of a new pipeline, the Lower Mainland Intermediate Pressure System Upgrade Projects (”LMIPSU Project”). The LMIPSU will pass through Coquitlam, Burnaby and Vancouver and will replace the NPS 20 pipeline with a larger line. A term of the approval provided that the NPS 20 pipeline would be permanently decommissioned.
As successor operator to the BCEC, Fortis entered into discussions with the City with respect to the new construction. Differences arose, however, over Fortis’s proposal to abandon the NPS 20 pipeline in place. The City withheld its consent to the new construction unless Fortis agreed to two conditions:
a) that Fortis, at its own cost, remove approximately 380 metres of the abandoned NPS 20 pipeline if the pipe ultimately conflicts with a planned City project that may proceed within 3 to 5 years, and patch the pavement to temporarily restore the road; and
b) that Fortis agree to repave the entire width of Como Lake Avenue for 5.5 kilometres after completion of the LMIPSU Project, and to provide security in the form of a letter of credit in the amount of $6 million for all the paving work.
If realized, these two conditions would cost Fortis an estimated $5 million and $5.5 million respectively.
In 2018, Fortis applied to the BCUC for orders settling the terms of the new construction, pursuant to ss. 32 and 33 of the Utilities Commission Act, R.S.B.C. 1996, c. 473 (“UCA”). Those sections make reference to situations where a public utility cannot come to an agreement with a municipality. The Court also made note of other sections of the UCA, including section 121 which insulates approvals from local government powers.
On April 15, 2019 the BCUC made the following orders:
1. Pursuant to section 121 of the UCA, it is affirmed that Fortis is authorized to abandon the decommissioned NPS 20 pipeline in place.
2. Pursuant to section 32 of the UCA, upon request by the City in circumstances where it interferes with municipal infrastructure, the costs of removal of any portion of the decommissioned NPS 20 pipeline shall be shared equally between Fortis and the City.
3. The City’s request that Fortis should be required to repair and repave the whole 5.5 kilometre section on Como Lake Avenue curb to curb is denied.
The City applied for reconsideration on two grounds: a) that the BCUC erred in finding it had jurisdiction to give “authorization” to Fortis within s. 121 of the UCA to abandon NPS 20 in place; and b) that the BCUC erred in finding that s. 32 of the UCA permitted it to specify the manner and terms by which the City could request Fortis to remove portions of NPS 20.
By order issued April 2, 2020, the BCUC dismissed the City’s reconsideration application and invited further submissions from the parties respecting the process and evidentiary record of the “cost allocation formula” component of the Reconsideration Decision.
Noting that the UCA was silent on the BCUC’s jurisdiction over decommissioned public utility assets, the tribunal cited ATCO Gas & Pipelines Ltd. v. Alberta (Energy & Utilities Board), 2006 SCC 4 (S.C.C.) (hereinafter “ATCO”) for the proposition that administrative tribunals may have powers that “exist by necessary implication from the wording of the act, its structure and its purpose.” The BCUC found that the authority to authorize decommissioning arose by necessary implication from ss. 41, 45 and 46 of the UCA, and further found that its jurisdiction over public utility assets survived decommissioning by necessary implication, on the basis that the BCUC would otherwise be unable to regulate matters that are an “integral part” of its core mandate of “rate setting and protecting the supply system in a manner which safeguards the public interest.”
The tribunal relied on the finding that it retained jurisdiction over decommissioned public utility assets to find that it could impose a term for sharing costs on future municipal use of the pipeline lands, pursuant to s. 32 of the UCA.
The City then filed an application for leave to appeal the Reconsideration Decision on June 30, 2020.
BCCA Analysis and Findings
The Court granted the application for leave to appeal, noting that the proposed appeal would raise novel issues of law concerning the jurisdiction of the BCUC vis-à-vis local governments. The fate of decommissioned public utility assets like pipelines is undoubtedly a matter of public importance, and parties noted the significant cost implications which arise from a decision on this issue.
Without making any findings on the merits of the case, the Court wrote that it was not persuaded by Fortis’s submission that the appeal would be without arguable merit. Notwithstanding the existence of provisions in the UCA that appear to subordinate municipal authority in many areas to that of the BCUC, the issues on appeal concern powers that the tribunal found by necessary implication rather than through express statutory language. The Court noted that resort to statutory language delineating established powers between the BCUC and local governments is therefore of limited assistance at this stage.
The Court further noted that whether the implied powers claimed by the BCUC exist, namely to authorize decommissioning, to retain jurisdiction over decommissioned assets and to authorize those assets’ abandonment in place on municipal lands, are not questions that have an obvious answer. They cannot be resolved by simple reference to the Supreme Court of Canada’s decision in ATCO, whose application to statutory interpretation in this context is unclear. Since these and other issues of law would be determined on a correctness standard on appeal, the BCUC’s own conclusions would not be given deference by this Court.
The Court was also not persuaded that the BCUC’s mandate, express or implied, is so evidently broad as to render an appeal inarguable. It recognized that binding authority dating from the 1950s, when much of today’s utility infrastructure was built, reflects a broader conception of the BCUC’s public interest mandate relative to municipalities when it comes to utility infrastructure. However, the real issue is whether those same principles apply at the end of the infrastructure’s life in comparison to when it/they went into service. As this issue has not been considered on appeal, and given the number of other pipelines which are approaching the end of their usefulness, leave ought to be granted so that this and related issues may be property considered by the Court.