Canada's energy regulator ups pipeline abandonment cost estimate to C$18.6 bln (updated)

Canada Energy Partners

16/06/2023 18:29

(Adds Enbridge comment)
    By Nia Williams
       June 16 (Reuters) - The Canada Energy Regulator (CER)
has raised its estimate of the cost of abandoning the pipelines
it regulates by 79% to C$18.6 billion ($14.10 billion), in a
preliminary review calculating how much companies should set
aside for taking oil and gas pipelines out of service.
    Pipeline abandonment costs are reviewed every five years,
and the steep increase from C$10.4 billion in 2019 is due to
inflation, changes to company-owned infrastructure and updated
abandonment assumptions, the regulator said in a statement
released on Thursday.
    "This will enhance our ability to ensure that pipelines are
safely abandoned while safeguarding the environment and
surrounding communities," the CER said.
    The increase means most of the 93 companies whose Canadian
pipelines are regulated by the CER will face higher abandonment
costs, the regulator said. 
    The final amount will be confirmed in the second part of the
review process when companies and other stakeholders can ask for
changes to the preliminary cost estimates for particular
pipelines.
    The CER regulates all pipelines that cross provincial
boundaries or the U.S.-Canada border, amounting to roughly
73,000 kilometers, or 10% of all pipelines in the country. Major
operators include Enbridge Inc  ENB.TO  and TC Energy  TRP.TO . 
        An Enbridge spokesperson said the revision will impact
how much the company sets aside for abandonment costs.
  
        "We have not yet determined whether we will request any
changes to the estimates," she added.
  
        TC did not immediately respond to a request for comment.
    Abandonment involves permanently removing a pipeline from
service, by emptying it of fluids, conducting inspections and
when necessary, cutting, capping and filling it with materials
like concrete.
    Companies must gradually accumulate the funds in a dedicated
trust by the end of 2054 or earlier, or post a financial
guarantee, essentially an agreement with a third party to cover
the cost of abandonment if the company cannot pay. 

($1 = 1.3188 Canadian dollars)

 (Reporting by Nia Williams; editing by David Evans and Leslie
Adler)
 ((nia.williams@thomsonreuters.com; +1 403 531 1624; Reuters
Messaging: nia.williams.thomsonreuters.com@reuters.net))