Pipeline companies under federal jurisdiction such as Enbridge and Kinder Morgan, which have plans for major oil projects to the west coast of B.C., must create funds to pay for abandoning pipelines by the start of next year.

 

The National Energy board announced that starting Jan. 1, 2015 pipeline companies must create a mechanism to start setting aside money to pay for abandoning pipelines, through measures such as a trust or a letter of credit from a major bank or a surety bond.

 

While pipelines can last for decades, the NEB wants to ensure that rehabilitation and environmental costs don’t fall on landowners, private or Crown, when they are shut down.

 

The NEB estimates the cost to abandon and rehabilitate land for pipelines it has jurisdiction over is $7.2 billion. The NEB, which has authority over pipelines that cross provincial boundaries, noted that most companies have many years to fund these future costs.

 

“The board will require almost all pipeline companies to provide their trust agreement, surety bond or letter of credit for approval,” the NEB said in a news release. “The board will regularly review the companies’ estimates of abandonment costs, the coverage provided by their set-aside mechanisms, and the assumptions about how those funds will grow."

 

The amount of money set aside by companies must be included in annual reports filed with the NEB.

 

The federal regulator had warned pipeline companies in 2009 that it intended to require companies to set aside money for pipeline abandonment.

 

Enbridge has existing abandonment liabilities of more than $1 billion, while Kinder Morgan has costs of more than $350 million, according to NEB estimates.

 

Those do not include abandonment estimates for Enbridge’s proposed $6.5-billion Northern Gateway oil pipeline, or Kinder Morgan’s $5.4-billion Trans Mountain oil pipeline expansion.

 

Kinder Morgan spokesman Andy Galarnyk said their company has no issues with the NEB announcement. “We support the NEB in their pursuit of clarity around estimating and pre-collecting the costs of abandonment,” he said.

 

Enbridge spokesman Ivan Giesbrecht said the NEB decision was expected. “We will comply with all regulatory requirements, now and in the future, and whatever may be required for (Northern Gateway) at that time,” he said.

 

The federal Conservative government lauded the NEB move, saying it will ensure that companies have the money to cover remediation costs.

 

“(The) decision by the National Energy Board further demonstrates Canada’s commitment to enhancing pipeline companies’ accountability for their operations,” Natural Resources Minister Greg Rickford said in statement.

 

The federal government has taken other steps to attempt to increase public confidence in the country’s pipeline system, including increasing the number of annual inspections and audits to prevent incidents and increasing companies’ liabilities for major oil pipeline spills to $1 billion.

 

A major spill from Enbridge’s oil pipeline into the Kalamazoo River in Michigan and the BP Deepwater Horizon spill in the Gulf of Mexico in 2010 — as well as several smaller spills in Western Canada in recent years — have ignited safety concerns over the transportation of oil.

 

Major oil pipeline projects — including Northern Gateway and the Trans Mountain expansion — have faced heavy criticism from B.C. First Nations, environmentalists and some municipalities including Vancouver and Burnaby.

 

The critics are concerned about the risks and effects of oil spills from pipelines and tankers, as well as the effect on climate change from increased greenhouse gas emissions from developing the Alberta oilsands.

 

Both projects to the B.C. coast are meant to create new markets in Asia for bitumen from the oilsands. The Northern Gateway project has received conditional approval from the NEB, and the federal government is expected to make a final decision sometime in June. The Trans Mountain expansion project begins its federal review hearings in August.

 

Wilderness Committee climate campaigner Eoin Madden said the new NEB measure to require companies to set aside money to abandon pipelines is not likely to tip the balance of opposition of the projects in British Columbia.

 

That’s because opponents are concerned about the bigger issues of oil spills and climate change, which this measure does not address, he said.

 

“I think that’s why an announcement about tanker safety, or 'we’ll cover the cost of getting one of these things back out of your community,' kind of falls on deaf ears,” said Madden.