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Tuesday, August 19, 2014

Enbridge Gas Distribution ordered to pay back Metrolinx over $2.3 million in pipeline relocation costs

Enbridge Gas Distribution was recently ordered by the Superior Court of Justice to pay back to Metrolinx more than $2.3 million that Metrolinx had earlier paid Enbridge for pipeline relocation costs.  Metrolinx operates an urban rail transit service in the Greater Toronto Area and required the relocation and/or removal of certain parts of Enbridge's gas distribution system in the vicinity of the rail lines.  The question before the Court in this application was who should bear the costs of relocation and removal.  Metrolinx had paid the costs to Enbridge without prejudice to its right to go to Court to try to recoup them.

Metrolinx referred to crossing agreements that had been made between its predecessor, Canadian National Railway (CN), and Enbridge's predecessor, Consumers Gas, that provided that Enbridge would bear the cost of any relocation or removal.  For instance, a 1958 Agreement and a 1963 Agreement both provided:
Should it become necessary or expedient for the purposes of repair or improvement on the said railway that the said pipe crossing be temporarily removed or relocated the applicant [now Enbridge] shall upon request of the railway and at the sole cost and expense of the applicant forthwith remove or relocate the works.
Enbridge argued that the agreements were not assigned or transferred to Metrolinx and that the agreements related to federally-regulated activities.  Therefore, because Metrolinx was a provincial agency, it could not rely upon the agreements.

The Court disagreed.  It accepted the Metrolinx position that the rights that it claimed and the payment obligations of Enbridge were granted to CN by Consumers Gas as a matter of contract.  Justice Morgan explained:

... like all market transactions, they occurred within a particular regulatory environment, but that fact does not undermine the contractual nature of the rights and obligations in question.  Metrolinx' position accurately reflects the governing documentation and legal state of affairs between the parties.  It may well be the case that the Crossing Agreements were an outgrowth of federal regulations that prevailed at the time of their signing.  Nevertheless they are valid contracts, and remain so whether or not the relevant federal regulations continue to govern either of the parties. 
Read the decision at: Metrolinx v Enbridge Gas Distribution Inc.