Northern Pipeline Agency Cost Recovery Charge Remission Order, 2017: SI/2018-27

Canada Gazette, Part II: Volume 152, Number 6

Registration

March 21, 2018

FINANCIAL ADMINISTRATION ACT

Northern Pipeline Agency Cost Recovery Charge Remission Order, 2017

P.C. 2018-207 March 6, 2018

Her Excellency the Governor General in Council, considering that it is in the public interest to do so, on the recommendation of the Minister of Natural Resources and the Treasury Board, pursuant to subsection 23(2.1)^{footnote a} of the Financial Administration Act ^{footnote b}, remits to Foothills Pipe Lines Ltd. the amount of $5,315,360, representing the amount by which the payments made by it under subsection 29(1)^{footnote c} of the Northern Pipeline Act ^{footnote d} exceed the costs incurred by the Northern Pipeline Agency.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

To seek the Governor in Council's approval of the Northern Pipeline Agency Cost Recovery Charge Remission Order, 2017, which would remit funds collected in surplus from Foothills Pipe Lines Ltd. (now owned by TransCanada PipeLines Limited) in the amount of $5,315,360, pursuant to subsection 23(2.1) of the Financial Administration Act.

Objective

The objective of this Order in Council is to remit excess funds collected from Foothills Pipe Lines Ltd. (Foothills).

Background

The Northern Pipeline Agency (NPA) has been the federal regulator of the Alaska Highway Gas Pipeline (AHGP) project in Canada since the Northern Pipeline Act was passed in 1978.

The Government of Canada recovers 100% of the NPA’s operational costs from the AHGP’s proponent, Foothills, which is now owned by TransCanada PipeLines Limited. Under the Northern Pipeline Act, Foothills pays for costs incurred by the NPA for the oversight and regulation of the project. Operationally, the NPA is the single window between federal authorities and Foothills, and between provincial and territorial governments and the Government of the United States.

Up until December 14, 2017, the costs of the NPA were based on the Main Estimates and collected from Foothills (through quarterly billing invoices) in advance of actual expenses, under a cost-recovery mechanism that was directed by the Northern Pipeline Act and the National Energy Board – Cost Recovery Regulations. This mechanism often resulted in a positive difference in the “deferred revenue” account of the NPA, since in any given year the NPA would not end up spending exactly what it had collected in advance from Foothills. In the following year, the actual expenses of the NPA would become known. The billing invoices issued to Foothills were then adjusted in the year following the year in which the actual expenses of the NPA were known, in order to reflect the difference. As a result, it took two years’ time from the initial billing of Foothills (based on the NPA’s Main Estimates) to when the billing adjustment would occur.

This cost recovery process worked for the NPA when it operated at a constant level of operational activity. However, within the context of rapid changes in NPA’s operational requirements and the limitations imposed by the NPA’s statutory cost-recovery framework described above, the NPA has unavoidably over-collected its costs from Foothills since 2002–2003. The only means of addressing these over-collected amounts, which are shown as a deferred revenue balance in government books, has been the issuance of remission orders by the Governor in Council pursuant to subsection 23(2.1) of the Financial Administration Act. Remission orders for this purpose were issued in 2003, 2004 and 2013.

Under provisions included in the Budget Implementation Act, 2017, No. 2 that came into force on December 14, 2017, the Northern Pipeline Act was amended to allow the NPA to collect annually from Foothills an amount equivalent to its actual expenses. For amounts collected from Foothills after December 14, 2017, these amendments ensure that only the NPA’s actual expenses are recovered, thus eliminating the need for future remission orders to address over-collected amounts. However, a final remission order is required to address the outstanding over-collection balance of $5,315,360 that has accumulated as of December 14, 2017.

Implications

It is in the public interest to remit the funds to Foothills because the NPA has, through the correct application of the Regulations, collected surplus funds that were not required to fund the NPA’s operational costs. In order to remain transparent and accountable for the collection and use of public funds, the surplus funds will be remitted and returned to Foothills.

In addition, the Office of the Auditor General has recommended that the NPA act to address surpluses in the deferred revenue account. In combination with the recent amendments to the Northern Pipeline Act, remission of the remaining surplus funds under this Order will respond in full to this recommendation.

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