Vol. 147, No. 25 — December 4, 2013

Registration

SI/2013-122 December 4, 2013

FINANCIAL ADMINISTRATION ACT

Northern Pipeline Agency Cost Recovery Charge Remission Order, 2013

P.C. 2013-1258 November 21, 2013

His 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) (see footnote a) of the Financial Administration Act (see footnote b), remits to Foothills Pipe Lines Ltd. the amount of $663,639, representing the amount by which the payments made by it under subsection 29(1) (see footnote c) of the Northern Pipeline Act (see footnote d) exceed the costs incurred by the Northern Pipeline Agency.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

To seek Governor in Council approval of the Northern Pipeline Agency Cost Recovery Charge Remission Order, 2013, which would remit funds collected in surplus from Foothills Pipe Lines Ltd. (now owned by TransCanada PipeLines Limited [TCPL]) in the amount of $663,639, 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 TCPL.

Background

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

The Government of Canada recovers 100% of the Agency’s operational costs from Foothills (now TCPL) as directed by the National Energy Board — Cost Recovery Regulations (the Regulations). Under the Northern Pipeline Act, TCPL pays for costs incurred by the Agency for the oversight and regulation of the Pipeline. Operationally, the Agency is managing a vast range of activities related to regulation, policy, corporate affairs, knowledge management and external relations.

The costs of the Agency are based on Main Estimates and are collected from TCPL (through quarterly billing invoices) in advance of actual expenses. This mechanism results in a positive difference in the “deferred revenue” account of the Agency since the Agency never spends exactly what it collects in advance from TCPL. In the following year, the actual expenses of the Agency are known. The billing invoices issued to TCPL are then adjusted in the year following the year in which the actual expenses of the Agency are known, in order to reflect the difference. It takes two years’ time from the initial billing of TCPL (based on the Agency’s Main Estimates) to when the billing adjustment occurs.

This cost recovery process works for the Agency when it operates at a constant level of operational activity. However, in periods of reduced activity, the Agency’s costs are reduced, which results in a higher balance in the deferred revenue account. In 2007 and 2008, the Agency entered a sudden period of contraction and a surplus of funds, which were collected in 2005 and 2006, was recorded in the deferred revenue account. This surplus was not reduced through the billing process where a credit should have been remitted to the proponent. Currently, the amount of $663,639 continues to remain in this account and needs to be refunded to TCPL.

However, the Regulations only permit account adjustments within one year following the collection of operational costs from TCPL. Given that more than one year has passed since collection and no mechanism exists under the Regulations to return the surplus revenue to TCPL, the only way to return the funds is through the authority of a remission order pursuant to subsection 23(2.1) of the Financial Administration Act.

Implications

It is in the public interest to remit the funds to TCPL because the Government of Canada has, through the correct application of the Regulations, collected surplus funds that belong to TCPL. In order to remain transparent and accountable to the proponent, the surplus funds will be remitted and returned to TCPL.

In addition, the Office of the Auditor General has recommended that the Agency act to address the escalating surplus in the deferred revenue account. Remission of the surplus funds would respond to this recommendation.

Departmental contact

Chrystia Chudczak
Assistant Commissioner
Natural Resources Canada
Northern Pipeline Agency
615 Booth Street, Floor 04A, Room 412
Ottawa, Ontario
K1A 0E9
Telephone: 613-995-4297