Decision 2006-105
Suncor Energy Inc.
Preliminary Decision Regarding Jurisdiction to have the Ventures Pipeline (Oil Sands Pipeline) Regulated Under the Provisions of the Gas Utilities Act
October 24, 2006
ALBERTA ENERGY AND UTILITIES BOARD Decision 2006-105: Suncor Energy Inc. Preliminary Decision Regarding Jurisdiction to have the Ventures Pipeline (Oil Sands Pipeline) Regulated Under the Provisions of the Gas Utilities Act Application No. 1453788
October 24, 2006
Published by Alberta Energy and Utilities Board 640 – 5 Avenue SW Calgary, Alberta T2P 3G4
Telephone: (403) 297-8311 Fax: (403) 297-7040
Web site: www.eub.gov.ab.ca
Contents
1 INTRODUCTION...... 1
2 IS VENTURES A “GAS UTILITY”?...... 2
3 IF VENTURES IS A GAS UTILITY, WHAT JURISDICTION CAN THE BOARD EXERCISE? ...... 7
4 SHOULD THE BOARD EXERCISE ANY JURISDICTION IT HAS? ...... 10
5 ORDER ...... 13
EUB Decision 2006-105 (October 24, 2006) • i
ALBERTA ENERGY AND UTILITIES BOARD Calgary Alberta
SUNCOR ENERGY INC. APPLICATION TO HAVE THE VENTURES PIPELINE (OIL SANDS PIPELINE) REGULATED UNDER THE Decision 2006-105 PROVISIONS OF THE GAS UTILITIES ACT Application No. 1453788
1 INTRODUCTION
On March 23, 2006, Suncor Energy Inc. (Suncor), pursuant to s.24 of the Gas Utilities Act, R.S.A. 2000 c. G-5 (GUA) applied to the Alberta Energy and Utilities Board (the Board or EUB) for an investigation of the services and tolls applicable to the pipeline held by TransCanada Pipeline Ventures Limited Partnership (Ventures Partnership) (Ventures Pipeline) that are currently implemented by NOVA Gas Transmission Ltd. (NGTL) and TransCanada Pipeline Ventures Ltd. (Ventures Ltd.). Further, pursuant to s.36 of the GUA, Suncor requested that the Board fix just and reasonable rates, tolls and charges and schedules for service; and proper and adequate rates and methods of depreciation, amortization or depletion.
On May 4, 2006, the Board issued a Notice of Application requesting that any party wishing to register an objection or submit comments on the Application should file a statement of intention to participate by May 18, 2006, following which the Board would determine the appropriate process for this Application.
The Board received Statements of Intention to Participate (SIPs) with regards to the Application from numerous parties.1
In a letter dated May 31, 2006, Ventures Ltd. submitted that the Board lacked jurisdiction to grant the relief requested in Suncor’s application, and requested that the Board deal with the issue of jurisdiction as a preliminary matter. Ventures Ltd. argued that Suncor had failed to provide the factual context and legal argument to establish the Board’s jurisdiction to entertain Suncor’s application, and submitted that serious questions are raised as to:
1. Whether the Ventures Pipeline is a “gas utility” as that term is defined in the GUA. 2. Whether the Board has jurisdiction to entertain Suncor’s application(s) made under s.36 of the GUA, without the Board having first obtained an order of the Lieutenant Governor in Council, as provided for in s.5 of the GUA. 3. Whether the Board has jurisdiction to grant that part of the relief requested by Suncor which would have the Board roll the assets of the Ventures Partnership into the rate base of NOVA Gas Transmission Ltd.
1 Statements on Intention to Participate were filed by: BP Canada Energy Company, Devon Canada Corporation, EnCana Corporation, Imperial Oil Resources, Pacific Gas & Electric Company, Petro-Canada, Shell Canada Limited, Syncrude Canada Ltd., Terasen Gas Inc., Williams Energy (Canada) Inc., the Consumers Coalition of Alberta(CCA), Canadian Association of Petroleum Producers (CAPP), the Office of the Utilities Consumer Advocate (UCA), NGTL, Ventures, ATCO Pipelines, and Industrial Gas Consumers Association of Alberta (IGCAA).
EUB Decision 2006-105 (October 24, 2006) • 1 Suncor Energy Inc. Application to have the Oil Sands Pipeline Regulated
The Board concurred with Ventures Ltd. that it was appropriate to address certain preliminary jurisdictional matters:
1. Whether the Ventures Pipeline is a “gas utility” under the GUA. This would include identifying the criteria for determining whether a facility should be regulated or non- regulated. 2. Whether s.5 of the GUA applies so as to render the Board without jurisdiction to deal with all or part of Suncor’s application under s.24 and s.36 of the GUA.
The Board considered that determining these two issues first would result in a more efficient use of time and resources. The Board stated that if it finds that the Ventures Pipeline is a “gas utility” and it has jurisdiction to consider the remainder of Suncor’s application, it would determine an appropriate process and the scope of that part of the proceeding at that time.
The Board set the following schedule:
Submission from Suncor June 28, 2006 Submissions from Ventures & Other Parties July 14, 2006 Reply Submission from Suncor July 28, 2006
Submissions were received from Suncor, Ventures Ltd. and NGTL.
The Board panel assigned to this application is R. G. Lock, P.Eng. (Presiding Member), J. I. Douglas, FCA (Member), and M. W. Edwards (Acting Member).
For purpose of this Decision, the Board considers that the record regarding preliminary matters to the Application closed on July 28, 2006.
2 IS VENTURES A “GAS UTILITY”?
Section 1(g) of the GUA sets out the definition of a “gas utility”:
1(g) “gas utility” means
(i) any gas pipeline,
(ii) any system, works, plant, pipes, equipment or service for the production, gathering, conveying, transmission, transporting, delivery, furnishing or supplying of gas by retail or wholesale, either directly or indirectly, to or for the public or any member of the public, whether an individual or a corporation, other than the transportation, delivery, furnishing or supplying by retail or wholesale, either directly or indirectly, of liquefied petroleum gas (except propane and butanes) by means of tank car, tank wagon, cylinder or vessel,
(iii) any absorption plant or scrubbing plant, and
(iv) any system, well, works, plant, equipment or service for the production of gas or capable of producing gas that may be declared by the Energy Resources Conservation Board to be a gas utility;
2 • EUB Decision 2006-105 (October 24, 2006) Suncor Energy Inc. Application to have the Oil Sands Pipeline Regulated
In Suncor’s application, it argued that the Ventures Pipeline falls within s.1(g)(ii). Ventures Ltd.’s submission was that it did not fall within either s.1(g)(i) or (ii), and was of the view that since Suncor did not raise s.1(g)(i) it was conceding this point. Suncor, in its reply, denied making such concession. The Board considers that it must assess both s.1(g)(i) and (ii) as on the face of these two sections, it appears the Ventures Pipeline might fall within either.
Section 1(g)(ii) of the GUA Suncor’s position was that the Ventures Pipeline falls within s.1(g)(ii) because the Ventures Pipeline transmits, transports and delivers gas directly for Suncor, Williams Energy and NGTL. Ventures Ltd. disagreed, arguing that the Ventures Pipeline is not supplying gas “to or for the public”. Ventures Ltd. took the position that “the public” means members of the general public in need of protection and cites the case of Edmonton et al. v. Northwestern Utilities Ltd.2, among others, in which the court stated:
The Public Utilities Act, RSA, 1955, c.267, now c.73 Statutes of Alberta, 1959, was passed inter alia, for the purpose of protecting consumers of natural gas against unfair prices and charges capable of being imposed by a supplier which had a monopoly of the right to supply gas to various communities, either by agreement or in fact.
Ventures Ltd. also cited Dome Petroleum Ltd. v. Public Utilities Board (Alberta) et al.3 in which the court stated “The protection of the provincial consumer is a primordial element in the scheme of Alberta legislation relating to natural gas and its components.” Ventures Ltd. concluded that Suncor (and Williams) is a sophisticated party that freely entered into long-term contracts for service on the Ventures Pipeline, and as such, should not be in need of protection. Therefore, Suncor did not fit the definition as being a member of the public.
On the other hand, Suncor argued that it is a member of the public on the basis that it is a corporation, and corporations are specifically mentioned in the definition of a gas utility as being a member of the public. Suncor referenced Ajax Alberta Pipeline Limited v. Canadian Chemical Company Ltd.4 in which the Court of Appeal was asked to determine whether the Alberta Board of Public Utilities Commissioners (PUB) had jurisdiction to set tolls for Ajax Alberta Pipeline Limited (Ajax Pipeline). The Court determined that the PUB did not have jurisdiction on the basis that Ajax Pipeline was not a “public utility” as defined in the legislation. As a corporation, Canadian Chemical was not a member of the public. The Court stated that “the words ‘member of the public’ are not apt to describe a corporation”.5
Suncor noted that shortly after the Ajax decision, the definition of “public utility” was amended to specifically define a member of the public as including a corporation. This is the wording currently used in s.1(g)(ii). Ventures Ltd. responded to this submission stating that while this amendment clarifies that a corporation can be a member of the public, it does not follow that every corporation is a member of the public for the purposes of s.1(g)(ii).
The issue of whether a utility must have a monopoly to attract Board regulation was also raised, with Ventures Ltd. arguing that since Board regulation takes the place of competition, in the
2 (1979), 287 D.L.R (S.C.C.), at p.272 3 (1977), 2 A.R. 453 (Alta C.A.), at p.460 4 (1955) 14 W.W.R. 193 (Alta C.A.) 5 ibid, at p. 198
EUB Decision 2006-105 (October 24, 2006) • 3 Suncor Energy Inc. Application to have the Oil Sands Pipeline Regulated
absence of a monopoly the Board should not regulate. Suncor responded stating that there is no requirement in the GUA or in the case law that suggests an entity must be a monopoly before it is subject to Board regulation. Further, Suncor noted that in Ajax, the Court stated “Where a pipeline is not a monopoly and serves one customer it would require very plain words to convert it into a “public utility””.6 Suncor stated that unlike the situation in Ajax, the Ventures Pipeline directly serves three customers. Suncor also argued that the Ventures Pipeline indirectly serves other members of the public through its service to NGTL.
The Board does not consider that the existence of a monopoly is a pre-condition to Board regulation. The Board agrees that regulation generally takes the place of competition and this provides protection to consumers; however, as Suncor mentioned, there are currently situations where the Board regulates gas pipeline utilities that are not in a strict monopoly position but subject to some competitive pressures, such as NGTL and ATCO Pipelines. Further, while a fully developed competitive market may tend the Board toward not regulating an entity that fits within the definition of a “gas utility”, in the absence of this, the Board would be more inclined to regulate such entities. However, the Board considers that the existence or lack, of competition goes to the issue of whether the Board should exercise any jurisdiction it has, which is discussed below, and not the issue of whether the Board has jurisdiction, that is whether an entity is a “gas utility”.
The parties do not appear to dispute the fact that the Ventures Pipeline fits within the first part of s.1(g)(ii), that is “any system, works, plant, pipes, equipment or service for the production, gathering, conveying, transmission, transporting, delivery, furnishing or supplying of gas by retail or wholesale”. In addition, the Board finds that the service provided by the Ventures Pipeline clearly fits within this description. The dispute between the parties relates to whether the service provided by the Ventures Pipeline is “either directly or indirectly, to or for the public or any member of the public, whether an individual or a corporation”.
The word “public”, on its own, is a general term that typically is used to describe an entire group of persons. The wording in the legislation “to or for the public or any member of the public, whether an individual or a corporation” suggests a liberal reading of s.1(g)(ii) is appropriate. The wording “to or for the public or any member of the public” on its own is broad. Taken together with the wording “whether an individual or a corporation” suggests this is all-encompassing, and lends further support to Suncor’s argument that it is a member of the public. The Board is of the view that this wording includes all gas consumers, and that Suncor is a member of the public. Ventures Ltd. argued that Suncor is not a member of the public because it entered into a private contract with Ventures Ltd. and is not a consumer in need of protection. This suggests that Suncor was a member of the public but lost that status once it entered into this contract. The Board considers that the wording of the section is all inclusive and that Suncor is a member of the public. The Board concludes that Suncor should not lose its status as a member of the public simply by entering into a private contract, nor is there anything in the legislation to suggest that is the case. The Board also does not accept Ventures Ltd.’s argument that since Suncor is a sophisticated party that it is not a consumer in need of protection. In the Board’s view, being a sophisticated party does not mean that party is not entitled to protection.
Further, the Board considers that Ventures Ltd. indirectly provides service to the public through the transportation by others (TBO) agreement with NGTL. When the Ventures Pipeline was first
6 ibid., at p. 201 4 • EUB Decision 2006-105 (October 24, 2006) Suncor Energy Inc. Application to have the Oil Sands Pipeline Regulated
approved by the Board in 1998, it was underpinned by contracts with Suncor and Novagas Canada Limited.7 Since then, the use of the Ventures Pipeline has changed. NGTL and Ventures Ltd. first entered into a TBO arrangement in 2002,8 and a TBO arrangement has been in place since. The TBO arrangement results in the Ventures Pipeline indirectly serving customers of NGTL, as this service is open to any customer of NGTL and this does constitute the public. Further, the capacity on the Ventures Pipeline is 730 MMcf/d @ 1200 psig9 and the TBO arrangement with NGTL is for a capacity of 533 MMcf/d @ 1200 psig.10 Moreover, the affiliate nature of the arrangement and the ownership structure of the Ventures Partnership are important in this determination. NGTL holds a 99.99% limited partnership interest in the Ventures Partnership. The other 0.01% is held by Ventures Ltd. who is the general partner of the Ventures Partnership. In turn, NGTL owns Ventures Ltd. As a result, NGTL is in essence the owner of the Ventures Partnership and the Ventures Pipeline. NGTL is a regulated gas utility and these facts lend support to the conclusion that Ventures Pipeline is indirectly, through NGTL, serving the public.
Based on the reasoning above, the Board finds that the Ventures Pipeline is serving the public, and that it is a “gas utility” pursuant to s.1(g)(ii).
Section 1(g)(i) of the GUA Section 1(g)(i) indicates that a “gas pipeline” is a “gas utility”. “Gas pipeline” is defined in s.1(f):
1(f) “gas pipeline”
(i) means a pipe or any system or arrangement of pipes wholly within Alberta whereby gas is conveyed from a well-head or other place at which it is produced to any other place, or from a place where it is stored, processed or treated to any other place,
(ii) includes all property of any kind used for the purpose of, or in connection with, or incidental to the operation of a gas pipeline in the gathering, transporting, handling and delivery of gas, and
(iii) without restricting the generality of the foregoing, includes tanks, surface reservoirs, pumps, racks, storage and loading facilities, compressors, compressor stations, pressure measuring and controlling equipment and fixtures, flow controlling and measuring equipment and fixtures, metering equipment and fixtures and heating, cooling and dehydrating equipment and fixtures, but
(iv) does not include any pipe or any system or arrangement of pipes that constitutes a distribution system for the distribution of gas to ultimate consumers.
Ventures Ltd. submitted it is not a gas pipeline as that phrase is defined because it sources its gas from the NGTL system, not from a well-head or other place at which it is produced. The Board questions whether such a narrow reading of the legislation is appropriate. The principles of
7 Decision 98-20, at p. 3 8 Decision 2002-16 – NOVA Gas Transmission Ltd. Application for Approval of Costs Delivery Service to Fort McMurray Area (Application 2001084) (Released: February 5, 2002) 9 2004 NGTL Phase 1GRA Application 1315423, NGTL Response to Williams-NGTL-005 10 2004 NGTL Phase 1 GRA Application 1315423, Table 8.8-1, Summary of Ventures TBO Terms and Conditions
EUB Decision 2006-105 (October 24, 2006) • 5 Suncor Energy Inc. Application to have the Oil Sands Pipeline Regulated statutory interpretation were recently summarized by the Alberta Court of Appeal in ATCO Electric Limited v. Alberta (Energy and Utilities Board):11
In interpreting the Board’s roles and responsibilities under the applicable statutory legislation, one must bear in mind that this is governed by the purposive and contextual approach to statutory interpretation repeatedly endorsed by the Supreme Court of Canada: Re Rizzo & Rizzo Shoes [1998] 1 S.C.R. 27; Bell Express Vu Limited Partnership v. Rex [2002] 2 S.C.R. 559, 2002 SCC 42. The purposive approach requires that a court assess legislation in light of its purpose since legislative intent, the object of the interpretive exercise, is directly linked to legislative purpose. The contextual approach requires, in turn, that the words chosen must be assessed in the entire context in which they have been used. Any attempt to deduce legislative intent therefore cannot be undertaken in a vacuum: Love v. Flagstaff (County) Subdivision and Development Appeal Board (2002) 317 A.R. 261, 2002 ABCA 292 at paras. 20-21.
The GUA sets out the scheme and a mandate for the Board to protect the public interest by way of regulating public utilities. The legislation requires the Board to balance competing interests and address broad policy concerns.12 The definition of “gas utility” and “gas pipeline” is broad and encompasses many aspects of gas production and distribution.
The Board is of the view that taking a purposive and contextual approach to interpretation of s.1(f)(i) suggests a broader reading of this section is appropriate. While the immediate source of the Ventures Pipeline’s gas is from the NGTL system, that gas is sourced from a well-head or other place at which it is produced. To take the view that simply because gas from a well-head or other place at which it is produced passes through one pipeline before moving onto the Ventures Pipeline and therefore does not fall within s.1(f)(i), would seem to constrain the purpose of the legislation. The Board considers that the intent of the legislation was likely not to preclude a pipeline system from being a “gas pipeline” simply because the gas from the well-head or other place at which it is produced goes through another pipeline system before entering the pipeline system in question.
Ventures Ltd. also submitted s.1(f) does not apply because its pipeline is a distribution system so it falls within the exemption under s.1(f)(iv). As support for this, Ventures Ltd. cited the Ajax decision which characterized the Ajax Pipeline as a system distributing gas to ultimate consumers:
In view of the concluding words of the subsection “but does not include any pipe or any system or arrangement of pipes which constitutes a distribution system for the distribution of gas to the ultimate consumers,” it would seem that the intention of the legislature was to except a pipe which served a consumer. The board was of the opinion that these words refer to companies which bring gas to homes and businesses in the various cities, towns and villages, presumably such companies as Northwestern Utilities, but the words seem to me to exclude any pipeline which distributes gas to the ultimate consumers, and I find the appellant is such a consumer.13
Ventures Ltd. relied on the above quote to say it is a distribution system because it distributes gas to ultimate consumers. The Board does not agree that the Ventures Pipeline is a distribution
11 2004 ABCA 215, at para. 127 12 ATCO Gas and Pipelines v. Alberta (Energy and Utilities Board) [2005] A.J. No. 495, para. 47 13 ibid., at p. 197 6 • EUB Decision 2006-105 (October 24, 2006) Suncor Energy Inc. Application to have the Oil Sands Pipeline Regulated
system. In the original application for construction of the Ventures Pipelines, Ventures stated the pipeline was for the purpose of transporting gas from an interconnection on the NGTL system to an NGTL meter station.14 This suggests to the Board that Ventures Ltd. did not consider its pipeline to be a distribution system, but rather more akin to a transmission system. Further, the size of the Ventures Pipeline also suggests that it is not a distribution system. The Ventures Pipeline is a 24 inch pipeline15 with a capacity of 730 MMcf/d @1200 psig. This is in sharp contrast to the Ajax pipeline in which it was delivering about 35 MMcf/d to Canadian Chemical.16 Canadian Chemical took 99.32% of the gas on the Ajax system, which suggests that the capacity of the Ajax pipeline was likely not much greater than the delivery amount to Canadian Chemical. While the Court of Appeal in Ajax found the pipeline to be a distribution system, the Board finds that the facts in Ajax to be distinguishable from the situation before the Board in this case.
However, the Board has already concluded that the Ventures Pipeline falls within s.1(g)(ii) as being a gas utility. While the Board did go on to assess whether the Ventures Pipeline falls within s.1(g)(i), and considers it is arguable that the Ventures Pipeline also falls within s.1(g)(i), the Board does not consider it necessary to make a determination on this point having found that s.1(g)(ii) applies.
3 IF VENTURES IS A GAS UTILITY, WHAT JURISDICTION CAN THE BOARD EXERCISE?
In its Application, Suncor requested the Board conduct an investigation into the services and tolls applicable to Ventures Ltd. pursuant to s.24(1) of the GUA, and to fix just and reasonable rates, tolls and charges, and proper and adequate rates and methods of depreciation, amortization and depletion pursuant to s.36 of the GUA. Having concluded that the Ventures Pipeline is a “gas utility”, the Board must now assess what jurisdiction it is able to exercise over Ventures Ltd.
Section 5 of the GUA precludes the Board from considering applications under certain sections of the GUA unless authorized to do so by the Lieutenant Governor in Council or by regulation:
5(1) Notwithstanding anything in this Act but subject to any regulations under subsection (2), the Board shall not proceed with any application under section 6, 8, 9, 10, 16, 17, 36 or 45 or any provision of them or proceed on its own motion or initiative under any of those sections unless it is authorized to do so by an order of the Lieutenant Governor in Council.
(2) The Lieutenant Governor in Council may make regulations exempting from the operation of subsection (1)
(a) all or any classes of applications under any section referred to in that subsection or under any provision of it, or
(b) all or any classes of cases under any section referred to in that subsection or under any provision of it when the Board is, apart from this section, empowered to proceed on its own motion or initiative.
14 Decision 98-20, Nova Pipeline Ventures Ltd. Application to Construct and Operate a Natural Gas Pipeline Wood Buffalo Lake to Fort McMurray Area, November 23, 1998 15 Decision 98-20 16 Ajax, at p. 195
EUB Decision 2006-105 (October 24, 2006) • 7 Suncor Energy Inc. Application to have the Oil Sands Pipeline Regulated
Section 24 of the GUA is not one of the enumerated sections specified in s.5. Section 24 states:
24(1) The Board, on its own initiative or on the application of a person having an interest, may investigate any matter concerning a gas utility.
(2) If in the opinion of the Board it is necessary to investigate a gas utility or the affairs of the owner of it, the Board shall have access to and may use any books, documents or records with respect to the gas utility and in the possession of any owner of the gas utility or municipality or under the control of a board, commission or department of the Government.
(3) If a person directly or indirectly controls the business of an owner of a gas utility within Alberta, that person and any company controlled by that person shall give the Board or its agent access to any of the books, documents and records that relate to the business of the owner or shall furnish any information in respect of it that may be required by the Board.
Having found that the Ventures Pipeline is a “gas utility”, s.24 clearly authorizes the Board to conduct an investigation into the Ventures Pipeline and the affairs of its owner(s). However, this section is permissive, that is, it states that the Board may investigate any matter concerning a gas utility. While the Board has jurisdiction to conduct an investigation as Suncor suggested, the Board must decide whether it is appropriate to do so. This is discussed in Section 4 below.
Section 36 is one of the sections specified in s. 5; however, there is a regulation in effect, the Gas Utilities Exemption Regulation, AR 63/2003 (Regulation) that exempts certain proceedings from the operation of s. 5. Section 2 of the Regulation states:
2 The following are exempt from the operation of section 5 of the Act:
(a) proceedings under section 36(a) of the Act, if the rates, tolls or charges to be fixed by the Board’s order are those which are to be imposed, observed and followed thereafter by an owner of a gas utility
(i) with respect to all gas supplied by the owner, if the owner of the gas utility supplies gas pursuant to a privilege or franchise granted to the owner by a municipality and approved by the Board, (ii) with respect to all gas supplied by the owner, if the owner of the gas utility is a municipality, or (iii) with respect to gas supplied by that owner to the owner of another gas utility who in turn will be supplying the same gas in any of the circumstances described in subclause (i) or (ii);
(b) applications under section 36(a) of the Act that arise out of section 44(2) or (3) of the Oil and Gas Conservation Act;
(c) proceedings under section 36(b), (c) or (d) of the Act;
(d) proceedings under section 36(e) of the Act, if the order applied for would require the owner of a gas utility to supply and deliver gas in any of the circumstances described in clause (a) of this section;
(e) proceedings under section 36 or 45 of the Act in relation to NOVA Gas Transmission Ltd.
8 • EUB Decision 2006-105 (October 24, 2006) Suncor Energy Inc. Application to have the Oil Sands Pipeline Regulated
The relief sought by Suncor pursuant to s.36 appears to be with respect to subsections (a) and (b). Section 36 states:
36 The Board, on its own initiative or on the application of a person having an interest, may by order in writing, which is to be made after giving notice to and hearing the parties interested,
(a) fix just and reasonable individual rates, joint rates, tolls or charges or schedules of them, as well as commutation and other special rates, which shall be imposed, observed and followed afterwards by the owner of the gas utility,
(b) fix proper and adequate rates and methods of depreciation, amortization or depletion in respect of the property of any owner of a gas utility, who shall make the owner’s depreciation, amortization or depletion accounts conform to the rates and methods fixed by the Board,
(c) fix just and reasonable standards, classifications, regulations, practices, measurements or service, which shall be furnished, imposed, observed and followed thereafter by the owner of the gas utility,
(d) require an owner of a gas utility to establish, construct, maintain and operate, but in compliance with this and any other Act relating to it, any reasonable extension of the owner’s existing facilities when in the judgment of the Board the extension is reasonable and practical and will furnish sufficient business to justify its construction and maintenance, and when the financial position of the owner of the gas utility reasonably warrants the original expenditure required in making and operating the extension, and (e) require an owner of a gas utility to supply and deliver gas to the persons, for the purposes, at the rates, prices and charges and on the terms and conditions that the Board directs, fixes or imposes.
In s.2(c) of the Regulation, proceedings under s.36(b), (c) and (d) are exempt from the operation of s.5 of the GUA. This means that the Board has jurisdiction to fix rates and methods of depreciation, amortization or depletion in respect of the Ventures Pipeline. However, the Board must also consider whether it has jurisdiction under s.36(a) to fix just and reasonable rates, tolls and charges. Suncor argued that the Board does possess this jurisdiction.
Suncor’s argument is based on s.2(e) of the Regulation that exempts from the application of s.5 of the GUA proceedings under s.36 that are “in relation to NOVA Gas Transmission Ltd.”. Having found that the Ventures Pipeline is a “gas utility”, Suncor’s view was that NGTL is an owner of the gas utility. Suncor made three submissions in this regard:17
1. NGTL is an owner of the Ventures Pipeline. Suncor submits that NGTL’s partnership interest in the Ventures Partnership means that NGTL effectively controls Ventures and that as the sole limited partner in the Ventures Partnership, NGTL owns 99.99% of the partnership.
2. NGTL manages and operates the Ventures Pipeline. NGTL submitted that this was incorrect. NGTL stated that in April 1999 NGTL did enter into an agreement with Ventures to provide certain operating services, but under that agreement Ventures Ltd. retained the right to manage and direct its business. Further, NGTL stated that this
17 Suncor June 28, 2006 submission, pp. 7-10, Suncor Reply submission
EUB Decision 2006-105 (October 24, 2006) • 9 Suncor Energy Inc. Application to have the Oil Sands Pipeline Regulated
agreement was subsequently assigned to TransCanada PipeLines Limited (TCPL). Suncor responded indicating that the assignment to TCPL does not impact Suncor’s argument because NGTL has no employees since it is TCPL employees that operate NGTL by way of service arrangements.
3. NGTL controls the Ventures Pipeline. As NGTL has a controlling interest in Ventures Ltd., it constitutes an owner of a gas utility.
Suncor also noted the wording used in the Regulation “in relation to” and submitted that this should be interpreted broadly:
The words “in respect of” are…words of the widest possible scope. They import such meaning as “in relation to”, “with reference to” or “in connection with”. The phrase “in respect of” is probably the widest of any expression intended to convey some connection between two related subject-matters.18
Suncor argued that a limited partnership is not a separate legal entity19 and to the extent TransCanada Ventures holds partnership property in its own name, it does so beneficially for NGTL as the owner of TransCanada Ventures. Taken together with the fact that NGTL owns 99.99% of the Ventures Pipeline, Suncor submitted that NGTL is the owner of the Ventures Pipeline.
While the Board considers there to be some merit in Suncor’s submission that NGTL and Ventures Ltd. are beyond just being related companies, the Board does not agree that the expansive interpretation of s.2(e) that Suncor suggests, is appropriate. To accept Suncor’s interpretation would result in the wording “in relation to NOVA Gas Transmission Ltd.” capturing all subsidiaries of NGTL or companies in which NGTL holds any ownership interest.
In the Board’s view, it is unclear what the legislature intended. Accepting Ventures Ltd.’s interpretation suggests that NGTL could establish controlled subsidiaries merely to escape potential regulation. The Board finds it difficult to accept that this is the intended effect of the legislation. However, in this current instance, and in the absence of specific language to clarify this concern, the Board finds it difficult to assume jurisdiction under s.36(a) with respect to Ventures Ltd. at this time, given the language used in s.2(e) of the Regulation.
On the question of who the owners of the Ventures Pipeline are for the purposes of the GUA, the Board notes that a partnership is not a legal entity. Thus, the Board must look to the partners in the Ventures Partnership, which are Ventures Ltd. and NGTL. Therefore, Ventures Ltd. and NGTL are the owners of the Ventures Pipeline gas utility for the purposes of the GUA.
4 SHOULD THE BOARD EXERCISE ANY JURISDICTION IT HAS?
Having concluded that the Board has jurisdiction pursuant to s.24 the GUA, the Board must now assess whether it should exercise its jurisdiction in this case. Section 24 states that the Board may conduct an investigation. As a result, the Board’s view is that it is not required to exercise jurisdiction, but must assess whether the circumstances warrant it doing so.
18 R v. Nowegijick, [1983] 1 S.C.R. 29, at p. 39 19 Suncor submission, at p. 7 10 • EUB Decision 2006-105 (October 24, 2006) Suncor Energy Inc. Application to have the Oil Sands Pipeline Regulated
Ventures Ltd. appeared to suggest that if the Board found that it possesses jurisdiction, the Board should not exercise jurisdiction in this case. Ventures Ltd. cites Decision E94047 re Peace Pipe Line Ltd., August 3, 1994, in this regard:
Price or tariff regulation is generally required where a service or services are provided on a monopoly basis. It is widely recognized and accepted that a purpose for regulation is to provide a surrogate for the competition that is absent in the monopoly situation. In this case, the Peace pipeline system is not regulated as to tariffs and has not been during its some thirty years of existence…The Board is not convinced that unique circumstances exist in this case which would justify initiation of setting tolls for service.
It seems neither just nor reasonable that a certain owner, or owners of oil lines whose services are subject to significant and active competition should have rates and tolls set by a regulatory board when its competitors do not.20
Suncor in response, noted a passage from Decision 98-20 in which the Peace Pipe Line decision was discussed:
While the Board agrees that competitive environments with many buyers and sellers can impose effective price discipline, it is not convinced that this situation with two suppliers of services, namely Federated and Peace, achieves the same scale of benefits as would be realized in a fully competitive environment. Moreover, while full regulation of rates may involve significant costs, there are more efficient approaches to regulation, such as incentive-based regulation and negotiated settlements. The Board is aware that Decision E94047 of the Public Utilities Board, may have left the impression with some parties that a regulatory solution to the problem of market power would not be considered. Without commenting on the circumstances of that decision, it should be made clear that a regulatory solution, under section 101 of the Public Utilities Board Act (PUB Act), will be considered in any situation where the existence of market power is apparent.
In this case, there was very little information as to status of the market in which the Ventures Pipeline operates. Ventures Ltd. stated that there are numerous pipelines serving the Fort McMurray area; however, the Board lacks specific information that would allow it to determine whether these pipelines are operating in a fully competitive market. In addition, the Board notes the change in use that has occurred with the Ventures Pipeline as a result of the TBO arrangement with NGTL.
In Decision 2004-06921 regarding NGTL’s 2004 Phase I GRA, the Board only approved the TBO arrangement until April 1, 2006 which was the deadline for NGTL and Ventures to negotiate in good faith a purchase of the Ventures Pipeline. In Decision 2005-057,22 the Board directed NGTL to provide the Board with an update regarding these negotiations. In a letter dated March 31, 2006, NGTL advised that NGTL and the Ventures Partnership were unable to reach an acceptable agreement. By letter of April 12, 2006, the Board advised that as part of this
20 Decision E94047 at p. 56 21 Decision 2004-069 – NOVA Gas Transmission Ltd. 2004 General Rate Application, Phase I (Application No. 1315423) (Released: August 24, 2004) 22 Decision 2005-057 – NOVA Gas Transmission Ltd. 2005-2007 Revenue Requirement Settlement (Application No. 1392296) (Released: June 7, 2005)
EUB Decision 2006-105 (October 24, 2006) • 11 Suncor Energy Inc. Application to have the Oil Sands Pipeline Regulated application, it may require further information related to the discussions between NGTL, the Ventures Partnership, Suncor and Williams.
Further, the Board has, in a previous decision, expressed concerns regarding the relationship between Ventures Ltd. and NGTL.23 As a result of these factors, the Board is unable to reach the conclusion advocated by Ventures Ltd., namely that the Board should not exercise its jurisdiction to conduct an investigation. The Board is persuaded by Suncor’s submission that an investigation should take place.
Therefore, the Board will proceed under its authority as set out in s.24 with an investigation to determine whether the rates charged are unjust or unreasonable or unjustly discriminatory, and then determine whether further action by the Board is warranted and appropriate given the circumstances. The scope of the investigation is as follows:
1. costs incurred for construction and expansion of the Ventures Pipeline 2. costs to operate the Ventures Pipeline 3. details related to capacity holders and quantities on the Ventures Pipeline 4. contract terms and conditions including rates for the Ventures Pipeline 5. facilities and operations configuration including interconnectivity to the NGTL system and other area systems as well as future expansibility 6. market area forecasts and any requested new services or service quantity increases 7. any other information that may have bearing on the Board’s investigation
Ventures Ltd. is to file a report providing the above information by November 30, 2006. Following that, the Board will advise parties of further process to be followed for this investigation.
23 Decision 2004-069, at pp. 74-75 12 • EUB Decision 2006-105 (October 24, 2006) Suncor Energy Inc. Application to have the Oil Sands Pipeline Regulated
5 ORDER
IT IS HEREBY ORDERED THAT:
(1) Ventures Ltd. is to complete a report and file it with the EUB that addresses the scope of the investigation as defined in this decision by November 30, 2006.
Dated in Calgary, Alberta on October 24, 2006.
ALBERTA ENERGY AND UTILITIES BOARD
(original signed by)
R. G. Lock, P.Eng. Presiding Member
(original signed by)
J. I. Douglas, FCA Member
(original signed by)
M. W. Edwards Acting Member
EUB Decision 2006-105 (October 24, 2006) • 13