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Application by West Coast Olefins Ltd. Regarding Jurisdiction over the Enbridge Frontier Project, CER Letter Decision A7I4V6

Link to Decision Summarized

Westcoast Test – Jurisdictional Determination

In this decision, the CER denied the application by West Coast Olefins Ltd. (“WCOL”) to establish a process to decide whether the Enbridge Frontier Project (“Project”), proposed by Enbridge Frontier Inc. (“Enbridge Frontier”), should be under federal jurisdiction.

WCOL Submissions

WCOL noted that the CER has the jurisdiction to determine the Project’s proper jurisdiction by virtue of subsection 32(1) of the Canadian Energy Regulator Act (“CER Act”). It asked the CER to follow the National Energy Board’s (“NEB”) practice of having a two-step process for determining jurisdiction whereby the CER would apply the prima facie test to decide whether holding a full jurisdictional process is warranted. WCOL submitted that, according to the Westcoast test, as established by the Supreme Court of Canada in Westcoast Energy Inc. v Canada (National Energy Board), [1998] 1 SCR 322 (“Westcoast”), a work or undertaking entirely within one province is under federal jurisdiction if it is, in relation to another federal work or undertaking:

  • functionally integrated and subject to common management, control and direction; or

  • essential, vital and integral to the other work or undertaking.

Based on filings by Enbridge Frontier, WCOL described the Project proposal as including a new straddle plant that would extract natural gas liquids (“NGLs) from gas from the BC Pipeline, and return the resulting gas back to the BC Pipeline near Chetwynd, BC. WCOL stated that the Project as well as the BC Pipeline were both ultimately owned by Enbridge Inc., and that the Project would be physically connected to the BC Pipeline. WCOL also pointed to questions it had raised regarding the goal for the NGLs transported by the Project, pointing to what were, in its view, “indicators of interprovincial aspects”. WCOL submitted that the CER should make inquiries to Enbridge Frontier to determine jurisdiction.

Enbridge Frontier

Enbridge Frontier did not dispute the CER’s jurisdiction to decide whether to hold a process to decide the jurisdictional question with respect to the Project. Enbridge Frontier said that WCOL had not met the prima facie test that the Project was part of a federal undertaking and that, as a result, the CER should decline to establish such a process.

Applying the first branch of the Westcoast test, upon which WCOL relied, Enbridge Frontier said that the Project was a local undertaking, providing service solely within BC, by extracting NGLs from existing systems in BC and transporting them to market in BC. Enbridge Frontier submitted that other than the Project’s physical connection to the BC Pipeline, the points raised by WCOL offered no indication whatsoever of functional integration between the Project and the BC Pipeline. Enbridge Frontier further submitted that importantly, there was no connection from the Project to any federally regulated transport system to transport NGLs out of BC. Enbridge Frontier pointed out that the Project’s purpose is to extract and transport NGLs within BC.

Enbridge Frontier further submitted that the Project’s purpose to extract and transport NGLs within BC is separate from the BC Pipeline (which transports gas from Alberta and BC to downstream markets in BC and the United States) and that the Project does not include any interprovincial infrastructure. Enbridge Frontier stated that impacts of local projects on federal undertakings do not turn local projects into federal undertakings, and that the Project’s downstream impacts on the BC Pipeline are not relevant to the jurisdictional question.

Reply from WCOL

WCOL summed up its reply and argument about functional integration as being met on a prima facie basis, by the Project’s connection to and sourcing NGLs from the BC Pipeline, and because the Project is “positioned to export NGLs out of province”.

CER Decision

Legal Tests for Initiating Full Jurisdictional Process

As noted by both WCOL and Enbridge Frontier, the test for whether a work or undertaking located entirely within one province is subject to federal regulation was outlined by the Supreme Court of Canada in the Westcoast decision. According to Westcoast, a work such as a pipeline located entirely within one province can fall into federal jurisdiction if it is part of a federal work or undertaking in the sense of being functionally integrated and subject to common management, control, and direction, or if it is vital and integral to a federal work or undertaking.

The CER only considered the first of these possibilities, as it is the one WCOL solely relied on. With respect to functional integrity, the CER determined key considerations to include whether:

  • the proposed project shared a common purpose with a federal work or undertaking (in this case, the BC Pipeline);

  • the owner of the project had a commercial relationship with a federal work or undertaking;

  • the two undertakings are dedicated to each other, such that the goods or services provided by one operation are for the sole benefit of the other’s operation and/or its customers, or are they generally available;

  • the undertakings were interdependent on each other;

  • they operate in common as a single enterprise; and

  • the proposed project is physically connected to a federal work or undertaking.

Regarding common management, control and direction, the considerations focus on daily operations of the facilities.

In its decision not to hold a full process to make a jurisdictional determination, the CER applied the Westcoast test on a prima facie basis. According to Sawyer v TransCanada Pipeline Limited, 2017 FCA 159 (“Sawyer”), a tribunal applying a prima facie test must ask only whether there is an arguable case, and must do so without weighing and balancing evidence or considering the merits of the case.

Applying the Test to the Frontier Project

The CER noted that there is no dispute that the Project would connect to the interprovincial, federally regulated, BC Pipeline, and that Enbridge Frontier (the Project’s proponent and owner) and WEI (BC Pipeline’s owner) have a relationship as companies wholly owned by a common corporate parent, Enbridge Inc.

However, the CER found no evidence supporting WCOL’s speculation that the Project was interprovincial in nature. The CER was unable to make a prima facie finding that the Project and BC Pipeline share a common purpose. The CER found that the Project, as proposed, does not make the Project and the BC Pipeline interdependent any more than other tie-ins that connect to and remove gas from the BC Pipeline. The CER was unable to make a prima facie finding that the Project and the BC Pipeline are interdependent, or that they operate solely for each other’s benefit.

The CER found that WCOL succeeded in demonstrating a prima facie or arguable case of common management, control and direction between the Project and the BC Pipeline, but WCOL failed with respect to functional integration. The CER declined to initiate a process, under subsection 32(1) of the CER Act, to determine whether the Project would be subject to federal jurisdiction.

WCOL further requested the CER look at impacts of potential downstream compression requirements along the B Pipeline’s T-South system and the potential cost impacts. WCOL argued that the removal of NGLs may lower the hydrocarbon dewpoint on the T-South system and requested the CER look at any related safety issues. The CER found these allegations vague and not warranting further inquiry.

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