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Foothills Pipe Lines (South BC) Ltd. Application for the Foothills Zone 8 West Path Delivery 2023 Project, CER Letter Decision C17973 – A8C3E6

Link to Decision Summarized

Leave to Open – Exemption

In this decision, the CER approved an application by Foothills Pipe Lines (South BC) Ltd. (“Foothills”) for an exemption from the provisions of ss. 180(1)(a) and 198 of the Canadian Energy Regulator Act (“CER Act”) for the Foothills Zone 8 West Path Delivery 2023 Project (the “Project”). Foothills also requested an exemption from the requirements of ss. 180(1)(b) and 213(1) to obtain leave to open (“LTO”) from the CER prior to the installation of the hot tap tie-in assembly.

Application and Project Overview

Foothills sought approval for the construction and operation of a single loop of approximately 32 km of 1219 mm Nominal Pipe Size (“NPS”) 48 natural gas pipeline that will loop the existing British Columbia Mainline and the Foothills South BC Pipeline (the “Elko Section”) and an expansion of the Kingsgate Border Meter Station (“Kingsgate Border MS”).

The proposed Elko Section is located 17 km east of the Town of Fernie, British Columbia. It will be built on Federal Crown freehold land (90 percent), private freehold land (8 percent), and provincial Crown land (2 percent).

The purpose of the Project is to increase capacity on the Foothills South BC (Zone 8) system to meet existing and incremental contractual obligations. The Project is underpinned by approximately 162 terajoules per day (TJ/d) of incremental Firm Transportation Delivery service on the Foothills South BC system from the Alberta-British Columbia Border to the Kingsgate Border MS. The Kingsgate Border MS component aims to expand the capacity of existing metering facilities by replacing 14 orifice-meter plates with larger diameter orifice-meter plates within the existing meter station site.

The Application Assessment Process

Following the notice of application filed by the CER on March 24, 2021, the CER received letters of comment from Elk Valley Métis Association (“EVMA”), Western Export Group (“WEG”), and the Nature Conservancy of Canada.

Foothills’ Engagement with Indigenous Peoples

The CER was satisfied that Foothills had appropriately notified and engaged with potentially impacted groups and that Foothills’ commitment to continue engagement activities throughout the lifecycle of the Project was appropriate.

Condition 10 requires Foothills to file information about any ongoing engagement activities with Indigenous peoples and Foothills’ responses to any concerns raised with the CER. The CER invited comments on draft Condition 10 but received no comments. Foothills proposed that Condition 10 be struck because the CER has not issued this condition on other recent projects of comparable scope and scale and with a similar level of interest or concerns expressed by Indigenous communities. The CER was of the view that the deciding factors in imposing this type of condition are the type of engagement by a company and whether the engagement is ongoing, rather than the particular scope and scale of a project and as such imposed Condition 10 as a condition of approval of the Project.

EVMA Letter of Comment

The EVMA filed a letter raising concerns about inadequate consultation, lack of capacity to effectively participate in the Environmental and Socio-Economic Assessment (“ESA”), and lack of capacity to undertake a traditional land use assessment. The letter also identified concerns about the proposed Project’s potential impacts on the environment, traditional land and resource use, socio-economic factors, and s. 35 rights of EVMA.

The CER considered the concerns raised by the EVMA, Foothills’ response to those concerns, and Foothills’ ongoing engagement with EVMA. The CER also considered Foothills’ stated efforts to support the EVMA’s Traditional Knowledge study and Foothills’ commitment to evaluate and adjust its planned mitigation measures as needed upon receipt of that study. The CER further noted that Condition 11 of the approval conditions would require Foothills to report on any outstanding Traditional Knowledge studies, including EVMA’s study before construction begins.

The CER determined that the issues raised by EVMA could be addressed through Foothills’ commitments and proposed mitigation measures and through compliance with Condition 10 and Condition 11. The CER was satisfied that Foothills’ commitment to continue engaging with EVMA, including engagement capacity funding and funding for a Traditional Knowledge study, demonstrates Foothills’ efforts to continue learning about and responding to EVMA’s concerns with the Project. The CER was further satisfied that Foothills’ Indigenous relations business engagement activities demonstrate Foothills’ efforts to provide employment and economic opportunities for Indigenous peoples, which is responsive to the socio-economic concerns raised by EMVA.

Crown Consultation and Potential Impacts of the Project on the Rights of Indigenous Peoples

Foothills stated that residual effects of the Project on the exercise or practice of the rights of Indigenous peoples recognized and affirmed by s. 35 of the Constitution Act, 1982 are likely to occur during construction but not during operations. These residual adverse effects are expected to be reduced through mitigation and enhancement measures and ongoing engagement throughout the Project’s operating life.

The CER noted that Foothills entered into agreements with potentially impacted Indigenous peoples to conduct Traditional Knowledge studies in relation to the Project and that not all of the expected studies are complete. Foothills stated that should Indigenous communities identify specific sites or features that have the potential to interact with Project activities; Foothills will engage in discussions with the appropriate Indigenous communities regarding the development of site-specific mitigation measures. The CER imposed Condition 11 (Outstanding Traditional Knowledge Studies) to ensure that Foothills incorporates any revisions necessitated by the studies or follow-up activities into the Environmental Protection Plan (“EPP”) for the Project.

Public Engagement

The CER found that all potentially impacted landowners and stakeholders have been notified and given adequate opportunity to comment on the Project.

Engineering Matters

The CER noted Foothills’ responsibility to ensure that the design, specifications, programs, engineering assessments, manuals, procedures, measures, and plans developed and implemented meet the Canadian Energy Regulator Onshore Pipeline Regulations requirements. This includes the Canadian Standards Association Standard Z662 – Oil and Gas Pipeline Systems (“CSA Z662-19”).

The CER imposed Condition 2 of the approval conditions, requiring Foothills to construct and operate the Project in accordance with the information referred to in its application or as otherwise agreed to in its related submissions. The CER also imposed Conditions 1 and 4 of the approval conditions, requiring Foothills to file any technical specification updates for the pipeline listed in the Application concurrently with its LTO application. The CER limited technical specification updates to differences in pipe length, diameter, wall thickness, grade, or material that do not impact any other information provided in Foothills’ application.

Partial LTO Exemptions

The CER was satisfied that, prior to installation, the relevant valves and tie-in assembly will be properly pressure-tested as required by the CSA Z662-19. The CER was further satisfied that the facility may be opened safely based on the facts presented: the nature of fluid (non-sour natural gas) reduces the potential consequences of a release, the expansion involves the replacement of interchangeable orifice-meter plates at a metering station, the maximum operating pressure is not being increased, and the company has not had recent compliance issues with hydro testing.

The CER, therefore, granted Foothills’ request for an exemption from the LTO requirements for the tie-in assembly and the LTO requirements for the Kingsgate Border Meter Station. The CER reminded Foothills that it must apply for and receive LTO for the remaining facilities pursuant to s. 213 of the CER Act before placing them into operation.

Geotechnical Design

Foothills submitted that a field assessment (Phase II Assessment) was finalized during the assessment of the application, and it focused on the moderate and high-rated hazards from Phase I. Foothills submitted it would implement engineering measures, which may include implementation of engineered grade plans, appropriate depth of cover, use of heavy-wall pipe, and surface erosion controls, to mitigate the identified hazards.

The CER was satisfied that the mitigation measures for geohazards committed to by Foothills were appropriate.

Financial Matters

When considering the economic feasibility of the Project, the CER assesses the need for the Project and the likelihood of it being used at a reasonable level over its economic life.

Need for, and Alternatives to, the Project

Foothills stated that the Project is required to increase capacity on the Foothills System for November 1, 2023, to meet existing and incremental contract obligations to serve forecasted long-term aggregate natural gas transportation requirements on the Foothills BC System and that the Project is underpinned by contracts with a weighted average length of 30.5 years.

WEG raised concerns regarding the long-term need for the Project. WEG submitted that new and anticipated government policies to reduce greenhouse gas emissions and regulations would significantly impact the demand outlook for the Pacific Northwest and California region. WEG further stated that, for a capacity expansion on the Full Westpath to be useful to shippers, the capacity expansions are required to be coordinated across all three pipelines that comprise the Full Westpath. A final issue WEG raised was that contracting for additional capacity on either the Foothills BC System and/or the NOVA Gas Transmission Ltd. System is not useful, absent a further expansion of the Gas Transmission Northwest Pipeline System.

The CER determined that the Project is needed to meet existing and new contracts and positions the Foothills System to meet market demand. The CER acknowledged the significant demand expressed through the various open seasons, which this Project will not address, and that Foothills currently does not have future expansion plans. The CER noted that while companies require the flexibility to operate their pipeline systems efficiently and effectively, the CER may become concerned if the demand expressed by shippers continues to significantly exceed the capacity offered by a given project or suite of projects. Multiple projects that are applied for in the same temporal and geographic area place higher burdens on stakeholders for consultation and assessment of the projects and participating in the regulatory processes associated with those projects. The CER was of the view that this approach may not reflect regulatory efficiency.

Ability to Finance the Construction, Operation, and Abandonment of the Project

Foothills submitted that it considered ongoing law and policy development on carbon and climate change as required by the CER Filing Manual and noted that the drivers of the Project do not change as a result of climate change laws.

The CER was satisfied with Foothills’ ability to finance the Project. The CER further found that Foothills had demonstrated that the net-zero action plan is unlikely to have a significant impact on the Project’s economic feasibility.

Commercial Impacts

Foothills proposed to treat the costs of the Project on a rolled-in basis and apply the existing toll methodology of the Foothills BC System. The CER was satisfied that this would result in tolls that are just, reasonable, and not unjustly discriminatory. The CER also determined that the rolled-in tolling methodology remains appropriate and adheres to the principle of no acquired rights, which dictates that existing shippers and new shippers should equally pay for the increase in tolls.

Environmental Matters

Environment and Climate Change Canada’s Response to Species at Risk Act Notification Letter

In response to the CER’s Species at Risk Act (“SARA”) notification letter, Environment and Climate Change Canada (“ECCC”) advised that Foothills consult with ECCC for expertise and advice for the species at risk identified as potentially impacted by the Project. ECCC identified an additional 18 SARA-listed species and one species listed by the Committee on the Status of Endangered Wildlife in Canada that may potentially be affected by the Project.

The CER found that, with the implementation of Foothills’ proposed mitigation measures and environmental protection procedures and the CER’s imposed conditions, the Project is not likely to cause significant adverse environmental effects. The CER further found that the Project’s contribution to existing and reasonably foreseeable cumulative effects will not be significant.

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