NEB to BC Regulators: You Can't Go Home Again

Canada's National Energy Board has beaten off a challenge to "light-handed" pipeline regulation, rejecting an attempt by the British Columbia Ministry of Energy to assert provincial control and revive traditional cost-of-service regulation over even a minor branch of Westcoast Energy's B.C. gas grid.

The NEB rejected all the B.C. ministry's claims, in a decision to approve a purchase by Westcoast of a 42-mile link titled Maxhamish Pipeline. Built in 1998-99 by Alberta Energy Co., the line connects the Westcoast grid to a prolific gas field, Maxhamish, near B.C.'s border with the Northwest Territories.

The NEB ruled it will automatically acquire jurisdiction over the Maxhamish line as a result of the transaction. As a result, the line automatically becomes subject to the light-handed system and its reliance on negotiated service terms. The board pointed to a federal victory in the last tangle over authority to govern the B.C. pipeline grid three years ago, when the Supreme Court of Canada declared the NEB is responsible for all elements of the Westcoast system.

Unlike Alberta's Nova grid, which has always fallen within fiercely-guarded provincial jurisdiction, the Westcoast pipeline and processing network has come under the NEB's wing since its birth in the 1950s. The B.C. grid has been legally defined as a "single federal undertaking" because it primarily serves commerce in gas that crosses provincial and national boundaries.

Affirming the tradition, the NEB said "portions of the Westcoast system that are functionally integrated and subject to common management, control and direction" cannot be separated and placed under provincial jurisdiction. The B.C. ministry maintained its bid to retain authority over Maxhamish Pipeline was an attempt to strike a blow for competition and development of provincial gas resources.

But, the Westcoast purchase spelled excessive concentration of corporate power with potential to discourage small producers, the ministry said. The prime concern was that under the light-handed regulation system, Westcoast did not disclose the price paid for the Maxhamish line, tolls to be charged AEC for continuing to ship gas on it, or effects of the transaction on other users of the pipeline system. The NEB ruled that the Maxhamish line was never in competition with the Westcoast system, but only served as a northern extension of it. The board pointed out that under the light-handed regulation policy, B.C. gas shippers have rights to use a complaints procedure if they suspect Westcoast deals might do harm. No complaints were filed in the Maxhamish case, although several gas shippers intervened to monitor the proceedings.

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