Saskatchewan expands and modernizes its pipeline law

Saskatchewan's Ministry of Energy and Resources is planning on expanding and modernizing its pipeline legislation in response to criticism in a 2012 provincial auditor’s report and a 1,500-barrel oil spill by Husky Energy this summer on the shoreline of the North Saskatchewan River. Bill 43, The Pipelines Amendment Act, 2016, will amend The Pipelines Act, 1998 to, among other things, require licensing of flowlines, impose new pipeline license and records transfer requirements, grant new inspection, investigation and compliance powers to ministry staff and allow for increased penalties.

In 2012, the provincial auditor noted that the legislation administered by the ministry only regulated spills from wells and facilities and not from pipelines. The provincial auditor also noted that the 68,000 flowlines that then existed in the province were exempt from the Act but posed the same risk of leakage as pipelines regulated by the legislation.

On July 21, 2016, ground movement near the North Saskatchewan River caused a Husky Energy pipeline to release over 1,500 barrels of oil and emulsion onto the shore and into the North Saskatchewan River. Downstream water users, including three cities, had to stop withdrawing water from the river for several months.
 

Licensing of flowlines

Currently Saskatchewan has over 80,000 flowlines. Flowlines are small pipelines connecting an oil or gas well to a battery, injection facility or gas compression or processing facility. The current legislation sets requirements as to how flowlines are designed, constructed, tested, operated, maintained and repaired but does not require them to be licensed. Accordingly, the ministry does not have records of where the flowlines are located in the province or documenting that they are designed, constructed and operated according to the law. If enacted, Bill 43 will enable the creation of a flowline licensing regime, which is expected to be phased in over time. Details on the flowline licensing process have not been released.
 

License and records transfer

Presently, a pipeline license may be transferred with the minister’s approval. If enacted, Bill 43 will replace this provision with one modelled after the license transfer requirements set out in Saskatchewan's Oil and Gas Conservation Act for wells and facilities whereby eligibility requirements must be met for a well or facility license to be transferred. This change will ensure consistency for all well, facility and pipeline license transfers.

Presently, pipeline licensees are supposed to have in their possession various records about the pipeline's location, depth, design, construction, testing, operation and maintenance. The transfer provisions proposed by Bill 43 will also require the pipeline license holder to promptly transfer all of these pipeline records to the transferee, making this requirement consistent with what is required in Alberta. In Alberta we are finding that pipeline operators do not always have all the required records and must undertake expensive engineering assessments of their pipelines where records are missing, especially for older pipelines. We expect the same issues to arise in Saskatchewan.
 

Compliance and penalties

Bill 43, if enacted, will give the ministry new compliance powers, including a power to require a licensee to comply with a provision of the legislation or a directive or license issued under it. Bill 43 will also give ministry staff modernized powers to carry out inspections and audits, including searching computers and other data storage devices. Further, a new regulation-making power is contemplated whereby in the future regulations can be created that will require licensees to post with the ministry financial security for their pipelines and licensed flowlines. Finally, Bill 43 contemplates increasing the maximum fine for a contravention of the Act from $50,000 to $500,000.


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