Canadian Regulator Raises Pipeline Abandonment Cost Estimate to Over $14 Billion
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)
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