AER Denies Developer's Request to Share Pipeline Crossing Costs

July 24, 2024

Written By Daron Naffin, Tim Myers, Thomas Machell and Shawn Munro

In a recent decision made pursuant to section 33 of the Pipeline Act,¹ the Alberta Energy Regulator (AER) rejected an application filed by Qualico Developments West Ltd. (Qualico) seeking orders requiring Pembina Pipeline Corporation and Plains Midstream Canada ULC (collectively, the Pipeline Companies) to share in the cost of the work required for Qualico to construct an arterial road across two existing pipelines in connection with a residential development being pursued by Qualico in the Edmonton area.

The AER's decision, released on July 4, 2024, represents the conclusion of a lengthy process dating back to November 2020 which culminated in a public hearing in March 2024 with participation by Qualico, numerous developers and development industry associations supporting Qualico's application, the Pipeline Companies, and SECURE Energy Services Inc. and Keyera Corp. supporting the position of the Pipeline Companies.

Section 33(1) of the Pipeline Act gives the AER discretion to, inter alia, direct a pipeline licensee to alter or relocate any part of the licensee's pipeline where, in the AER's opinion, it would be in the public interest to do so. Section 33(2) provides that where the AER directs the alteration or relocation of a pipeline, it may order by whom and to whom payment of the cost of the work and material, or either, shall be made.

In its application, which was filed at the direction of the City of Edmonton and its Arterial Road Assessment Steering Committee, Qualico requested orders from the AER directing the Pipeline Companies to pay for 50 percent of the cost of the protective measures required to facilitate the crossing of the Pipeline Companies' existing pipelines by Qualico's road. At all times, the Pipeline Companies were prepared to undertake the necessary alteration work provided Qualico agreed to pay for the cost of same.

In its decision, the AER directed the Pipeline Companies to provide protective measures for their respective pipelines at the crossing locations under section 33(1) and rejected Qualico's request for cost sharing orders by directing Qualico to pay the Pipeline Companies for the cost of the protective measures under section 33(2). Based on the evidence presented by the parties, including expert appraisal, land use planning, economics, and public interest evidence, the AER determined that Qualico, as the "second in time" party, is responsible for the pipeline crossing costs necessary for it to complete its development, particularly where Qualico had purchased the subject lands and development will full knowledge of the presence of the existing pipelines and the potential costs associated with constructing roads across those existing pipelines.

The AER's findings are consistent with what the Pipeline Companies described as a long standing industry practice in Alberta where the second in time party routinely pays for the cost of crossing existing linear infrastructure, as well as with fundamental principles of property law.

Bennett Jones represented the Pipeline Companies and SECURE in this proceeding. To learn more about our Energy Regulatory team, please contact one of the authors.

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