Friday, September 9, 2011

PetroBakken Energy seeks to abandon oil pipeline in place

In what is likely to become a more common occurrence, PetroBakken Energy Ltd. has applied to the National Energy Board for permission to abandon one of its pipelines in the ground.  The pipe is 580 metres in length and is connected to an oil well within the Alsask Gathering System, about 30 km east of Oyen, Alberta (it crosses the border with Saskatchewan).  Construction of the line was approved by the NEB in 2003, and the well ceased production in 2009. 

PetroBakken says it has no plans to put the line back into operation and now must either suspend the line, maintaining cathodic protection, or abandon it.  PetroBakken says that maintaining cathodic protection on the line to avoid corrosion is too expensive, so it chooses to attempt to clean the line and then leave it in place.  On the issue of "liability exposure", PetroBakken states in its application to the NEB:
The proposed abandonment of the pipeline segment is largely driven by legal obligation to meet the requirements of NEB regulation, which indicates that PetroBakken must either suspend or abandon any pipeline that has not operated for over 12 months.  Secondarily, but equally, or more importantly, the proposal to abandon is also being done for ethical reasons as the potential for ground contamination by the (unknown) product within the pipeline must be eliminated.  Leaving this potential risk in the ground (for no operational benefit) would be an unjustified environmental liability for PetroBakken, which could be minimized or eliminated by cleaning and abandoning the pipeline segment.

As the volume of contents remaining within the pipeline segment is uncertain, the environmental liability to the organization is unknown.  The cost to abandon is expected to be less than $10k, which is considered minimal when considering the potential environmental liability.
The Saskatchewan land affected by the line is privately owned.  PetroBakken says that it notified the landowner by phone and was told that the proposed abandonment was "fine".  The Alberta land is in a Special Area and is leased to a farmer.  Again, notification of the project was given by phone and the farmer apparently had "no issues".  The lands affected by the pipeline are apparently used for grazing purposes on both sides of the provincial boundary.

At about 1/2 a kilometre in length, this is a short pipeline to be abandoned.  However, it does give some indication of what might be in store for other landowners across the country facing pipeline abandonment in the future.  The NEB has issued a hearing order for the abandonment application, but no funding has been available for participation in the hearing either by directly affected landowners or other concerned parties.  Therefore, anyone wishing to participate in the process will do so at his or her own cost.  Unlike the situation in provincial jurisdictions, the NEB will make no costs award at the end of the process. 

This application demonstrates the failings of the NEB's recent creation of a participant funding program.  It is assumed that no funding has been made available in this case because of the relatively short length of the pipeline involved (participant funding is reserved for "large projects").  However, for the landowners directly involved, the pipeline is quite long enough to cause concern.  How long does a pipeline have to be before directly affected landowners will have access to "participant funding"?  Is the participant funding sufficient in any event to enable landowners to test the appropriateness of the abandonment plan that is being proposed? 

And can we expect moving forward that pipeline companies will choose to abandon small segments of pipeline on a continual basis rather than applying for the abandonment of large pipeline segments so as to avoid the participant funding program?  The NEB has made it quite clear in its previous decisions that it will allow companies to decide how they make their regulatory applications, even where it is clear that the manner in which those applications are made is intended to thwart the ability of landowners to participate in the process.

Read the PetroBakken application at: Abandonment Application.

Read the NEB Hearing Order at: Hearing Order dated September 6, 2011.