Key Messages - Briefing Binder for CER Appearance at the House of Commons Standing Committee on Natural Resources

CER’s Role in Tolls and Tariffs

  • The CER’s role is to ensure that where market power exists, it is not abused and that tolls for pipeline services are just and reasonable, and that there is no unjust discrimination.
  • With respect to detailed costs of the project, one of the issues in the hearing is whether costs were reasonably and necessarily incurred.
    • Accordingly, the public hearing record already includes thousands of pages of detailed cost information from Trans Mountain. In the coming months, shippers and other intervenors can also file evidence.
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CER’s Role in Energy Transition

  • The need for up-to-date analysis of energy trends in Canada is needed more than ever.
  • The CER produces timely, fact-based, and relevant energy analysis to inform the energy conversation in Canada.
  • The CER’s flagship series, Canada’s Energy Future, has also been expanded to include modelling consistent with Canada’s commitment to achieve net-zero by 2050 (as requested by the Honourable Jonathan Wilkinson, Minister of Natural Resources, in December 2021).
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Role of Indigenous Advisory and Monitoring Committees

  • In 2016, the Government of Canada announced the creation of Indigenous Advisory and Monitoring Committees (IAMCs) for both the Trans Mountain Expansion Project and the Enbridge Line 3 Replacement Program;
  • The TMX-IAMC brings together 13 Indigenous and six senior federal representatives to provide advice to regulators, as well as to monitor the TMX Project and the existing pipeline. The IAMC includes Indigenous representatives selected from among the 129 communities impacted by the project;
  • The IAMCs allow for Indigenous participation in project oversight, to help ensure projects are built and operated in a manner that respects and incorporates Indigenous Peoples’ knowledge, perspectives and relationship with the land. They reflect Canada’s commitments to Indigenous Peoples, and their involvement improves safety and environmental outcomes on the project.
  • IAMC involvement enhances competitiveness, because they are part of a coherent, predictable and transparent operating environment.
  • The involvement of the TMX-IAMC supports the CER’s strategic priority of Trust of Confidence in the regulatory oversight of the TMX project and by extension in the natural resource sector and its management in Canada.
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CER’s Role in GHG Emissions

  • The CER does not directly regulate GHG emissions. Rather, it regulates energy infrastructure itself.
  • Releases of methane and other GHG emissions from CER-regulated facilities are subject to ECCC and provincial regulations.
  • The Commission considers the potential GHG emissions of new energy infrastructure when assessing projects under the CER Act.
    • These assessments are guided by the CER Filing Manual, which reflects the principles and objectives of ECCC’s Strategic Assessment of Climate Change; notably the new requirement for proponents to provide a credible plan to achieve net-zero emissions by 2050.
  • Throughout operations, the CER verifies compliance with requirements for companies to develop, implement and maintain an Integrity Management Program, which leads to decreased nonplanned emissions.
  • The CER works closely with other federal government departments (such as ECCC) in implementing regulations that are applicable to GHGs.
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The CER and net-zero requirements

  • The CER’s Filing Manual requires companies to develop and implement a net-zero plan which aligns with Canada's commitment to reach net-zero by 2050.
    • As part of the decision-making, the Commission makes a determination of whether the project contributes or hinders Canada's climate change commitments and obligations.
  • We expect our regulated companies to implement the regulations and policies as set by Environmental and Climate Change Canada and other government departments.
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CER’s Role in the economic feasibility assessment of TMEP

  • The NEB undertook a detailed assessment of the economic feasibility of TMX as part of the hearing process on the project.
  • Because the contractual support for the project was an important element that demonstrated its economic feasibility, the NEB did not allow Trans Mountain to start construction until it confirmed that all the contractual off-ramp provisions had lapsed, and that at least 60 per cent of the system’s total capacity remained under contract. Trans Mountain did so in 2017, and indicated contracts equaled 80 per cent of capacity.
  • Beyond that, we do not review the ongoing economic feasibility of a pipeline as it is being constructed.
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CER’s role in assessing utilization of TMEP

  • There are different elements to the question of how much Trans Mountain will be utilized.
    • One is that 80% of the system’s expanded capacity is under contract for the next 15 to 20 years. It will be very attractive for shippers to use this share of capacity, because they would have to pay most of the toll even if they did not actually use the contracted capacity.
    • For the remaining 20% of capacity that will be available on a monthly basis, the degree of utilization may be more susceptible to fluctuating market forces.
  • Of note, the market impacts of Trans Mountain’s tolls are being considered in the tolls hearing.
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The Government of Canada’s purchase of TMEP

  • The CER was not involved, in any way, in the Government’s decisions to purchase the Trans Mountain Pipeline System; nor was its predecessor the NEB.
  • The transaction did not trigger the need for NEB or CER approval of the sale, so we did not assess the deal.
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CER’s Role in Any Potential Sale of TMEP

  • Depending on the nature of any eventual Trans Mountain sale, CER approval may or may not be required.
  • In instances where only ownership shares are transferred, but the operator remains the same, CER approval may only be required for any changes to the company’s financial resource plan, as was the case with the transfer from Kinder Morgan to the Government of Canada.
  • If there is a new TMEP operator, the new operator would be required to demonstrate to the CER that it can operate the pipeline safely, that it has management systems in place to ensure it can meet the CER’s regulatory requirements.
  • Also, the new operator would have to demonstrate that it has plans in place to fund both pipeline abandonment and financial resources.
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CER and TMEP GHGs

  • TMEP’s construction-related GHGs were assessed, and two regulatory conditions were required as mitigation beyond existing federal or provincial regulatory requirements:
    • To provide a more accurate estimate of the direct greenhouse gas emissions that are required to be offset, Trans Mountain is required to quantify the total direct greenhouse gas emissions after all construction activities are complete.
    • Given the substantial amount of anticipated direct emissions that would be generated by Project construction, the CER requires Trans Mountain to develop an offset plan for the Project’s entire direct construction-related greenhouse gas emissions determined post-construction. The intent of offset plan is to confirm that there are no net greenhouse gas emissions from Project construction.
  • Greenhouse gas emissions during Project operations are expected to be relatively low compared to construction-related emissions and are guided by the applicable provincial and national regulations.
  • Trans Mountain recently filed a post-construction assessment report pursuant to Condition 140. Trans Mountain submitted that the total calculated direct emissions from construction and land clearing is 1,125,033 tonnes carbon dioxide equivalent (CO2e). This is approximately 10% increase as compared to the predicted emissions. Last week, the Commission approved Part 1 of the Condition 140 filing. Note that Trans Mountain will submit the GHG emissions Offset Plan by 31 December 2024. (Condition 142 filing).
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TMEP’s Regulatory timeliness and the CER

  • Both the NEB Act and the CER Act impose time limits for the consideration of projects.
  • The project application was filed with the NEB in 2013 and was initially approved in 2016;
    • there was a pause in project assessment after Trans Mountain changed project routing to go through Burnaby Mountain. After the initial approval, a legal challenge followed, triggering a Reconsideration process.
  • In 2019, the NEB published its reconsideration report, which recommended that the project was in the public interest and should be approved with conditions. The GIC reapproved the project and a certificate was issued shortly thereafter.
  • The CER’s expert advice on safe design, construction, and operation of pipelines, as well as its comprehensive analysis of projects, supports its recommendations as to whether a project is or is not in the public interest.
  • Issuance of a certificate does not end regulatory proceedings.
    • For example, Trans Mountain faced numerous challenges, resulting in 39 detailed route hearings, the assessment of 121 right of entry applications and 63 route deviation decisions by the Commission.
  • The CER is a lifecycle regulator overseeing the construction of the project and ensuring compliance with certificate condition
    • Of TMEP’s 156 certificate conditions, 133 have been either partially or fully assessed. TMX must file or continue to file responses to approximately 27 conditions, as those conditions are ongoing.
    • Between August 2019 and May 2024, the Commission issued a total of 275 Letter Reports and Decisions on matters related to condition compliance.
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