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Norton Rose Fulbright Canada LLP 1800 - 510 West Georgia Street Vancouver, BC V6B 0M3 CANADA

F: +1 604.641.4949 nortonrosefulbright.com Matthew D. Keen 604 641 4913 [email protected]

Assistant 604 641 4527 [email protected]

Our reference

1000385944

May 19, 2020

Sent By E-mail

British Columbia Utilities Commission 6th Floor – 900 Howe Street Vancouver, BC V6Z 2V3 Attention: Patrick Wruck, Commission Secretary

Dear Sir:

Kinder Morgan (Jet Fuel) Inc. 2019 Tariff Filing – Vancouver Airport Fuel Facilities Corporation (“VAFFC”) PUBLIC Information Request (“IR”) No. 2 to PKM Canada (Jet Fuel) Inc. (“PKMJF”)

We are legal counsel to VAFFC in this matter and write to enclose VAFFC’s IR No. 2 to PKMJF.

As part of IR No. 2 to PKMJF, VAFFC has also prepared IRs to PKMJF that include confidential materials (“VAFFC Confidential IR No. 2”), over which the Commission has already granted PKMJF’s requests for confidentiality.

VAFFC will file, under separate cover, (i) a public version of the VAFFC Confidential IR No. 2 in which all confidential information has been redacted, which can be posted on the Commission’s website; and (ii) an unredacted version of VAFFC Confidential IR No. 2. Any party requesting access to the VAFFC Confidential IR No. 2 may follow the procedure set out in Section 24 of the Rules.

Please contact the writer if you have any questions.

Yours very truly,

(for) Matthew D. Keen

Enclosures

C2-20A NORTON ROSE FULBRIGHT

Yvonne.Lapierre

KMJF 2019 Tariff Filing

Kinder Morgan Canada (Jet Fuel) Inc. 2019 | VAFFC IR Round No. 2 1 of 66

BRITISH COLUMBIA UTILITIES COMMISSION KINDER MORGAN CANADA (JET FUEL) INC. 2019 TARIFF FILING APPLICATION

Vancouver Airport Fuel Facilities Corporation (VAFFC) Information Request (IR) No. 2 to PKM Canada (Jet Fuel) Inc. (PKMJF)

May 19, 2020

1.0 Abandonment costs, Site inspection and interview documentation 2

2.0 Abandonment costs, Engineering and Project Management 3

3.0 Abandonment costs, Abandonment preparation 6

4.0 Abandonment costs, Post-abandonment monitoring 8

5.0 Abandonment costs, NEB Precedent 13

6.0 Abandonment costs, Pipeline to be removed 17

7.0 Abandonment costs, Above-ground facilities 20

8.0 Abandonment Cost True-up Proposal, Surplus funds 23

9.0 Abandonment Cost True-up Proposal, Future liability of shippers 25

10.0 Abandonment costs, Cost of removal 27

11.0 Abandonment costs, Financial reporting of decommissioning liabilities 33

12.0 Economic life of the Jet Fuel Line, Quantitative analysis 35

13.0 Economic life of the Jet Fuel Line, Calculations for extension to 5 years 38

14.0 Economic life of the Jet Fuel Line, Implications of Pembina audited financial statements 39

15.0 Depreciation, Collection during previous toll period 40

16.0 Corporate Cost Allocation, General 42

17.0 Corporate Cost Allocation, Cost consequences of Pembina Transaction 46

18.0 Operating expenses, Staffing 49

19.0 Operating expenses, Fuel and power 51

20.0 Operating costs, Outside services 52

21.0 Operating costs, Other expenses 54

22.0 Integrity Costs 55

23.0 Capital additions, Leak detection equipment 59

24.0 Revenue and cost information, Historical and forecast 62

25.0 Other capital additions 64



28.0 Tank salvage 66

REQUESTOR NAME: Vancouver Airport Fuel Facilities Corporation INFORMATION REQUEST ROUND NO: 2 TO: PKM Canada (Jet Fuel) Inc. DATE: May 19, 2020 PROJECT NO: File 1598984 APPLICATION NAME: Kinder Morgan Canada (Jet Fuel) Inc. 2019 Tariff Filing Application


1.0 Abandonment costs, Site inspection and interview documentation

Exhibit B-10, Final Site-specific Abandonment Cost Estimate Report Reference (i):

At p. 6, pdf p. 14, ELM states:

ELM’s inspection team of Jason Schroeder, Terry Oatway and Dean Fitzgerald travelled to Burnaby on June 17, 2019. Over the next three days we, accompanied by representatives from Kinder Morgan, thoroughly inspected all surface infrastructure associated with the KMJF Pipeline. The following locations were inspected:

Facility Sites:

KM 0 - Parkland Refinery Area 1 at 355 Willingdon Avenue Trans Mountain’s Westridge Marine Terminal at Bayview Drive KM 7.5 – Kinder Morgan Burnaby Terminal Shell Burmount Terminal at 2751 Underhill Avenue KM 35.7 KMJF Airport Terminal at Tank Road & Ferguson Road

Block Valve Sites (underground in concrete caissons):

KM 4.25 at Hastings Street & Ellerslie Avenue KM 4.75 at Union Street & Cliff Avenue KM 11.4 at Government Street & Horne Street KM 13.5 at Elwell Street KM 19.7 at Firth Avenue & Byrne Road

River Crossings:

KM 11.7 Brunette River (suspended crossing under Trans-Canada Highway) North Arm Fraser River (KM 21.9 – Byrne Road & Fraser Park Drive; KM 22.6 –

River Road) Middle Arm Fraser River (KM 32.6 – River Road & W Road; KM 33.1 – Airport

Road)

Preamble:

The referenced portions of ELM’s Final Abandonment Cost Estimate were not present in the original version filed as Appendix E to Exhibit B-8. VAFFC is seeking additional information regarding the referenced site inspections and interviews to assess the Final Abandonment Cost Estimate.

Information request:

1.1 Please provide all notes, written observations, photos, documents, and all other records made with regard to the site inspections.



1.2 Please provide, in chart form, the following details of the interviews ELM has had with local Kinder Morgan operations personnel and Trans Mountain Operations personnel: dates, times, persons spoken to and by whom, employer, and what was discussed. Please also provide the notes from ELM’s file from each conversation.

1.3 Please provide, in chart form, the following details of the interviews ELM has had with local vendors: dates, times, persons spoken to and by whom, employer, what was discussed (e.g., heavy equipment & operators, waste disposal, vac trucks, hydrovac and hauling), and quotes. Please also provide the notes from ELM’s file from each conversation.

1.4 Please confirm that the materials provided in response to IRs 1.1 – 1.3 above constitute the entirety of the notes, written observations, photos, documents, and other records made by ELM with regard to the site inspections, interviews with local Kinder Morgan operations personnel and Trans Mountain Operations personnel, and contact with local vendors, respectively.

1.5 If the statement in IR 1.4 above is not confirmed, please list all materials that have not been provided, together with a specific explanation of why each item cannot be provided.

2.0 Abandonment costs, Engineering and Project Management



1. Engineering & Project Management

This category includes a broad range of activities covering land use study, depth of cover survey, regulatory & stakeholder consultations, surface land agreements, as well as regulatory, legal & finance support, external relations, detailed engineering, project management and supervision activities, and environmental studies including species at risk and nonindigenous vegetation (see Appendix B: Other Considerations: Species at Risk and Nonindigenous Vegetation). The NEB recommends a factor of 20% be applied to sections 2, 3a, 4, 5 and 6 for small diameter pipelines less than 50km in length. A factor of 25% has been applied in this case due to the urban setting and the current regulatory environment in British Columbia. Preliminary discussions with the cities of Burnaby and Richmond lead us to believe that there could be significant additional time and effort required to complete tasks in this category including: land use study; depth of cover survey; regulatory & stakeholder consultations; and surface land agreements.

[Emphasis added]

At p. 7, pdf p. 14, ELM notes that its cost estimate for section 2 (Abandonment Preparation):



lands above the high end of the range prescribed by [the] NEB and is consistent with the urban setting and logistics involved with mobilization of services in and through the cities of Burnaby and Richmond.

[Emphasis added]

At p. 8, pdf p. 16, ELM states, regarding its cost estimate for section 4 (Special Treatment):

[d]ue to the urban settings of Burnaby and Richmond involved with the mobilization of services and the presence of buried pipeline, the high end of the range prescribed by NEB was selected to represent the cost estimate for water crossing abandonment…

[Emphasis added]

At p. 9, pdf p. 17, ELM states, regarding its cost estimate for section 5 (Pipeline Removal and Backfilling):

a. City of Richmond

The length of the KMJF Pipeline residing within the City of Richmond is approx. 13.2 km. Of that, approx. 5.25 km is constructed in an agricultural setting, with the remaining 7.95 km constructed in a developed urban setting. We have used NEB’s low range for pipeline removal in agricultural areas, and the high range in urban areas. We expect the cost of removal to be lower in agricultural areas due to the absence of civil infrastructure including roads, walkways and utilities. Costs for restoration of disturbed areas are included in the estimates, with the exception of pipeline removal in urban areas where the NEB’s high range of 15% has been added.

…

b. City of Burnaby

The total length of the various KMJF Pipeline segments residing within the City of Burnaby is approx. 25 km. Due to the urban setting in which this pipeline is situated, it is reasonable to expect that the potential for future development is likely at some points along the pipeline route. This estimate includes costs to remove 20% of the total pipeline length, or 5.0 kilometers. These costs could increase depending on the response we receive from the City of Burnaby regarding abandonment of the Jet Fuel Line. We have used NEB’s high range for pipeline removal in urban areas due to the logistics involved with mobilization of services in and through the City of Burnaby. Costs for restoration have also been added using NEB’s high range of 15% due to the urban setting.

[Emphasis added]

At p. 9, pdf p. 17 ELM states, regarding its cost estimate for section 6 (Above-ground Facilities):

Logistical challenges include limited availability of local equipment, materials and services, long turn-around times to waste disposal facilities, higher than industry average fees for waste disposal, and heightened security requirements due to the urban setting and current regulatory environment.



[Emphasis added]

Exhibit B-11, BCUC IR 10.2 Reference (ii):

At p. 53, pdf p. 54, PKMJF states:

The NEB Base Case provides for an assumed cost for Engineering and Project Management costs based on a 20 percent factor to be applied to sections 2, 3a, 4, 5 and 6 for small diameter pipelines less than 50km in length. A factor of 25 percent has been applied in this case due to the site-specific urban setting and the current regulatory environment in British Columbia. The NEB Base Case assumptions standards, including the 20 percent factor for Engineering and Project Management Costs, are generally based on a rural environment and ELM determined that applying a factor of 25 percent takes into account the additional risks and cost associated with an urban environment.

As ELM explains in its Final ELM Report, preliminary discussions with the cities of Burnaby and Richmond lead it to believe that there could be significant additional time and effort required to complete tasks in the Engineering & Project Management category including: land use study; depth of cover survey; regulatory & stakeholder consultations; and surface land agreements. Therefore, ELM determined that applying a 25 percent factor was appropriate.

Preamble:

In Reference (i):, at p. 6, ELM refers to “preliminary discussions with the cities of Burnaby and Richmond” as a basis for applying a section 1 (Engineering and Project Management) factor of 25%, which is higher than the NEB Base case. This basis was not listed in the original ELM Abandonment Cost Estimate.

ELM also estimates costs for sections 2, 4, 5, and 6 at or above the high range of the NEB guidelines due to the “urban setting” or “current regulatory environment”. Section 1 costs are derived by multiplying each of those costs by the elevated section 1 factor.

VAFFC is seeking additional information regarding the relationship between the cost factor used by ELM for its Engineering and Project Management cost estimate, and the costs included in sections 2, 4, 5 and 6.


2.1 Please explain how the “preliminary discussions with the cities of Burnaby and Richmond” indicated that an elevated section 1 factor of 25% is appropriate. Please make reference to specific statements.

2.2 Please confirm that the effects of an “urban setting” and the “current regulatory environment” are counted twice by being included in the cost estimates for sections 2, 4, 5, and 6 of the Final Abandonment Cost Estimate, and again in section 1. If not confirmed, please fully explain your response.



3.0 Abandonment costs, Abandonment preparation



Local vendors were contacted to obtain current rates for heavy equipment & operators, waste disposal, vac trucks, hydrovac and hauling – communications with local vendors revealed higher than industry average rates. The cost estimate lands above the high end of the range prescribed by NEB and is consistent with the urban setting and logistics involved with mobilization of services in and through the cities of Burnaby and Richmond.

At p. 7, pdf p. 15, ELM produces the following table to calculate costs of abandonment preparation:

Exhibit B-11, Appendix BCUC-KMJF 10.1, NEB Reasons for Decision MH-Reference (ii):001-2012

At p. 33, pdf p. 45, the Board states, with regard to the category of Abandonment Preparation:

Trans-Northern submitted that Unit Costs were applied at the low end of the Base Case range. Trans-Northern further submitted that the lower end of the Base Case range was selected for its cost estimate as these costs best consider the type of product transported (refined products), and the flat terrain traversed by the pipeline.

[Emphasis added]

At p. 38, pdf p. 50, the Board states:

Trans-Northern applied the Base Case methodology and costs for this cost category. The Board finds that the costs provided by Trans-Northern in this cost category to be reasonable. The Board approves the estimates of Trans-Northern for this category as filed.

Project Phase Cost Estimate Value Unit NEB low NEB High Range Range

2. Abandonment Access rights & permits, temporary workspace, damages, Preparation re-establish survey markers, as-built survey, update GIS,

discharge rights. $4,000/ $6,000/ Pipeline pigging, cleaning and purging, Isolate pipe km km sections. Final cleaning pig runs (in N2), waste storage and dosposal. Cleanliness verifications.

- Pl 81476-3,15,16 Parkland Refinery to KMJF Airport $202,550 $5,674/km Terminal (35.7km)

- Pl 280458-1 Westridge Terminal to Ellerslie Tie-in $30,210 $23,238/km (1 .3km)

- Pl 280452-1 Shell Burmounl Terminal 10 Burnaby $34,280 $27,645/km Terminal (1.24km)

Total for Category 2: $267,040 $6,983/km



Preamble:

VAFFC seeks additional information about ELM’s investigations into local costs of services related to abandonment preparation and the basis for increasing its estimated cost in this category for the Final Abandonment Cost Estimate.

Further, like the Jet Fuel Line, Trans-Northern’s pipeline (a) carries refined products, (b) through largely flat terrain. On the basis of those two factors, the NEB approved Trans-Northern’s estimate of Abandonment Preparation costs using the lower end of the Base Case range. VAFFC seeks to understand how and whether ELM considered these factors in its final Estimate.


3.1 For each category of local vendor contacted (“equipment & operators, waste disposal, vac trucks, hydrovac and hauling”), please indicate how many vendors were contacted.

3.2 For each category of local vendor contacted (“equipment & operators, waste disposal, vac trucks, hydrovac and hauling”), please provide the following, using the same units of measurement for each rate:

(a) the average rate quoted by local vendors;

(b) the “industry average” rate;

(c) the difference between the local rates and the “industry average”;

3.3 Please provide ELM’s source for identifying “industry average” rates.

3.4 When ELM adjusted the cost of abandonment preparation in its Finale Estimate, did it consider the fact that, like Trans-Northern’s pipelines, the Jet Fuel Line (a) carries refined product and (b) traverses flat terrain?

(a) If ELM did consider these factors, why did it go above the high range of the NEB base case in spite of these factors?

(b) If ELM did not consider these factors, why not?

3.5 In the table described in Reference (i), ELM divides the Jet Fuel Line into three segments, giving a Value and a Unit for each:

Pipeline segment Value Unit Parkland Refinery to KMJF Airport Terminal (35.7 km) $202,550 $5,674/km Westridge Terminal to Ellerslie Tie-in (1.3 km) $30,210 $23,238/km Shell Burmount Terminal to Burnaby Terminal (1.24km) $34,280 $27,645/km

(a) In determining the amounts above, did ELM derive the Values from the Units, or vice versa?



(b) Please explain how ELM arrived at each of the amounts above for each pipeline segment. Please provide all supporting data, assumptions, and calculations.

(c) For each pipeline segment, please provide a breakdown of all cost factors used to calculate the Values and Units above. Please describe what costs were assigned to each of the activities described in Reference (i): “Access rights & permits, temporary workspace, damages, re-establish survey markers, as-built survey, update GIS, discharge rights. Pipeline pigging, cleaning and purging, Isolate pipe sections. Final cleaning pig runs (in N2), waste storage and disposal. Cleanliness verifications.”

4.0 Abandonment costs, Post-abandonment monitoring

Exhibit B-10, Cover letter to Final Site-specific Abandonment Cost Estimate Reference (i):Report

At p. 4 of its cover letter to the Final Abandonment Cost Estimate (pdf p. 4), PKMJF states:

The post-abandonment monitoring unit cost is applied to the whole length of the pipeline. The Final Report reflects an updated total length of the Jet Fuel Line.

Exhibit B-10, Final Site-specific Abandonment Cost Estimate Report Reference (ii):


The KMJF Pipeline is comprised of the main pipeline, as well as two lateral pipelines totaling 38.24 kilometers.


3. Basic Pipeline Abandonment in Place

This category comprises two sub-categories for the determination of costs associated with abandonment-in-place…

The second sub-category considers post-abandonment monitoring. Post-abandonment responsibilities may include activities to address the following:

future depth of cover issues due to erosion, subsidence, frost heave;

line locating requirements;

continued participation in provincial one-call program;

maintenance of signage at utility crossings and along right-of-way;

remediation of contamination, or soil drainage problems;



weed control (where not dealt with under easement agreements),

or any other problem caused by the presence of the pipeline.

At p. 8, pdf p. 16, ELM provides the following chart, which includes costs for Post-abandonment Monitoring under category 3b:

At p. 9, pdf p. 17, ELM provides the following two charts, which contain ELM’s pipeline removal cost estimates for the portions of the Jet Fuel Line in the Cities of Richmond and Burnaby, respectively:

…

At p. 11, pdf p. 19, ELM provides the following “Cost Description” for category 3b:

Post-abandonment Monitoring (38.24km)

In Appendix C of its Final Abandonment Cost Estimate, ELM includes “NEB Unit Costs for Abandonment Activities – Amended, Table A-3”. At pdf p. 38, Table A-3 includes the following content relating to “Pipeline Abandonment-in-Place”:

Project Phase Cost Description Value Unit NEB Low NEB High

Range Range

3. Pipeline a. Basic Pipeline Abandonment in Place $0' N/A $10,000/km $25,000/km Abandonment

b . Post-abandonment Monitoring $764,800 $20,000/km $20,000/km $97,000/km . Financia l provisions for periodic monitoring and

for contingencies, such as later removal of some

pipeline/ associated facilit i es if problems occur.

Project Phase Cost Description Va lue Unit NEB Low NEB High

Range Range

Sa. Pipel ine Removal a. Pipeline Removal - Rural (approx. S.25km) $S25,000 $100,000/km $100,00/ $250,00/ km km

- City of Richmond b. Pipeline Removal - Urban (approx. 7.95km) $1,987,500 $250,000/km

(13.2 km or 3S% of c. Pipeline Removal Land Restoration (Urban $298,125 15% of above 0% 15%

tota l length) Areas)

Tota l for Category Sa (Richmond): $2,810,625

Proj ect Phase Cost Description Va lue Unit N EB Low NEB High

Ran11e Ra n11e

Sb. Pipe line a. Pipeline Removal - Urban (approx. 5.0km) $1,250,00 $250,000/km $100,000/k $250,000/k Removal 0 m m

- City of Burnaby b. Pipeline Removal Land Restoration (Urban $187,500 15% of above 0% 15% (25km or 65% of Areas)

tota l length)

Tot al for Category Sb (Burnaby): $1,437,50

0



Footnote 1 on pdf p. 37 states:

Method A, A+ or R respectively: Abandon in place; Abandon in place with special treatment; and Removal. For purposes of the preliminary cost estimation, the cost factors described here would be applied by companies using the Base Case. For pipelines that are abandoned in place all rows with an A or A+ are applicable, for pipelines that are removed all rows with an R are applicable. [Emphasis added]

Note: this table can also be found NEB Decision MH-001-2012, reproduced in Appendix BCUC-KMJF 10.1 (Exhibit B-11, pdf pp. 199–201).

Exhibit B-11, Appendix BCUC-KMJF 10.1, NEB Reasons for Decision MH-Reference (iii):001-2012

At p. 52 (pdf p. 177), the NEB states:

Financial provisions for post-abandonment activities apply to all pipelines proposed to be abandoned-in-place.

In Table A-3, the Board stated that post-abandonment activities may include financial provisions for periodic monitoring and for contingencies, such as later removal of some pipeline or associated facilities if remediation events occur. Remediation events include subsidence issues, pipe rising to the surface, or discovery of contamination. The Board also stated that this cost category would include costs for line locations, as needed; maintenance of signage; erosion and subsidence; frost heave control; pipe displacement at slopes or river crossings; remediation of contamination; the creation of waterways or soil damage problems; weed control (where not dealt with under an easement agreement); or any other problems created by the presence of a pipeline.

The post-abandonment financial provisions in the Base Case would provide for perpetual monitoring of pipelines abandoned-in-place. These provisions would also provide for an

Amended Table A-3 Table A-3 Base Case Cost Definition Grid

Broad Cate2ory Method' May Include 3 Pineline Abandonment-in-Place 3a. Basic Pipeline A n/a Install plugs to prevent water movement, removal of some

Abandonment-in- underground appurtenance , backfi lling and reclamation of Place dig ite . 6 At the 9 September 20 IO meeting, parties

discussed whether to include removal of underground appurtenances in category 3a or in 6. The estimates shown to the right include removal of underground appurtenances.

3b. Provision for Post A n/a Financial provisions for periodic monitoring and for abandonment and contingencies, such as later removal of some acti vi ties A+ pipeline/as ociated faci lities if problems occur.

Events include subsidence is ues, pipe rising to surface, or di covery of contamination7



allowance to cover remediation events into perpetuity, taking into account the likely frequency and cost of remediation events…

[Emphasis added]

At pp. 74–77 (pdf pp. 199–201), Table A-3 of the NEB’s decision contains Unit Costs for abandonment activities. This table is included as Appendix C to ELM’s Final Abandonment Cost Estimate, and is reproduced in part above under Reference (ii):.

At p. 78 (pdf p. 203), Table A-4 of the NEB’s decision, reproduced below sets out “Total Estimated Costs”, with the instructions to “[a]dd up the rows of estimated costs to get total estimated costs”. Cost Category 3b (“Provision for Post abandonment activities”), which includes post-abandonment monitoring, is indicated as applying to portions of the pipeline which are either abandoned in place or abandoned in place with special treatment:

Step 4: Add up the rows of estimated costs to get total estimated co ts

Table A-4 Total Estimated costs

Broad Category Method" Pipeline A,•erage Cost" Cost by Features" Cate11.on-·11

I Engineering & Project A R nla E.g. 20-30 per Manaeement cent

2 Abandonment Prepara tion

a. Land access and clean up A R X (Km)

b. Pipeline Purging and Cleaning A R

3 Pipeline Abandonment•in-Place

a. Basic Pipeline Abandonment- A nla Y (Km) in-Place

b. Provfaion for Post A and n/a Y+ ST(Km) abandonment activities A+

4 Special treatment A+ n/a ST (Km)

5 Pipeline Removal

a. Pipeline Removal and nla R X - (Y+ST) backfilling (Km)

b. Pipeline Removal - land nla R rest.oration

6 Above-gro und fa cilities

a. All fac ilities A R C # -b. Portions removed nla R C # -C. Portions left in place A n/a #

Total Cost (e.g. in 2010 dollars) for future abandonment activities

For example, for a 425 km pipe line with 25 km under roads, and 3 compre ors:

14

16

17

X =425 km Y = 320 km, or 80% (X-ST) using 80% of 400 from Table A-2 T=25 km

X-(Y+ T) = 80 km, or 425 - (320+25) The 3 compres ors to be removed would be entered as C

Method A, A+ or R rc:spectively: Abandon in pla.c~ Abandon in plact- with special tttatmen~ and R.ttnoval.

Either linear kilometers or count by facility type. Table A-2 facilitates estimating the entries to this column.

Entries in this column may come from Table A-3 when available. If using the Base CBS(: cost assumptions, collies in this colunm are the product of the previous l'wo columns. lf using pipeline specific cos1 c:stimation, rotcr the tot.al for each category.



Preamble:

ELM’s Final Abandonment Cost Estimate calculates post-abandonment monitoring costs based on the entire length of the Jet Fuel Line. However, the Final Abandonment Cost Estimate also assumes that 13.2 km of pipeline will be removed in the City of Richmond and 5.0 km of pipeline will be removed in the City of Burnaby.

NEB Decision MH-001-2012 indicates that post-abandonment monitoring costs only apply to portions of a pipeline which are abandoned in place.

VAFFC is seeking additional information regarding the relationship between the post-abandonment monitoring cost estimate and the pipeline removal cost estimate in ELM’s Final Abandonment Cost Estimate.


4.1 According to the NEB’s framework for estimating abandonment costs set out in NEB Decision MH-001-2012, costs for the “Provision for Post abandonment activities” only apply to those sections of a pipeline which are proposed to be abandoned-in-place. Please confirm that the costs estimated in section 3b of ELM’s Final Abandonment Cost Estimate (Post-abandonment Monitoring) are based on section 3b of Table A-3 from NEB Decision MH-001-2012. If not confirmed, please fully explain.

4.2 Please confirm that the costs estimated in section 3b of ELM’s Final Abandonment Cost Estimate (Post-abandonment Monitoring) are calculated based on the entire length of the Jet Fuel Line. If not confirmed, please fully explain.

4.3 Please confirm that the costs estimated in sections 5a (Pipeline Removal – City of Richmond) and 5b (Pipeline Removal – City of Burnaby) are calculated based on the removal of approximately 13.2 km of pipeline in the City of Richmond and approximately 5.0 km of pipeline in the City of Burnaby, respectively. If not confirmed, please fully explain.

4.4 Are the costs estimated in section 3b of ELM’s Final Abandonment Cost Estimate (Post-abandonment Monitoring) calculated based on the sections of pipeline which are assumed to be removed pursuant to sections 5a (Pipeline Removal – City of Richmond) and 5b (Pipeline Removal – City of Burnaby)? Please fully explain your response.

4.5 Please provide an updated estimate for section 3b costs applying the Unit Cost to only sections of pipeline that are planned to be abandoned in place. Please provide updated section 3b costs for two scenarios:

(a) 100% of the pipeline in Richmond and 20% of the pipeline in Burnaby is removed; and

(b) 20% of the pipeline is removed in both Richmond and Burnaby.



5.0 Abandonment costs, NEB Precedent

Exhibit B-10, Cover letter to Final Site-specific Abandonment Cost Estimate Reference (i):Report


Based on its desktop review and onsite inspection, ELM based its estimates on the National Energy Board (“NEB” or “Board”) Base Case assumptions range, where the Base Case assumption appeared reasonable or better information was not available for site-specific estimates.


The Final Report assumes a higher portion of the pipeline removal being required based on site-specific assessments and communications with the City of Richmond. ELM made numerous attempts to contact the City of Burnaby in June 2019, to request a meeting to discuss their requirements for abandonment and removal, but representatives from the City of Burnaby were unable to meet to discuss this City’s requirements. The Final Report continues to assume removal of 20 percent of the total pipeline length within the City of Burnaby, or 5.0 kilometers. KMJF notes that this cost could increase depending on the response received from the City of Burnaby regarding abandonment of the Jet Fuel Line.



5. Pipeline Removal and Backfilling

This category includes all activities necessary to physically remove portions of the pipeline in areas where prospective future development or special consideration necessitate removal. In most instances involving pipeline abandonment, it is assumed that landowners, municipalities, and regulators will allow for pipeline abandonment in place unless there is a compelling reason to remove a segment of the pipeline….A desktop aerial review of the pipeline route was completed to identify industrial and commercially zoned lands where the potential for future development is higher. [emphasis added]


The length of the KMJF Pipeline residing within the City of Richmond is approx. 13.2 km. Of that, approx. 5.25 km is constructed in an agricultural setting, with the remaining 7.95 km constructed in a developed urban setting…

The total length of the various KMJF Pipeline segments residing within the City of Burnaby is approx. 25 km. Due to the urban setting in which this pipeline is situated, it is



reasonable to expect that the potential for future development is likely at some points along the pipeline route. This estimate includes costs to remove 20% of the total pipeline length, or 5.0 kilometers.

Exhibit B-11, Appendix BCUC-KMJF 10.1, NEB Reasons for Decision MH-Reference (iii):001-2012

At p. 11 (pdf p. 23), the NEB stated:

Table A-2 (Appendix III) of the Board’s 4 March 2010 letter provides the Base Case abandonment method assumptions for each land-use category. Abandonment assumptions include abandonment-in-place, abandonment-in-place with special treatment, and removal. The Board stated in its 4 March 2010 letter that, for the purposes of estimating costs for the sub-categories of “Agricultural, Cultivated”; “Agricultural, Non-Cultivated”; and “Non-Agricultural, No Future Development Anticipated,” the Base Case assumption would be 80 per cent of pipeline to be abandoned-in-place and 20 per cent to be removed in all three sub-categories.

At p. 73 (pdf p. 85), the Base Case assumptions for the other sub-categories were reproduced in full:

At pp. 16-17 (pdf pp. 28-29), the NEB summarized the physical assumptions made by Trans-Northern regarding abandonment methods:

Agricultural

K on-_.\gri<ultum l

O ther

T able A-2: Ph~-..cru ,-\s.sumption bJ- L-,.od Us.e and F,<ility F o r the- Purpos.e of E..satimating P reli:min:11r7t Cos t Estim..··1.i'es.

Pip-e,l:i:ne- D i a.meter

2:rt [O l2"' 14~ 1:o 24" ~26"

60.3 to 355.6 to 6IO "'660 mm 323.9mm =

Cultivated A: 80% A:80¾ A: so • (R: 2'0¾) (.R: 20%) (.R: 20%)

Cultivated u -ith special R R R fe21tures

Non Cultivated A: SM~ A : 80¾ A:_80¾ (R: 20%) (.R: 20%) {R: 20%)

E>cisting Developed Lmcis A A A

Prospecti~-.. futm-e R R R oo,.Jopment

No future dew J.opment A: -80-/4 A: so,~ A:80¾ An!icipared ( ... g. fo n,st) (R: 20%) (.R: 20%) {R: 20%)

l:'11Mromnai!ally Sensitive An,a,; A A A

Roads &Raim'.ay; A+ A+ A+

Water Crossings A A A

Other .=mg,; (Utilities) A A+ A+

Leg=d: A = Abaru:ion in p lace, A+ = A bandon in p lace with sp,acial treatment', R = Remo,-..!

Al,o.-~G.-ouad Faciliries

R

R

R

R

R

R

R

R

R

R



Trans-Northern assumed that pipelines in non-agricultural areas would be abandoned-in-place except any in the “Prospective Future Development” sub-category with depth of cover less than one metre. Pipeline with depth of cover less than one metre would be removed.

Trans-Northern submitted that it assumed mostly abandonment-in-place because a large portion of its network is located in densely populated urban areas within utility corridors and with a depth of coverage greater than one metre. Trans-Northern also noted that the CEPA Report recommended that pipelines in agricultural areas (cultivated and non-cultivated), non-agricultural areas and developed areas, be left in place as removal would have a greater environmental impact than abandoning-in-place.

At p. 28 (pdf p. 40), the NEB stated:

Assumptions made by Applicants with pipe in “Agricultural, Cultivated with Special Features”; “Non-Agricultural, Existing Developed Lands”; “Other Areas, Environmentally Sensitive Areas”; and “Other, Water Crossings” sub-categories

…. The Board notes that all Applicants have assumed 100 per cent abandonment-in-place in the “Non-Agricultural, Existing Developed Lands” and “Other Areas, Environmentally Sensitive Areas” sub-categories (with or without special treatment). The Board finds that the assumptions proposed by Applicants for pipelines they own in these two sub-categories are consistent with the Base Case. In the Board’s view, these assumptions are reasonable. The Board accepts the Applicants’ assumptions for pipelines they own in these sub-categories as filed.

At p. 100 (pdf p. 112), Trans-Northern’s summary of physical assumptions was provided:

Trans-No,-tJ1en1

Physical A.s.sumprions

L aa.d-U~C-:r.t•i:ol'Ws

Culti\"ated

Apioultunl Cultivated with Specia1 F uture:s

Non-Cultn.-ated

Existing De,·eloped Lands

Ncm-Prospective Future Development

Ai:ric:aliunl

No future Development Anticipated

Em-ironmentally Sensitive Areas

R.Dads (if)

~ Railways(#)

\'Vater C.rossin_gs (#)

Other C.·os, inp - Utilitieo (~)

A.b:1adolllllftlt l!.th.od I Total km or •

Pipelines (by di:uzwrer c--:neg_ory) :r-iumber of A.ban ...

small medium largo Cround F:ac,ilitle-s

A A A 227 49 ...

R R R

A A A 90 !3 A A A

160 52 ... R R R R 10 73

A A A 171 72

A A A

A+ A+ A+

322 106

A+ A+ A+ 50 23 ... A+ A+ A+

---A A+ A+

3 ---



National Energy Board, Abandonment Cost Estimates Review – Final Reference (iv):Technical Conference Review (2018)

In 2018, the NEB published its final Technical Conference Report summarizing the discussions that took place amongst companies, organizations and NEB staff during the NEB’s Abandonment Cost Estimates review. At p. 18 (pdf p. 21), the NEB stated:

For the “Existing Developed Lands” category, several companies supported the continued use of the Base Case abandonment method assumption of 100% abandonment in-place. One company suggested adding a small amount of removal (e.g., 2%) to the abandonment method assumption for the overall category to account for potential removal costs at the time of abandonment.

Preamble:

In a key 2016 NEB consultation paper, listed above in Reference (iv), one participant company suggested allocating only 2% of the developed land base case assumption to removal. Other participant companies favoured the status quo of assuming 100% of developed land will be abandoned in place.

Trans Northern Pipeline is a useful comparator for PKMJF’s Jet Fuel Line, as both pipelines are primarily small diameter refined fuel pipelines with a significant proportion of their length in urban areas. Trans Northern Pipeline’s abandonment cost assumptions expect a very high proportion of the pipeline to be abandoned in place, particularly in urban areas. Trans Northern Pipeline’s accepted physical assumptions in the “non-agricultural” land-use category in the MH-2-2012 proceeding before the NEB largely reflect the “existing developed lands” and “no future development anticipated” categories.

ELM’s Final Report makes no mention of the “existing developed lands” or “no future development anticipated” or “environmentally sensitive areas” land uses. It estimates “potential future development” for Burnaby of 20% of the pipeline length.

VAFFC seeks to better understand the basis for ELM’s Final Abandonment Cost Estimate.

Information Request:

5.1 Please confirm that the Jet Fuel Line passes through land that falls under the land use categories of “environmentally sensitive areas”, “existing developed lands”, and “no future development anticipated”. In your response, please include a discussion of how ELM (and if applicable, PKMJF) interpret and distinguish between these land use categories.

5.2 Why did PKMJF restrict its desktop review of non-agricultural areas to “potential for future development lands” while excluding the categories of “existing developed lands”, “environmentally sensitive lands”, and “no future development anticipated”? If the latter categories were considered, please provide the associated working papers relied on at the time that the report was prepared. If such papers are provided, how did PKMJF distinguish between those categories and “potential for future development”?



5.3 Was ELM instructed by PKMJF to assume that municipal preferences concerning the extent of pipeline removal would receive full effect in any abandonment order?

5.4 ELM only uses the top or bottom of the NEB unit factor ranges on pages 8-10 of its Final Report. Was ELM instructed by PKMJF to only use maximum or minimum values?

5.5 Please provide all background material and calculations used to drive the cost estimates presented in the “Value” column of the chart on page 7 of the Final Report.

5.6 Please confirm that:

(a) the “value” and “unit” columns on page 8-10 (at Reference (ii)), comprising sections 3-5b, reflect selecting either a maximum or minimum of a range provided by the NEB guidelines;

(b) sections 2 and 6 on pages 7 and 10, respectively, reflect site-specific cost estimates and not NEB guideline ranges; and

(c) sections 1 and 7 on pages 6 and 10, respectively, reflect 25% contingency calculations.

If not confirmed, please provide the unit cost factors for each removal activity and describe how the unit cost factors were developed, and explain what the “intermediate steps” are required to complete the removal activities.

6.0 Abandonment costs, Pipeline to be removed


In section 5 (Pipeline Removal and Backfilling) at p. 8, pdf p. 16, ELM states:

In most instances involving pipeline abandonment, it is assumed that landowners, municipalities, and regulators will allow for pipeline abandonment in place unless there is a compelling reason to remove a segment of the pipeline.

At p. 9, pdf p. 17, ELM then states:

The City of Richmond was contacted to formulate a preliminary estimate of how much of the pipeline they may wish to have removed. We received an email response from Milton Chan, Acting Director, Engineering. His email stated that “Richmond’s expectation is for the pipeline to be fully removed as part of the decommissioning process.”

As a result, ELM “assumed that 100 percent of the 13.2 km of pipe located in the City of Richmond will be removed.” (pdf p. 5)



Exhibit B-13, VAFFC IR 18.3, pdf p. 86 Reference (ii):

Please provide details on the consultation carried out by KMJF with persons and groups potentially affected by the proposed abandonment of the pipeline. In your response, please provide copies of all relevant correspondence sent or received by KMJF.

Exhibit B-22, PKMJF Further Information (PKMJF’s response to BCUC Reference (iii):Order P-10-19)

At pdf pp. 9–10, in response to VAFFC IR 18.3, PKMJF stated:

ELM, on behalf of KMJF, consulted with the Cities of Burnaby and Richmond and with the BC Oil and Gas Commission (“BCOGC”) regarding the abandonment of the Jet Fuel System. Since providing the KMJF’s initial and supplemental response, KMJF has identified additional emails between ELM and the cities of Richmond and Burnaby underlying the references in the ELM Final Report. In addition, ELM has identified an email communication with the BCOGC. Please see attached as Appendix (Suppl.) VAFFC-KMJF 18.3 additional copies of email communications between ELM and the cities of Richmond and Burnaby and the BCOGC. There were also additional phone conversations and voicemail messages between ELM and the Cities, but there are no transcripts of these communications and no summary of their content other than what ELM has already provided in its responses. In addition, the substance of these communications is reflected in the email communications that KMJF is providing. ELM did not have conversations with any other persons and/or groups that potentially may be affected by the proposed abandonment of the pipeline.

…

With this response, KMJF confirms that it has provided all relevant correspondence it has identified.

Exhibit B-13, VAFFC IR 29.7(c), pdf p. 115 Reference (iv):

Please provide copies of any correspondence between KMJF and landowners, municipalities, or regulators regarding specific removal requests.

Exhibit B-22, PKMJF Further Information (PKMJF’s response to BCUC Reference (v):Order P-10-19)

At pdf p. 10, in response to VAFFC IR 29.7(c), PKMJF stated:

Please see response to VAFFC-KMJF 18.3. ELM, on behalf of KMJF, consulted with the Cities of Burnaby and Richmond and with the BCOGC regarding the removal of the pipeline.

ELM and KMJF did not have any other correspondence with landowners, municipalities or regulators regarding the specific removal requests beyond than those provided in KMJF’s initial response, supplemental response, and this response.



Exhibit B-22, PKMJF Further Information (PKMJF’s response to BCUC Reference (vi):Order P-10-19), Appendix (Suppl.) VAFFC-KMJF 18.3

On June 11, 2019, Kala Young of ELM wrote to Josh Reis of the City of Richmond (p. 35 of 97, pdf p. 51):

You mentioned certain areas along the Pipeline Right-of-Way that may have a potential for rezoning and development.

On June 11, 2019, Kala Young of ELM wrote to Jason Wilson of the BCOGC (p. 4 of 97, pdf p. 20):

I spoke with you a couple of weeks ago about pipeline abandonments within municipal areas and am following up with more detail to see if the BCOGC would have any other specific requirements.…

We are requiring input from the cities of Burnaby & Richmond, and the BCOGC on what might reasonably be expected as part of any future pipeline abandonment. The Jet Fuel Pipeline has a diameter of 6 inches, and is planned to be abandoned in place, where possible, assumed 80-90%.

This would involve cleaning the pipeline, capping all segments, and leaving the empty pipeline in the ground. The remaining portion would be removed in situations where the pipeline comes above surface, and anywhere there is potential for future development that would necessitate removal.

On the same day, Jason Wilson of the BCOGC replied in full as follows:

Hello Kala, thank you for your email. The minimum requirements which we discussed and are outlined CSAZ662 must be met. The exact details of the abandonment plan must be developed by the pipeline company. For guidance please see: The NEB Pipeline Abandonment: A Discussion Paper on Technical and Environmental Issues, National Energy Board, Section 2 provides guidance.

Preamble:

VAFFC seeks to better understand the basis on which ELM, in its Final Abandonment Cost Estimate, now considers that removal of 100% of the pipeline in Richmond is a realistic abandonment fund collection assumption.


6.1 For the current Jet Fuel Line right-of-way in the City of Richmond, please identify (i) the length of the right-of-way (in kilometres), and (ii) the proportion of the right-of-way (as a percentage of the total length within Richmond, which is 13.2 km per p. 9, pdf p. 17 of Exhibit B-10) which is:

(a) along a road corridor;



(b) on agricultural land;

(c) on sea island; and

(d) on developed land.

6.2 Please confirm that the Jet Fuel Line’s right-of-way on Sea Island parallels roads, traverses the MacArthur Glen shopping mall parking facilities, and crosses a portion of the Sea Island Conservation Area.

7.0 Abandonment costs, Above-ground facilities

Exhibit B-8, Appendix E, 2019 ELM [Preliminary] Abandonment Cost Study Reference (i):

At p. 8, pdf p. 132, in section 6 (Above-ground Facilities), ELM states:

The estimate includes a unit value of $55,000 per site for block valve sites.


In section 6 (Above-ground Facilities), at p. 9, pdf p. 17, ELM states:

This category includes all activities necessary to remove above-ground infrastructure associated with the pipeline. There are at least 15 locations along the pipeline route where the pipeline comes above-ground. … Logistical challenges include limited availability of local equipment, materials and services, long turn-around times to waste disposal facilities, higher than industry average fees for waste disposal, and heightened security requirements due to the urban setting and current regulatory environment. Costs for 6.a – 6.h are based on site-specific evaluations.

At p. 10, pdf p. 18, ELM includes the following chart, which includes costs for decommissioning 6 Block Valve Sites at a unit cost of $88,281 per site, for a total of $529,686 (section 6f):

6. Above-ground Facilities This category includes all activities necessary to remove above-ground infrastructure associated with the pipeline. There are at least 12 sites along the pipeline route where the pipeline comes above-ground. These include all block valve sites, riser sites on either side of water crossings, t ie-in points and any other riser sites. Infrastructure may include risers, valves, pilings, anchor blocks, electrical equipment, and fencing. An allowance for the cost to restore the resulting disturbed areas is also included.

Project Phase Cost Description Value Unit

6. Above-ground Facilities a. Decommission 10 Block Valve Sites $550,000 $55,000/site

b. Decommission at two Water Crossings $100,000 $50,000/site

c. Restoration at Above-ground Facilities $97,500 15% of above



At p. 6, pdf p. 14, ELM lists 5 block valve sites that it inspected, as follows:

ELM’s inspection team of Jason Schroeder, Terry Oatway and Dean Fitzgerald travelled to Burnaby on June 17, 2019. Over the next three days we, accompanied by representatives from Kinder Morgan, thoroughly inspected all surface infrastructure associated with the KMJF Pipeline. The following locations were inspected:

…

Block Valve Sites (underground in concrete caissons):

KM 4.25 at Hastings Street & Ellerslie Avenue

KM 4.75 at Union Street & Cliff Avenue

KM 11.4 at Government Street & Horne Street

KM 13.5 at Elwell Street

KM 19.7 at Firth Avenue & Byrne Road

In Appendix C of its Final Abandonment Cost Estimate, ELM includes “NEB Unit Costs for Abandonment Activities – Amended, Table A-3”. At pdf p. 40, Table A-3 includes the following content relating to “Above-Ground Facilities”, which includes a range of expect costs for block valve assemblies of between $15,000 and $55,000:

Project Phase Cost Description Value Unit 6. Above-ground Facilities a. Decommission at Parkland Refinery $184,879

b. Decommission at Westridge Terminal $148,724

c. Decommission at Burnaby Terminal $174,137

d. Decommission at Shell Surmount Terminal $85,000

e. Decommission at KMJF Airport Terminal $1,110,758

f. Decommission 6 Block Valve Sites $529,686 $88,281/site

g. Decommission at 3 riser sites $76,560 $25,520/ site

h. Decommission at Brunette River Crossing $118,679

Subtotal: $2,428,423

i. Restoration at Above-ground Facil ities $364,263 15% of above

Total for category 6: 2,792,686

Amended Table A-3 Table A-3 Bue Ca e Co'"t Definition Grid I D«cmb,r 2010

Abov...-.Gru und Facili ties Al l ilbove ground A R Purgi ng and cle.aning piping Llnd fobriei!lions ,

Site rccl31nntion .. trcmcdia1ion of contamination, rccontouring.. rcplaccmcm of 1opsoil. rc-vcgcuuion). This includes reston:uion ofland as close as possible 10 the surrounding land Excludes Lhc valul\ of any aOOvr-graund facilities lha1 may be salvaged 1:1.nd re-used

I £..(lim:au.•d Co.st Faclor- Value (2010 CS)

6 (a) and (b) applicable lo all ; Ran,gi: S per umt s.::xcepl as nol.:d above-ground facilities. 1 Low ! lligh

Block valve a Kmblits ) SI 5.000 ) .............. ~5.~:0()(). Mch:r station (gas) : 50,000 ! 2501000

M<k< ·1,1ion (o,I)" ! 50,000 ! $500,000

Maintenance Base ! S50,000 ! Could be salvagal



Exhibit B-11, PKMJF Response to BCUC IR 10.8.1, p. 59 of 72 (pdf p. 60): Reference (iii):

In its response to BCUC IR 10.8.1, PKMJF states:

Upon completion of the on-site inspection of the Jet Fuel Line system, ELM now anticipates a cost of $95,481 to decommission each block valve site…

Preamble:

None of the facilities listed in sections 6a – 6e on p. 10, pdf p. 18 of Reference (ii): were included in ELM’s original Abandonment Cost Estimate, and ELM’s revised estimate for the decommissioning of block valve sites exceeds the high range of the NEB Unit Costs for Abandonment Activities.

VAFFC is seeking additional information regarding the abandonment costs for above-ground facilities.


7.1 For each of the above-ground facilities listed in sections 6a – 6h on p. 10, pdf p. 18, of Reference (ii), please provide:

(a) an explanation of how the estimated cost was calculated and the specific abandonment activities planned;

(b) any alternative abandonment options that were evaluated (e.g. removal of all structures vs partial abandonment in place, etc.), together with an explanation of why the abandonment strategy assumed in the calculations was chosen;

(c) any salvage value that was included, and if no salvage value was included, an explanation of why not.

7.2 Please fully explain why PKMJF’s response to BCUC IR 10.8.1 states that ELM anticipates a cost of $95,481 to decommission each block valve site, when p. 10, pdf p. 18 of ELM’s Final Abandonment Cost Estimate includes a cost of $88,281 to decommission each block valve site.

7.3 Please fully explain why the Final Abandonment Cost Estimate includes costs for 6 Block Valve Sites in its estimate for section 6f (p. 10, pdf p. 18), but ELM only lists 5 Block Valve Sites which were inspected (p. 6, pdf p. 14).

7.4 At p. 6, pdf p. 14 of the Final Abandonment Cost Estimate, ELM lists 5 block valve sites which it inspected, but it includes costs for 6 block valve sites at p. 10, pdf p. 18.

(a) Please explain why the costs for 6 block valve sites were included, rather than 5.

(b) If there are 6 block valve sites being decommissioned, please explain why ELM only inspected 5 of the 6.



7.5 Please explain and provide documentation to support the following claims:

(a) local equipment, materials, and services are subject to limited availability;

(b) turn-around times to waste disposal facilities are long;

(c) waste disposal fees are higher than industry average; and

(d) security requirements are heightened.

8.0 Abandonment Cost True-up Proposal, Surplus funds

Exhibit B-14, PKMJF Amended Application Reference (i):

At pp. 26–27, pdf pp. 27–28, of its amended Application, PKMJF puts forward a new “Abandonment Cost True-up Proposal”, stating:

KMJF proposes that, following the completion of the physical decommissioning and abandonment of the Jet Fuel Line, the relevant party37 will refund any surplus to shippers or bill shippers for any shortfall based on the difference between the estimated abandonment costs collected and the actual cost incurred for abandonment, which will become known at that time. KMJF proposes that the true-up amount be refunded to or collected from shippers based on volumes shipped during the total period during which the abandonment cost surcharge was collected (the “Abandonment Cost Estimate True-up Mechanism”).

Footnote 37 in the above excerpt states:

With respect to a potential surplus remaining after abandonment activities have been completed, in NEB Decision MH-001-2013, p 31, the Board set out the following requirements for abandonment trusts:

All companies’ trust agreements must allow the trustee to decide the person or persons among the class of beneficiaries, or an orphan pipeline fund, able to receive any surplus or portion thereof. Before disbursing the funds, the trustee must obtain Board approval. This approach achieves certainty because it clarifies which persons are eligible to receive surplus. It does not, however, guarantee that any particular pipeline company would be the recipient. This reduces the incentive to over-collect.

KMJF’s requested trust mechanism would be based on establishing an environmental trust compliant with the indicative terms outlined in Appendix F of the Application (the “Indicative Trust Terms”), as applicable, taking into account the Jet Fuel Line is regulated by the BCUC and the BCOGC. Section 9 of the Indicative Trust Terms provides as follows:



9. Surplus

The Trustee has the discretion to distribute any surplus, or any part of the surplus, existing after all Reclamation Obligations are discharged among the class of beneficiaries or to an orphan pipeline fund.

[Emphasis added]

Exhibit B-14, PKMJF Amended Application, Appendix F: Indicative Terms Reference (ii):for Environmental Trust

At p. 117, pdf p. 224, Appendix F states:

The Agreement should define the beneficiary or beneficiaries as the person or persons, including the Company, having reclamation obligations in respect of the NEB-regulated pipeline system (Beneficiary or Beneficiaries).

NEB Decision RH-2-2008, Land Matters Consultation Initiative Stream 3, Reference (iii):Pipeline Abandonment – Financial Issues1

At p. 32, pdf p. 38, the NEB states:

2. Pipeline companies are ultimately responsible for the full costs of constructing, operating and abandoning their pipelines, and the Board will hold the regulated company responsible for these costs.

Preamble:

In the text of Reference (i), PKMJF states that any surplus abandonment funds would be returned to shippers. The Indicative Terms for the trust contained in Reference (ii), however, imply that the Trustee would have the discretion to distribute any surplus to the beneficiaries of the trust, and the beneficiaries to be defined as “the person or persons, including the Company, having reclamation obligations”.

VAFFC seeks to understand who would receive any surplus abandonment funds in PKMJF’s proposed abandonment trust.


8.1 Please confirm that, consistent with NEB Decision RH-2-2008, the trust terms PKMJF has proposed treat the pipeline company as bearing the risk of under-collection. If not confirmed, please fully explain the response.

8.2 Please provide the terms of the trusts in place for other Pembina pipelines regulated by the Canadian Energy Regulator (formerly NEB).

1 Available online at: https://apps.cer-rec.gc.ca/REGDOCS/File/Download/557895



8.3 Please explain how the trustee could distribute funds to the shippers, considering that:

(a) the Trustee can distribute surplus funds only to beneficiaries or an orphan pipeline fund;

(b) beneficiaries are defined as “the person or persons, including the Company, having reclamation obligations” in respect of the pipeline; and

(c) legal responsibility for abandonment and reclamation of the pipeline lies with PKMJF and not with the shippers, and thus shippers cannot be beneficiaries.

8.4 Please indicate whether an “orphan pipeline fund” currently exists to which the Trustee could distribute surplus funds.

8.5 Please confirm that in the absence of an “orphan pipeline fund”, the Trustee can only distribute funds to the class of beneficiaries, which includes PKMJF.

9.0 Abandonment Cost True-up Proposal, Future liability of shippers

Exhibit B-14, PKMJF Amended Application Reference (i):

At pp. 26–27, pdf pp. 27–28, of its amended Application, PKMJF puts forward a new “Abandonment Cost True-up Proposal”, stating:

KMJF proposes that, following the completion of the physical decommissioning and abandonment of the Jet Fuel Line, the relevant party will refund any surplus to shippers or bill shippers for any shortfall based on the difference between the estimated abandonment costs collected and the actual cost incurred for abandonment, which will become known at that time. KMJF proposes that the true-up amount be refunded to or collected from shippers based on volumes shipped during the total period during which the abandonment cost surcharge was collected (the “Abandonment Cost Estimate True-up Mechanism”).

[Footnotes omitted]

NEB Decision MH-001-2013, Set-aside and collection mechanisms2 Reference (ii):

At p. 73, pdf p. 91, the Board stated:

Pipeline companies proposed two approaches for collecting abandonment funds: (i) using a toll surcharge and (ii) inserting a new line item in their revenue requirement. Some companies proposed to self-fund contributions to the trust. The Board finds each of these approaches reasonable.

2 Available online at: https://apps.cer-rec.gc.ca/REGDOCS/File/Download/2477576



Exhibit A-31, BCUC IR No. 3 Reference (iii):

At p. 12, pdf p. 13, the Commission makes the following two information requests:

7.6 In PKMJF’s view, should the ratepayer or PKMJF’s shareholders be responsible for abandonment costs if the actual cost of abandonment exceeds the final estimate? Please discuss.

7.7 Is PKMJF aware of any other jurisdictions that have approved an abandonment surcharge mechanism? Please provide any relevant analysis in your response.

Preamble:

In Reference (iii), the Commission asks who should be responsible for making up any shortfall if actual abandonment cost exceed the set-aside funds, and about abandonment surcharge mechanisms approved in other jurisdictions. VAFFC seeks related additional information not specifically requested by the Commission.


9.1 Please confirm that none of the collection mechanisms approved by the NEB in Decision MH-001-2013 imposed an obligation on shippers to pay for the shortfall if abandonment costs ultimately exceed abandonment trust funds.

(a) If not confirmed, please explain with reference to specific pipelines and specific tariffs or other NEB-approved instruments that created this future liability for shippers.

9.2 Please provide examples of where other Canadian energy regulators have invoiced pipeline shippers following a shortfall in abandonment funds after the pipeline ceased to provide service.

9.3 Please supply the text of the tariff or other instrument through which PKMJF proposes that the Commission would impose future contaminated site and other abandonment cost related liability on shippers.

9.4 Please provide examples of where Canadian energy regulators have considered whether abandonment costs, or components of abandonment cost estimates, reflect the costs arising from imprudent operation of the pipeline that should not be recovered from shippers (e.g., environmental remediation costs due to spills or leaks).

9.5 How does PKMJF propose that the Commission assess whether abandonment costs invoiced to shippers are limited to reasonable costs attributable to prudent operation of the pipeline? How would any such process interact with court, Ministry of Environment and Climate Change, or OGC processes dealing with contaminated site liability?



10.0 Abandonment costs, Cost of removal

Exhibit A-31, BCUC IRs 2.2.1 and 2.2.2 Reference (i):

The BCUC seeks further information concerning PKMJF’s 2019 planned cost of removal activities and requests a detailed 2019 depreciation study of PKMJF’s assets, if any exists.

Exhibit B-11, BCUC-PKMJF 1.5.5 Reference (ii):

PKMJF states:

The cost of removal amount shown above reflects the actual unamortized amount of cost of removal as of December 31, 2009. The amount reflected in the Application reported in Table 5: 2019 Depreciation Study, column c, reflects the actual unamortized amount of cost of removal as of December 31, 2018. The difference reflects cost of removal incurred from January 1, 2010 through December 31, 2018, less the amortization of cost of removal for that same time period.

Exhibit B-11, Appendix BCUC-KMJF 1.6.9-B Reference (iii):

PKMJF provides Fixed Asset Retirements for 2012 and 2013

Exhibit B-13, VAFFC-KMJF 4.13 Reference (iv):

The depreciation expenses shown on Exhibit B-13, VAFFC-KMJF 4.13, for the cost of removal account imply the use of amortization rates from 7.69% in 2012 increasing each year to 12.42% in 2018.

Fixtd .\sstH Rtrirtmtnts for 12 month.,; tnding Dtrtmbtr 31! 2012 Kindn lJor:an Jtr Futl Int.

Datt c._,.y c ... AccDtp ~H C/(1.)

Eattrtd Acq_. Datt Asstt N• . Dtstriptioa (CADS) (CAD S) CO& h KH4' (CAD S)

°"""' l l/3112000 B1141 2000 BALA.>;CE • I SJOO (616.S~.43) 6 16,89•U3 0.00 W .00 0.00

°"""' l l/31/'lOOO B21411 1000 B.AL\."l'CE • l saoo ( ... 117.66) -M,117.66 0.00 W .00 0.00

°"""' l l/Jl/2000 B1IU9 2000 BAL.u-JCT • I S900 (63.011 ,76) 63,011 76 0.00 W.00 o.oo

°"""' l l/31/2000 B2H90 2000 B.AL\.~CE - 16000 (II ,S71.PI) 117,S 1.91 0.00 W.00 0.00

°"""' I 311'.!000 B2H91 2000 BALA."l'CE · 16060 (~ 4 SO OS) ~ ,480 0S 0.00 W.00 0.00

°"""' l l/31/2000 Bll49'.l 2000 BALANCE· ISl'OI r.s.; ... s7) 25,344.17 0.00 W.00 0.00

°"""' l l/31/2000 UJl49l 2000 BALANCE • 11911 (17.189.SS) 27,189. IS 0.00 W.00 0.00

°"""' 11/31/'lOOO 1121494 1000 BALANCE · 19010 (114,733.15) 12-1, 33. lS 0.00 W .00 0.00

Total (l.m,u.1.m Sl,IJJ.UUI SO.to W.00 Sf.GO

f iud .\sstrs Rtrirtmtnrs for 12 months ndiug Dtc-tmbtr .H, 201J Ki.ndtr lforoao Jtr futl Inc.

o, .. C.mp.uy c ... .... ,, o.p ~H C/(1.)

urtrtd Acq_.Datt As~ ~-- DtsmptiOI (C.UI !) (CAD !) COi< ~- (C.UI !)

Dtcombtr l?.131 .000 141Sll 2000 BAL.A.."l'CE • l S900 (177_!13,61) 177,313.ISI 0.00 W.00 0.00 0.00 W.00 0.00

Total (l .,.u.6~ l77r\JJ.6S



Exhibit B-13, Appendix VAFFC-KMJF 4.13 Reference (v):

PKMJF has significant retirements in the cost of removal account in in 2012.

Exhibit B-13, VAFFC-PKMJF IR 5.5 Reference (vi):

PKMJF provides its Plant in Service as of December 31, 2018 by account and vintage year:

mu Depreciation .at End ol

c- .. a in ofYe~r Addioon-s to Pbnt R~emfflts. A1:fustme-nts Cost ~ End of Ye.- Re-tirftM.nts UStmffl15 v ••

,,, L.andfll!lltl OUM ...... 79.535 1.7-47 81 .282 IM .... .._.. 5.002.107 287.245 (0 16.!P<) 4.M2.M7 2.144.243 235.008 (318.ffl) 2.Dft:2 .522 ·~ _.,,. 457,323 457.323 211 ,512 18,248 22Q ,70(J

158 -·- 1. 131 ,2◄3 30.DO< (4-4.118) l.120.13CI 058.008 52,015 (2◄ .40-3) 580.251 ,,. =-- 2.150.JeO (03.012) 2.003,348 1.13&.285 87.101 {30.08◄} 1.187 ,)g2 , .. ONf~!qupffll!nl 2.Ml .478 11 11.5n) 2.M3,004 OM.04 1 147.500 {30.040) t fJn.-◄lil2 ,eoc Cerm1 Pl'pe,IM Con:rtf 423,.El>e ("'4,490) 320.320 ~ .ni:i 17,134 .4&1) 273,433 ,., Stngf:TiKIU 1,348,048 1,34G,OO &24,280 ... ""' ego;z,e 163 """""""' 184,068 5G,1&4 240,250 131 ,546 23,125 15'&,57 1

185WE won.e:~ ◄5, 3,4Q 45,341i1 45,341i1 ....... 180HW --- 3_7sg 3,789 3.7811 3,78SI 180$\Y - - B.025 B.e25 8-.825 8 ,825 1900 ,,_I....,. 174,s-43 (20.3◄5) 14Q,11il18 114,lilU' o.m ( 10.40-3) 103.~2 , ... ,,,__, 187,2-40 (27.100) ,eo.os, 114, IQG 5,i◄ I {10.◄ l lil} 103,5 18

'"' """""""'""""" 3.ID.045 (124,733) 3.2S2.312 1 .lil0◄ . 358 138JM0 (77,6 10} 1.DM.888 8S COlldittmtWa §_gf:ffl! 4.512 1,~i~:~l ; :;:1 {571.204} ,_ ,,.~,.~ ~.◄:J3'. p,11D44i 1~::W1§:i ~~,~ 1~:m

Far YEAR 2013

,,, ..... ~~ DB,eM ...... 81.282 1 ,7◄7 Bl.0211 , .. .... ,_,. 4.M2.5◄7 ...... ◄.732 .ero 2.~.522 231 ,!,◄ t 2.204 .083 ·~ """"" ◄57,323 ◄$7.323 m .1eo 1 82◄8 248 ,00G 158 -·- 1.120,130 12.800 1.138,"JCI ... .,., ,,.,.. ... .... ,,. =-- 2.0DJ,348 5 ,◄92 ( ITT.31 ◄ ) U21.52e 1.187,Jv.! 80.203 (109,12 1) 1 . 1 &4 ,M◄ , .. Ol'lef~cn!quJlffllffll 2.5◄3,Q'.>4 135.61 1 2.0N.515 1 .on.◄02 1◄5,&43 1223.1M ,eoc Cennll P!:peln! Ccn.rol 320.320 320,320 m.◄ll 17,134 ""·''" ,., _Tan ..

1 ,3◄0,048 020.220 1,872,273 • ..,;z,e 79.8110 7Ml ,030 163 ~ 2◄0,250 240,250 154,67 1 23,125 1n .1~

185WE wan.!~ ◄5,349 45,34g 45,34Q 45,34D 180HW -- 3,789 3,78Q 3.7811 3,78D 180$\Y - . .,. B.025 B.e25 a.825 8,825 1900 ,.,_, l"ffl'Q 14Q,1~ l ◄D , 1 1118 103.~2 4,a1g 108 ,37 1 , ... """"- 1eo.~1 100.Q51 103,518 5-,420 10i ,liM◄

'"' """'""""'"""'""' 3.252.312 3.2S2.312 1."65.e88 13e.e64 2 ,102 ,351 BS C.CCal!\lfflOW~ (571.204} ◄2.!181 ,111:a~!l f~ .8 11!1} ,.,., ll!.!5IRI.~ nm.1113 m1Jm 17.DaaJ53 9'.ool.366 M4,Jo& 8.&W,41i

.. .... '211 2t "" .... GI. I .., ,. ... 1 """' ,,. ISi t:!11 .. ., \.,

I 11111 el 1Jt. ~ 11 1J!l.1r I .. , .. 11 ..

UI

,,. .. ~ ... 11Q. I ~ II >12

...., ..



Exhibit B-13, VAFFC-PKMJF IR 12.8 Reference (vii):

PKMJF provides its Cost of Removal expense by asset class

Exhibit B-13, VAFFC-PKMJF IR 12.10 Reference (viii):

PKMJF provides the remaining life by asset class from its 2010 Depreciation Study and compares it with the 2019 version:

Response:

2018 cost o removal amortization expense was calcu lated as follows:

Deserio k>n Cost of Removal Balance as of December 31, 2007

Loss On Dlsposals • 2012 Cost of Removal • 012 Loss On Disposals • 2013

Cost of Removal Balance as of December 31, 2017

Cost of Removal Amortlzat on Rate 2018 Cost of Remova l Amortlz.a on Expense

Amoun $58,669

$495,04 $22,001

~ $643,908

7.69%

$49.517

The amortization of normal costs of remo al and retirements are comp tely separa e from abandonment costs. ormal costs of remo al are incurred up until the ·me the pipeline is abandoned, at ich time abandonment costs are incurred.

Jan. 1, 2010 Dec. 31 , 2018 Remaining Remaining

Account Numer & DesaiQ!ion Life Life Variance 1/ '}}

152 l.anj Ri;;,ts 13.0 4.0 9.0 153 Line Pipe [2/] 13.0 9.0 4.0 156 Buildings 13.0 7-2 5.8 158 Pu ng Ecµ 13.0 4.5 8.5 159 Station Lines 13.0 4.4 8.6 160 Oller Station E<1!iixrent 13.0 5.0 8.0 161 storage Tariu; 13.0 7.1 5.9 163 Cormuicaions 13.0 2.9 10.1

185WE Wak Equiprrenl 13.0 3.0 10.0 1890 AFLOC (Interest) 13.0 3.5 9.5 189E AFLOC (Equity) 13.0 4.4 8.6 190 Conslruc~O'I ()ahead 13.0 3.7 9.3 BS Cost a fero\01 13.0 8.2 4.8

11 Per 2010 Depreciatioo study, coum (i). '1J Per 2010 Depreciatioo study, coum (g)_

Given that KMJF uses the group method of deprecation, KMJF would not expect the remaining life to precisely decrease by the number of years since the last depreciation study. As the plant balance for each account is change<l due to additions, retirements, or adjustments, the remaining l~e will adjust accordingly when the group method of depreciation is used. This is standard and expected for any 011 pipeline that uses the group method of depreciation. Please refer to the response to BCUC 6.9 to see all plant activity, by accoun~ for th e period 2010 through 2018.



Exhibit B-13, VAFFC-PKMJF IR 12.15 Reference (ix):

PKMFJ notes that in some cases, the depreciation expense is affected by “assets that became fully depreciated” in a given year.

Preamble:

Related to the additional depreciation information recently requested by the BCUC in Reference (i), VAFFC has identified multiple discrepancies between the depreciation information presented, in particular relating to the treatment of cost of removal activities, but also other elements. Understanding the basis for the collection of those costs is important to understanding the appropriateness of the amendment to PKMJF’s application concerning the abandonment trust and its newly proposed true-up function.

VAFFC accordingly seeks precise clarifications from PKMJF concerning its cost of removal activities, depreciation practices and accounting methods.


10.1 Concerning Reference (ii), KMJF response to BCUC IR 5.5:

(a) Please confirm that the actual unamortized amount of cost of removal as of December 31, 2009 referred to in response to BCUC IR 5.5 is $55,736. If not confirmed, provide the unamortized amount as of December 31, 2009.

(b) Please confirm that Reference (v), Appendix VAFFC-KMJF 4.13, shows an unamortized cost of removal amount of $58,669 as of December 31, 2009. If confirmed, provide a reconciliation between the amount shown in response to References (ii) and (v). If not confirmed, where is the unamortized cost of removal shown on Reference (v), Appendix VAFFC-KMJF 4.13?

(c) What is the cost of removal amount incurred per year from January 1, 2010 through December 31, 2018? What is the amortization amount of cost of removal for that same period? Please explain any discrepancies between Reference (vi), the response provided in VAFFC 12.8, and the plant activity provided in Reference (v), PKMJF’s Appendix VAFFC-KMJF 4.13.

(d) In what year did KMJF begin a separate line item for cost of removal, Account BS, and by what BCUC order? What was the original amount to be amortized? Is the actual cost of removal incurred each year added to the amount to be amortized? If not, how is it determined?

(e) Please show and fully explain the calculations for the 7.69% existing depreciation rate for Cost of Removal. Please show the derivation of the 8.2-year current forecasted remaining life.

10.2 Concerning Reference (iii), the depreciation data provided in Appendix BCUC-KMJF 6.9-B, please denote the account for each retirement listed for 2012 and 2013. Please



include in your response a description of the nature and cause for the individual retirements. Also, provide what each item under “Description” means. For example, what does “2000 BALANCE-15300” mean? What specific asset is Asset No. 1321487?

10.3 Concerning Reference (iv), VAFFC-KMJF 4.13:

(a) Please explain why the implied depreciation/amortization rates vary from 7.69% in 2012 to 12.42% in 2018.

(b) Please explain why Reference (vi) (VAFFC 12.8) does not include amortization expenses for each year 2012-2017 when Reference (iv) shows amortization (depreciation) expense recorded for each of those years.

10.4 Concerning Reference (v), Appendix VAFFC-KMJF 4.13:

(a) What is the origination of the January 1, 2012 cost of removal account balance? What does the cost of removal balance include and what is the account’s purpose? Please explain why retirements are recorded to the account and how these retirements differ from retirements recorded in other accounts. Please explain why the cost of removal accumulated depreciation balance is negative.

(b) Please explain with specificity why the retirements for 2012 and 2013 for each account differ between that reported to plant and that reported to the accumulated depreciation. For example, the retirements reported to plant in 2012 for Line Pipe, Account 153, are $616,894 while the retirements reported to accumulated depreciation for the account are $316,729 – please explain the specific reasons for the difference of $300,165.

(c) Please explain the nature of the retirements reported to the cost of removal account and explain why they are specifically reported as cost of removal retirements. Please include a description of the assets retired and explain why those retirements are different from other account retirements.

(d) Does the $22,001 reported under “Adjustments” in 2012 represent removal costs associated with the retirements of $495,046? If no, explain the nature and cause for the adjustments in 2012 and 2018. If affirmative, please explain what removal activities were involved in 2012 and 2018.

(e) Please explain why the retirements reported in 2013 to the cost of removal account did not incur any removal costs.

(f) Please explain the adjustments to accumulated depreciation in 2018 given there were no reported retirements in that year.

10.5 Reference (vi), KMJF’s response to VAFFC IR 5.5, provides plant in service by account and vintage year, as of December 31, 2018:

(a) Please provide the average age of each account’s surviving investment as of December 31, 2018. Include an explanation of all assumptions and calculations.



(b) The 2007 depreciation study notes that a combination of historical trends and estimated future trends yields a complete pattern of life characteristics from which the average service life and average remaining life can be derived. For each account, please provide the average service life underlying the remaining life approved in 2007 and in 2010.

(c) Please provide the average service life used when the Jet Fuel Line first began providing service. If something other than average service life was used, please identify it and explain.

(d) For each account, provide the average age of the retirements for each year since 2007. Please include an explanation as to how the average age was determined and include all calculations.

10.6 Reference (vii), KMJF’s response to VAFFC IR 12.8, shows the calculation of the 2018 amortization expense for the cost of removal account. The calculation shows “Loss on Disposals” for 2012 and 2013 and “Cost of Removal” for 2012 to arrive at the Cost of Removal Balance as of December 31, 2017 of $643,908. However, Reference (v), Exhibit B-13, Appendix VAFFC-KMJF 4.13, shows the Cost of Removal Balance as of December 31, 2017 as $398,750. Please reconcile the discrepancy between the two December 31, 2017 Cost of Removal balances. Additionally:

(a) Do all PKMJF disposals lead to a loss or gain on disposal? Please explain.

(b) If not all disposals lead to a gain or loss on disposal, please explain the events leading to the loss on disposals shown in VAFFC 12.8 an why these events recorded a loss on disposal

(c) Does “Loss on Disposals” refer to retirements? If no, please explain the meaning of “Loss on Disposals.”

(d) Please provide a reference for the statement quoted from Reference (vi) above.

10.7 In Reference (viii), KMJF’s response to VAFFC IR 12.10, KMJF references the group method of depreciation:

(a) Please explain why any disposal leads to a loss on disposal in that context, as losses on disposals appear inconstant with the normal concept of a group method (i.e., where gains and losses on disposal are recorded as part of accumulated depreciation).

(b) Please explain the basis for the response to Reference (ix), VAFFC 12.15, which notes that in some cases, the depreciation expense is affected by “assets that became fully depreciated” in a given year. Does PKMJF depreciate assets by unit (tracking specific accumulated depreciation against each asset) and stop depreciation when the asset is fully depreciated? Or, does PKMJF use a group method, where depreciation continues on all plant in service regardless as to any individual asset’s accumulated depreciation (such that no individual asset would ever become “fully depreciated”)?



(c) Please explain in detail how the December 31, 2018 remaining life for each account was determined, including how additions, retirements, and adjustments were considered. Please include the Iowa curve shape used in the remaining life determination for each account and, using Account 163, Communications, as an example, please show the development of the 2.9-year remaining life.

(d) Please show the derivation of the cost of removal amortization rate of 7.69% and provide all necessary supporting information.

11.0 Abandonment costs, Financial reporting of decommissioning liabilities

Pembina Pipeline Corporation, Q4 2019 Annual Report (February 27, 2020) Reference (i):

In its 2019 Annual Report, Pembina includes its audited consolidated financial statements as of December 31, 2019 and 2018 (“2019 Audited Financial Statements), which state, at pp. 89-90, pdf pp. 90-91, that Pembina’s acquisition of Kinder Morgan Canada Limited and the U.S. portion of the Cochin Pipeline system (the “Kinder Morgan Acquisition”) included a “Decommissioning provision” valued at $74 million:

On December 16, 2019, Pembina acquired all the issued and outstanding shares of Kinder Morgan Canada Limited ("Kinder Morgan Canada") by way of a plan of arrangement and the U.S. portion of the Cochin Pipeline system (collectively the "Kinder Acquisition") for total consideration of $4.3 billion comprised of $2.0 billion in cash and $2.3 billion of share consideration including, 35.7 million common shares of Pembina at $47.87 per share, 12 million series 23 preferred shares at $24.43 per share and 10 million series 25 preferred shares at $24.33 per share…

The purchase price equation, subject to finalization, is based on assessed fair values and is as follows:

Pembina engaged an independent valuator to assist with determining the fair value of certain tangible and intangible assets within the purchase price equation. Tangible assets of $2.7 billion were valued primarily using a cost approach. Intangible assets of $1.3

($millions)

Purchase Price Consideration

Common shares

Cash {net of cash acquired)

Preferred shares

Current assets

Property, plant and equipment

Intangib le assets

Right-of-use assets

Goodwill

Other assets

Current l iabilit ies

Deferred tax liabilities

Decommissioning provision

Lease hability

Other liab ili ties

December 16, 2019

1,710

2,009

536

4,255

68

2,660

1,254

348

809

9

(124)

(281)

(74)

(348)

(66)

4,255



billion are entirely attributable to the acquisition date fair value of customer relationships, which was determined using a discounted cash flow model based on significant assumptions including forecasted revenue growth rates, contract renewal rates, and the discount rate.

…

Given the acquisition closed on December 16, 2019, the purchase price allocation is not final as Pembina is continuing to obtain and verify information required to determine the fair value of certain assets and liabilities and the amount of deferred income taxes arising on their recognition, including: identification and classification of leases, contingencies, decommissioning provisions and other potential provisions.

On p. 84, pdf p. 85, the 2019 Audited Financial Statements describe “Decommissioning Provision” in part as follows:

Pembina's activities give rise to certain dismantling, decommissioning, environmental reclamation and remediation obligations at the end of an asset's economic life. A provision is made for the estimated cost of site restoration and capitalized in the relevant asset category.

On p. 100 (PDF p. 101), the 2019 Audited Financial Statements further explain that:

The decommissioning provision reflects the discounted cash flows expected to be incurred to decommission Pembina's pipeline systems, gas processing and fractionation plants, storage and terminalling hubs, including estimated environmental reclamation and remediation costs.

Changes in the measurement of the decommissioning provision are added to, or deducted from, the cost of the related property, plant and equipment or right of use asset. When a re-measurement of the decommissioning provision relates to a retired asset, the amount is recorded in earnings.

The undiscounted cash flows at the time of decommissioning are calculated using an estimated timing of economic outflows ranging from one to 83 years, with the majority estimated at 50 years. The estimated economic lives of the underlying assets form the basis for determining the timing of economic outflows.

Exhibit A-31, BCUC IR 2.1 Reference (ii):

In BCUC IR 2.1, at pdf p. 4, Commission staffed asked PKMJF the following:

2.1 Please explain whether the cost of removal shown in the 2019 depreciation schedule has already been incurred by PKMJF.

2.1.1 If yes, please provide the details of the same.

2.1.2 If no, please explain the difference between the cost of removal and the proposed abandonment cost.



Preamble:

VAFFC is seeking to reconcile the information presented by PKMJF in this Application regarding decommissioning liabilities with information that has been made publicly available relating to Pembina’s recent acquisition of Kinder Morgan Canada.


11.1 Please provide all documents relating to the Jet Fuel Line that Kinder Morgan and its agents and advisors provided to Pembina as part of the marketing and due diligence process for the Kinder Morgan Acquisition.

(a) Please provide any notes, including further supplemental explanations, which Kinder Morgan provided to Pembina as part of the due diligence process for the Kinder Morgan Acquisition.

11.2 Of the $74 million in decommissioning provisions associated with the Kinder Morgan Acquisition, what proportion was associated with the Jet Fuel Line? Please provide all related calculations, data, documents and assumptions used to calculate the Jet Fuel component of the $74 million figure.

11.3 According to the 2019 Audited Financial Statements, the calculation of the decommissioning provision amount is based in part on “estimated economic lives of the underlying assets”. What estimated economic life of the Jet Fuel Line was used for the purposes of the 2019 Audited Financial Statements in calculating the decommissioning provisions associated with the Jet Fuel Line? Please provide all related calculations, data, documents and assumptions used to make that claim.

11.4 Please confirm whether the $74 million in decommissioning provisions associated with the Kinder Morgan Acquisition includes the cost of removal discussed in BCUC IR 2.1. If not confirmed, please fully explain.

12.0 Economic life of the Jet Fuel Line, Quantitative analysis

Exhibit B-11, PKMJF Response to BCUC IR 2.2 Reference (i):

On pp. 6-8, pdf pp. 7-9, PKMJF states:

Table 2.2 below sets out below additional details regarding KMJF’s quantitative analysis demonstrating that, assuming shippers are economically rationale, once the VAFD project is in service, transportation on the Jet Fuel Line will be uneconomic.

To perform this analysis, KMJF developed a hypothetical effective toll in 2022 ($/Bbl), assuming that:

(a) the VFAD project would become operational at the end of 2021;



(b) for 2022, the residual annual demand for jet fuel transportation services would be at most 40 percent of 2021 volumes shipped on the Jet Fuel Line, as a result of some combination of Air Canada and the other shippers moving volumes (60 percent of 2021 Jet Fuel Line throughput volume) to the VAFD project to completely bypass the Jet Fuel Line;

(c) from the beginning of 2022, the Jet Fuel Line would be fully depreciated;

(d) 2022 operating costs based on the 2019 forecasted operating costs escalated by 2 percent each year; and

(e) KMJF’s required 2022 revenue requirement to remain in service once the Jet Fuel Line is fully depreciated includes a business risk fee in order to justify KMJF’s continued operation of the Jet Fuel Line.

KMJF assumes that a business risk fee would be necessary in order to compensate KMJF for the continued operation with decreased volumes and for the assumption of the risks associated with the continued operation of a Jet Fuel Line in proximity to urban and environmentally sensitive areas. KMJF notes the VFAD project may become operational before Jet Fuel Line is fully depreciated on December 31, 2021. KMJF therefore faces significant risk of not being able to pass on all of its costs to its ratepayers, if any remain.

On p. 9, pdf p. 10, PKMJF states:

While KMJF is unable to reasonably estimate a cost of service-based rate for the VAFD project, based on the barging cost from Parkland Refinery to the VAFD Marine Terminal, any rate for transportation from the VAFD Marine Terminal to YVR via the VAFD pipeline

Table 2.2: Competitive Alternatives to Jet Fuel Line (Parkland Refinery to YVR - 2019-2022)

Row Description

2019 2020 2021 2022

1 Jet Fuel Line Revenue Requirement (Excluding $7,150,000 $7,293,000 $7,438,860 $5,586,541 Abandonment)1

2 Jet Fuel Line Throughput Volumes' (Bbl) 7,436,296 7,436,296 7,436,296 2,974,518

3 Effective Toll on Jet Fuel Line ($/Bbl) $0.962 $0.981 $1 .000 $1 .878

4 Cost via Truck ($/Bbl)' $1 .110 $1 .132 $1.155 $1 .178

5 Cost from Parkland to VAFD Pipeline via Barge $0.820 $0.836 S0.853 $0.870 to VAFD South Fraser Marine Terminal ($/Bbl)'

6 Cost from VAFD South Fraser Marine Terminal NIA N/A NIA Unknown to YVR via VAFD Pipel ine'

(1) Actual for 2018; 2019-2021 as applied-for in the Application; 2022 is a hypothetical revenue requirement that includes (a) operating costs and {b) an annual business risk fee of $1 million that would be included to compensate KMJF for the risks associated with continued operation and to provide incentives for the Jet Fuel Line owner to continue to maintains safe, reliable and effacient operations. (2) 2019-2021 assumed to be equal to 2018 throughput volumes; 2022 assumed volumes decrease to 40% of previous year volumes once VAFD project enters service. [3) KMJF determined that the effective rate ($/Bbl) to transport jet fuel from the Parkland Refinery to YVR via truck is approximately S1 .110/Bbl in 2019. 2020-2022 assumes the 2019 rate adjusted for inflation based on 2.00 percent annual escalation. [4) KMJF determined that the effective ra te ($/Bbl) to transport jet fuel from the Parkland Refinery to the new VAFO Marine Terminal via barge is approximately $0.820/Bbl. 2020-2022 assumes the 2019 rate adjusted for inflation based on 2.00 percent annual escalation. [5) KMJF lacks the necessary information to reasonably estimate the costs for the VAF-D project and associated terminal service fee.



at or below about $1/Bbl would make the Jet Fuel Line economically unviable ($1.878 $0.870/Bbl).

Exhibit B-14, PKMJF Amended Application, Table 9 (Abandonment Cost Reference (ii):Collection Mechanism)

On p. 28 (PDF p. 29), PKMJF proposes an annual contribution to abandonment costs of $4,102,000 (the “Abandonment Cost Surcharge”).

Preamble:

VAFFC is seeking additional information regarding PKMJF’s quantitative analysis of the remaining economic life of the Jet Fuel Line, and its relationship with PKMJF’s proposed abandonment cost collection mechanism.


12.1 Please confirm that PKMJF’s quantitative analysis did not consider if tankage, storage, turnaround, barge and tug availability, barge cleaning or other logistics restrictions may make it “economically rational” for shippers to either truck from Parkland to the VAFD terminal or continue using the Jet Fuel Line. If not confirmed, please fully explain your response.

12.2 Please provide an explanation (including supporting data and calculations) to support KMJF’s determination that:

(a) the effective rate ($/Bbl) to transport jet fuel from the Parkland Refinery to YVR via truck is approximately $1.110/Bbl in 2019; and

(b) the effective rate ($/Bbl) to transport jet fuel from the Parkland Refinery to the new VAFD Marine Terminal via barge is approximately $0.820/Bb

12.3 Please provide a version of Table 2.2 that replaces Row 1 with the total amounts to be collected from shippers, including both the Jet Fuel Line Revenue Requirement, and the Abandonment Cost Surcharge.

12.4 Please confirm that if contributions to the Abandonment Cost Surcharge are counted as part of the cost to shippers of using the Jet Fuel Line, the cost of using the Jet Fuel Line in 2019 to 2021 (as shown in Row 3 of Table 2.2) would be higher than the costs of shipping via truck (as shown in Row 4 of Table 2.2). If not confirmed, please explain fully, providing supporting data and calculations.

12.5 PKMJF states that “any rate for transportation from the VAFD Marine Terminal to YVR via the VAFD pipeline at or below about $1/Bbl would make the Jet Fuel Line economically unviable.” Please provide all studies, analysis, and calculations done by PKMJF to determine that the rate for transportation on the VAFC pipeline will likely be at or below $1/Bbl, or confirm that no such studies, analysis, or calculations have been done.



13.0 Economic life of the Jet Fuel Line, Calculations for extension to 5 years

Exhibit B-13, PKMJF Response to VAFFC IR 9.8 Reference (i):

In IR 9.8, at p. 48, pdf p. 49, VAFFC asked:

Please provide a schedule that sets out annual revenue requirements if the current pipeline operations were extended to five years, as opposed to the three currently forecast in KMJF’s application. In this schedule, please identify or otherwise explain in detail how the proposed depreciation expense and abandonment cost collection, along with any other material changes to KMJF’s application that would result, would be affected by such an amendment.

Exhibit A-18, Order P-10-19 Reference (ii):

In Order P-10-19 at p 7, pdf p. 11, the Commission directed that:

KMJF must provide a full and better response to this IR, pursuant to Section 14.04 of the Rules.

Exhibit B-22, PKMJF Submitting Further Information Reference (iii):

In its response to VAFFC IR 9.8 at p. 3, pdf p. 3, PKMJF states:

Please see the attached Appendix (Suppl.) VAFFC-KMJF 9.8 for annual revenue requirements which assumes: (1) application of the existing depreciation rates over the five-year period (2019-2023) (consistent with the study provided in VAFFC IR 5.3); (2) annual contribution for abandonment costs over the same five-year period (instead of three years); and (3) amortized rate case costs based over the same five-year period (instead of three years).

In Appendix (Suppl.) VAFFC-KMJF 9.8 at pdf p. 15, the “Modified Amount” for the Rate Base (2019 Forecast) is $5,134,000, compared to the “As Filed Amount” of $4,757,000.

Preamble:

VAFFC is seeking additional information regarding why the modified Rate Base (2019 Forecast) in Appendix (Suppl.) VAFFC-KMJF 9.8 has increased compared to the as filed amount.


13.1 Please fully explain how PKMJF determined the “Modified Amount” for the Rate Base (2019 Forecast) of $5,134,000 in Appendix (Suppl.) VAFFC-KMJF 9.8, including all supporting calculations, documents and information.



14.0 Economic life of the Jet Fuel Line, Implications of Pembina audited financial statements

Pembina Pipeline Corporation, Q4 2019 Annual Report (February 27, 2020) Reference (i):

This document is available at: http://www.pembina.com/Pembina/media/Pembina/Investor%20Centre/Presentations%20and%20Events/Q4-2019-Annual-Report-Final.pdf

At pp. 89-90, pdf pp. 90-91, Pembina’s 2019 Audited Financial Statements give estimates of the fair values of certain assets and liabilities Pembina acquired in the Kinder Morgan Acquisition. The 2019 Audited Financial Statements estimate the value of the property, plant and equipment acquired to be approximately $2.7 billion, and the intangible assets acquired to be approximately $1.3 billion:

On December 16, 2019, Pembina acquired all the issued and outstanding shares of Kinder Morgan Canada Limited ("Kinder Morgan Canada") by way of a plan of arrangement and the U.S. portion of the Cochin Pipeline system (collectively the "Kinder Acquisition") for total consideration of $4.3 billion comprised of $2.0 billion in cash and $2.3 billion of share consideration including, 35.7 million common shares of Pembina at $47.87 per share, 12 million series 23 preferred shares at $24.43 per share and 10 million series 25 preferred shares at $24.33 per share…

The acquisition was accounted for as a business combination using the acquisition method where the acquired tangible and intangible assets and assumed liabilities were recorded at their estimated fair values at the date of acquisition, with the exception of right-of-use assets, deferred tax liabilities, and lease liabilities, which are measured in accordance with Pembina's accounting policies.

The purchase price equation, subject to finalization, is based on assessed fair values and is as follows:

($ mil lions)

Purchase Price Consideration

Common shares

Cash (net of cash acquired)

Preferred shares

Current assets

Property, p lant and equipment

Intangible assets

Right-of-use assets

Goodwill

Other assets

Current liabilities

Deferred tax liabilities

Decommissioning provision

Lease liability

Other liabili ties

December 16, 2019

1,710

2,009

536

4,255

68

2,660

1,254

348

809

9

(124)

(281)

(74)

(348)

(66)

4,255



Pembina engaged an independent valuator to assist with determining the fair value of certain tangible and intangible assets within the purchase price equation. Tangible assets of $2.7 billion were valued primarily using a cost approach. Intangible assets of $1.3 billion are entirely attributable to the acquisition date fair value of customer relationships, which was determined using a discounted cash flow model based on significant assumptions including forecasted revenue growth rates, contract renewal rates, and the discount rate.

…

Given the acquisition closed on December 16, 2019, the purchase price allocation is not final as Pembina is continuing to obtain and verify information required to determine the fair value of certain assets and liabilities and the amount of deferred income taxes arising on their recognition, including: identification and classification of leases, contingencies, decommissioning provisions and other potential provisions.

Preamble:

VAFFC is seeking to reconcile the information presented by PKMJF in this Application regarding the economic life of the Jet Fuel Line with information that has been made publicly available relating to Pembina’s acquisition of Kinder Morgan Canada.


14.1 In determining the fair value of the each of the categories of assets and liabilities Pembina acquired in the Kinder Acquisition, as set out in the table reproduced in Reference (i):, above (i.e., “Current assets”, “Property, plant and equipment”, “Intangible assets”, etc.), what value did Pembina’s 2019 Audited Financial Statements assign to the Jet Fuel Line? Please provide the calculations, data, and assumptions supporting this value assigned by Pembina’s auditors.

14.2 What value did the “independent valuator” retained by Pembina “to assist with determining the fair value of certain tangible and intangible assets within the purchase price equation” assign to the Jet Fuel Line? Please provide the documents and correspondence from the independent valuator that provide and explain the value attributed to the Jet Fuel Line.

14.3 Please provide all documents that Pembina or its agents have disseminated or otherwise prepared for the purpose of any potential sale of the Jet Fuel Line to third parties.

15.0 Depreciation, Collection during previous toll period

Exhibit A2-1, 2010 Tariff Filing dated December 7, 2010, Appendix 1 Reference (i):

At pdf p. 2, Commission Staff provided a copy of the 2010 Depreciation Study which was included in the 2009 Settlement Application for the Jet Fuel Line, as follows:



Preamble:

VAFFC is seeking additional information regarding the depreciation rates in the 2010 Depreciation Study.


15.1 Please provide the rationale for changing the remaining life for the Jet Fuel Line assets to 13 years in the 2010 Depreciation Study, or identify where on the record this rationale is already provided.

15.2 Even though the BCUC denied the 2007 accelerated depreciation request, did TMJ/PKMJF reflect shorter depreciation lives in its financial statements? If not, why not? If yes, please provide the financial statements disclosing the shorter lives.

15.3 Following the BCUC’s denial of the 2007 accelerated depreciation request, was the abandonment liability disclosed for financial reporting purposes? If not, why not?

Appendix 1: Depreciation and Amortization rates

Calculatirn of Depreciation and Amortizatirn Rates to be effeciive Januaiy 1, 201 0 ($000)

- ... ,.,. - - ...... ~paicaa. - '""''"'""" - '"""'- - Prapn!l!!d~ -._. ... IDer:11~ ~ O!c" :JI 2Dm D!cSI, 21119 ~ ~ --- 13~•&..edlaa ...

I•! ti> l<l (<l (ej Ill (9) -[d l •J '11 0) -(1, / ~ tl -[d / 11

152 Lam Rights 9l1.!B4 76,DOJ """" l . "'2 1.21 ... 19.D 1,7"2 1.7"" 13.0

15.1 """""' 4.li09Jli3 1.,6.97,754 2.912.100 147.726 '-"" 19.7 Z>l,lllll ....... 13.0

156 Bl.iclrgs ....... 175,315 18S"'74 9.972 ,.,.,,. 19.D 1",575 ui,,. 13.0

158 ~Eq,Jpmett 1.131.21$3 •suo 6'n.D31 '1&3511 ..,,.., IU S!.D79 ...,., 110

IS!l StalonlJIJe!; 2, 139.161 960,168 1.17B.!J92 611.!1!6 2.lfi ... l 'l,3 !ll,B!l2 """' 110

IOl OnerSla!kln&Jjpn,nl 2,819195 720.""7 2.099.1-48 1111..515 ,.,...., 19.D 161 .47:J s.= 110

IOlC a.--a..., 25U61 251,761 0 """' 0.0 0 a.aa.. o.D

1'1 SlonlgeT.,.. 13'6.0<B -51D 857,5'8 "1,11;1 ""'" 19.6 16.965 ....,., 13.0

l <l O:fflnR:alora ff t &UE6 86.5.D 87,5.13 17.5117 IOJIJ'I, 5.0 v :,,r, 1a.aa.. 5.D

IE'tl: WorkEq,Jpnen (II .. .,.9 - 0 2lllll", 0.0 0 2!llm, o.D

lllitM'CDfrprtetHaidfiill'e t'l 3.J89 3.1'11 0 211-""" 0.0 0 2!llm, o.D

llliSN Cmp.l1E!t Safrt&e (1I 8.825 ..... 0 2lllll", 0.0 0 2!llm, o.D

l l!lO AFLOC (- 181.54 105,500 ,a- ....., 2.21 ... 19.D S.876 """' 13.0

l lllf AFLOC (&,;"1 179.&!9 100.T.!io 76163 ..... 23!'11, "'" ...... """" 13.0

1"1 °"""'""""°""""' 3,377.045 1.614,'56 1.762.589 92.""' ,..,.,,. 19.D 135.584 4111 ... 13.0

BS Ol!ilt!IOI~~ ---~ ~~ ~ 19.D ~ , ...... WI

Talal 16,7"42JD1 6.743.841 "·""'"'"' - = ... , ... 719.878 12.B ---------------Ba!i! laaimpuled~ 16.C32N6 715.S!IO .,....

Slftmaryot Depl!ClalonRall!!i 21119 2010 o.p,.......,e_,,.,11rnutBasna,S- ('flS'JO,,,.~- 541. 1:22 715.!00 M'ICldlzallon Of nc:lffl8I Costs Of R.emowil ~ fl!ttemer8) ___2.l!!L _...!.l!!L TCll!JPrDWIO"ltuP'tpewie - T79.81B

Nal'(S): (1) Fof 20CS. the lolowmguseltl lifeeslina.185 -were u:;ed TMJ<i:>es.not p-oposechalgi~ these useful He es1:ina.ss:

O:mTulicalin to~ no ehlr'lgl!o ln:mcngnal ~ WOf'k EqJp.. ~ (d & tard.ta'e) s )ear!! no~ r, dE!pl!ir:i~ 111161!! a:wadi!f«t appq::riate

The pri:p:ised l'l!d.Jdi:m rl lEeall Ue i5. based m amrtizi~ t,e DEi ba:k WlUe as J.aru.ry 1 • 201 Oof th! renanlQ ~s CM:!I" IE CXlllra'.:t 'lefm Jl,..E I fl.. Ae::tu::lic:n of dE IB!ful ife ID align will the corsact E nn. 11:!d.Ja!s. saned lhe risk to TW Im- IICl re:xneriig the fu l as.set YElue CM!r the lam of l t'e rEgciia:a::I agreerrett. TM.I utl'Er expeclS 1t'e1 a 50R]EI" ney a:ntin.E u!ilg ttE pipe6'le SS'WlE!s .lter Ile term oftlE ~rBE!mEllle,pn!S..

(~ Base kl1 ocmpued ~ (de1Yeciatiln ra:e) eddes asset daises nu .we lkJly CEpra(ia:a:I a:d anatiz:ation of ca.t of lBI\OlaL



16.0 Corporate Cost Allocation, General

Exhibit B-8, PKMJF 2019 Revenue Requirement and Final Tolls Application, Reference (i):Appendix A, Schedule 17 (A&G Costs)

In Schedule 17 to Appendix A, at pdf p. 56, PKMJF provided the following table setting out its 2019 forecast A&G Costs:

Exhibit B-12, PKMJF Response to Parkland IR 7.1 and 7.2 Reference (ii):

At pdf p. 17, in its response to Parkland IR 7.1 and 7.2, PKMJF stated:

7.1 Please provide those costs listed on Schedule 17 that are an allocation from Kinder Morgan Canada.

Response:

KMJF is unsure which entity Parkland refers to as “Kinder Morgan Canada.” All costs listed in Schedule 17 are an allocation from Kinder Morgan Inc. (“Kinder Morgan”) and Kinder Morgan Canada Services Inc. (“KMC Services”) to KMJF.

Schedule 17

A&G Costs

($000)

Payrol Tax [1 /) AJbcated Corporate Overhead Trawl, Training, etc.

Employee Benefits [1 /) Labor [1 /) Materials and Supplies QJtside Ser.foes Phones/Utilities Rent Insurance

lvlscelaneous

Total

[1/) Includes costs from 1he folo1Mng groups:

- OpernUons - Product Logistics - EHS - Operator Q.Jalification Training -Tax - Insurance -IT - Accounting

- Payrol - Human Resources

2019 Forecast

$79

$15 $55

$311 $632

$4 $49 $28

$129 $50

$7

$1,358



7.2 For each of the costs listed in 7.1, please provide for each of 2014 to 2019 the method of allocating the costs to KMJF.

Response:

With respect to general and administrative (“A&G”) costs from September 1, 2018 onwards, there are no administrative staff directly employed by KMJF. A&G costs are allocated by Kinder Morgan and KMC Services to KMJF using the Massachusetts Model ("Mass Model"), which is similar to the NEB allocation model used by Canadian entities to allocate general and administrative type expenses.

The Mass Model allocates general and administrative expenses of the corporation to operating entities within the corporation. Costs incurred in departments that support the entire business operations such as Human Resources, IT, AP, Accounting, Scheduling, Procurement, Legal, Audit, Insurance, etc. are generally coded into an account on the parent company and allocated based on three factors: PP&E (plant in service), Revenue, and Direct Labour. Ratios are averaged and calculated as a percentage of the total for all operating entities and that average is used to allocate costs to the KMJF Jet Fuel Line each month.

KMJF understands that for the period 2014 to August 31, 2018 costs were allocated by the owner of the Trans Mountain Pipeline to the Jet Fuel Line based on the methodology set out in the 2002 Allocation Study filed with the NEB.

[Footnotes omitted]

Exhibit B-25, PKMJF Submitting Supplemental Responses to VAFFC Reference (iii):Information Request Nos 22.1 and 23.1

At pdf pp. 6-7, in its response regarding VAFFC IR 23.1(b), PKMJF stated:

The underlying accounting support is included in the attached Appendix (Suppl.) VAFFC-KMJF 23.1.2 (conf). Appendix (Suppl.) VAFFC-KMJF 23.1.2 (confid) will be provided by KMJF under a separate letter, which letter will request confidential treatment of this information. This file presents the amount of labor allocated to KMJF for the period January 1, 2019 through April 30, 2019, by department. These 4-month amounts were annualized (i.e., multiplied by 3) and included in KMJF’s Application. Kinder Morgan utilizes the Massachusetts Model ("Mass Model"), which is similar to the NEB allocation model used by Canadian entities to allocate General and Administrative type expenses. The Mass Model allocates General and Administrative expenses of the corporation to operating entities within the corporation. Costs incurred in departments that support the entire business operations are generally coded into an account on the parent company and allocated based on three factors. PP&E (plant in service), Revenue, and Direct Labor ratios are averaged and calculated as a percentage of the total for all operating entities and that average is used to allocate costs to the Jet Fuel Line each month. Prior to 2019 the allocation procedures followed the TMPLP Cost Allocation Study as filed with the NEB in 2002 and attached as Appendix (Suppl.) VAFFC-KMJF 22.1.3.



Exhibit B-25, PKMJF Submitting Supplemental Responses to VAFFC Reference (iv):Information Request Nos 22.1 and 23.1

At pdf p. 2, in its response regarding VAFFC IR 22.1, PKMJF stated:

Please further see the attached Appendix (Suppl.) VAFFC-KMJF 22.1.2 which provides KMJF’s Direct Field Expenses from 2009 through 2018. Appendix (Suppl.) VAFFC-KMJF 22.1.2 provides a breakdown of Direct Field Expenses based on the same accounts reported in the 2007 Toll Application.5 As KMJF previously noted, prior to September 2018, the previous operator of the Jet Fuel Line maintained accounting in a different manner than as is currently used by KMJF and as is reflected in the Application. Please see the Application Schedule 16 for a schedule for all Direct Field Expense costs for 2019

At pdf p. 3, in its response regarding VAFFC IR 22.1(a), PKMJF stated:

Prior to 2019 the allocation of staff costs and cost allocation procedures followed the TMPLP Cost Allocation Study as filed with the National Energy Board (“NEB”) in 2002 and attached as Appendix (Suppl.) VAFFC -KMJF 22.1.3. In addition, Kinder Morgan Canada ( “KMC”) personnel who provided service to support the operation of the Jet Fuel Line charged their time to the asset. This time spent was then multiplied by an applicable rate and the resulting cost was recorded by the Jet Fuel Line in the attached Appendix (Suppl.) VAFFC-KMJF 22.1.4 (please see Staff – Direct line ). For example, in 2009 the total employee costs was $909,581 (combine Staff as the sum of: Direct, Staff Allocations, and Common Staff Charges). Accordingly, prior to 2019 costs associated with employees were accounted for as Administration and General (“A&G”) costs. As shown in the break-down of Direct Field Expenses in the attached Appendix (Suppl.) VAFFC -KMJF 22.1.2, prior to September 2019 there were no employee costs included in the Direct Field Expenses. Please see Appendix (Suppl.) VAFFC-KMJF 22.1.4, which reflects that during the time period from 2009 to 2018 employee costs were included in A&G, since KMC provided personnel to support the Jet Fuel Line using a shared service methodology.

For 2019, KMJF forecasted that it would have five on-site full-time employees ( “FTE”), which is reflected in the 2019 Direct Field Expenses contained in the Application (Schedule 16). The FTE include: two operations technicians, two pipeline protection technicians, and one lead operations technician. Please see Appendix (Suppl.) VAFFC -KMJF 22.1.FTE (confid), which will be provided by KMJF under a separate letter, which letter will request confidential treatment of this information that supports the “Field Payroll” line in Schedule 16 of the Application…

At pdf p. 4, in its response regarding VAFFC IR 22.1(c), PKMJF stated:

KMJF disagrees with VAFFC’s characterization that there has been a 400% increase in costs of materials and supplies since the 2007 Application. Prior to 2019, costs associated with this type of work were allocated in a different manner than in KMJF’s current Application. Furthermore, KMJF asserts that this filtration work is a compliance cost for the operation of the Jet Fuel Line.



At pdf pp. 5-6, in its response regarding VAFFC IR 22.1(h), PKMJF stated:

Schedule 16 of the Application “Field Major Maintenance” reflected the following costs associated with: ROW Clearing and maintenance, Flood alerts, Cathodic Protection (Test leads, AC mitigation, Rectifier maintenance Ground bed replacement). Prior to 2019, costs associated with this type of work were allocated in a different manner than in KMJF’s current Application. Furthermore, KMJF asserts that this type of work is a cost necessary for the operation of the Jet Fuel Line.

At pdf p. 6, in its response regarding VAFFC IR 23.1(a), PKMJF stated:

From 2009 through August 31, 2018, all employee benefits were accounted for in A&G Costs (i.e., would have been included in Schedule 17 of the Application). However, once KMJF took over operation of the pipeline, employee costs were included in both Schedule 16 and 17 of the Application.

Exhibit B-13, PKMJF Response to VAFFC IR 26.1 Reference (v):

At pdf p. 102, in its response to VAFFC IR 26.1, PKMJF stated:

26.1 For each cost category listed in Table 8 [regarding Normalized Integrity Costs], please provide the actual costs for each year for the years 2008 to 2018. Please compare the forecast costs for 2008 to the costs provided in KMJF’s 2007 Application.

Response:

Please see the response to BCUC 4.5.

KMJF has not performed a study comparing actual 2008 costs to the forecasted 2008 costs forecast in the 2007 Application.

KMJF has expended significant effort to obtain historical cost information related to the Jet Fuel Line. Despite its good-faith efforts, KMJF has not been able to obtain actual historical operating expenses prior to 2009.

In addition, KMJF has not been able to obtain a breakdown of operating expenses based on the same accounts reported in the 2007 Application. During the period from 2007 to August 31, 2018, the previous operator of the Jet Fuel Line maintained accounting in a different manner than as is currently used by KMJF, as reflected in the present Application. KMJF is therefore also unable to provide the level of detail VAFFC is requesting in VAFFC 26.1.

KMJF further notes that much of the historical cost data being requested by VAFFC that KMJF has been unable to obtain is of no relevance to the costs forecasted for 2019, which are the forecasted costs for which KMJF is requesting BCUC approval in the present Application.

[Underlining added]



Preamble:

PKMJF has asserted that the accounting treatment of multiple categories of cost changed in 2018 (including within Direct Field Expenses, A&G Costs, and Normalized Integrity Costs). PKMJF has also asserted that, prior to 2019, it allocated certain categories of costs pursuant to the “TMPLP Cost Allocation Study”, whereas Kinder Morgan utilized the Massachusetts Model, which is similar to the NEB allocation model used by Canadian entities to allocate General and Administrative type expenses

VAFFC seeks to understand the reasonableness of PKMJF’s cost forecasts by obtaining additional information regarding the basis for PKMJF’s corporate cost allocations, and the categories of costs which are subject to such cost allocation.

Information Request

16.1 Please provide a copy of the Massachusetts Model referenced in PKMJF’s response to Parkland IR 7.2.

16.2 Please confirm that Pembina uses the Massachusetts Model to allocate general and administrative type expenses. If not confirmed, please confirm how Pembina allocated such expenses, and provide a copy of all related documentation (including any associated models or guidance documents).

16.3 Please list all categories of expenses relating to the Jet Fuel Line (including without limitation any Direct Field Expenses, A&G Costs, and Integrity Costs) for which the accounting treatment changed in 2018. Please provide a schedule of each of these categories of expenses for each year from 2009, or indicate where such information can already be found on the record of this proceeding.

16.4 Please list all categories of corporate expenses which are allocated to PKMJF using the Massachusetts Model or any other method, and the dollar value of such expenses which are forecast to be allocated to PKMJF in 2019. Please fully explain how each allocation to PKMJF is calculated.

17.0 Corporate Cost Allocation, Cost consequences of Pembina Transaction

Exhibit B-12, PKMJF Response to Parkland IR 7.1 and 7.2 Reference (i):

At pdf p. 17, in its response to Parkland IR 7.1 and 7.2, PKMJF stated:

7.1 Please provide those costs listed on Schedule 17 that are an allocation from Kinder Morgan Canada.

Response:

KMJF is unsure which entity Parkland refers to as “Kinder Morgan Canada.” All costs listed in Schedule 17 are an allocation from Kinder Morgan Inc. (“Kinder Morgan”) and Kinder Morgan Canada Services Inc. (“KMC Services”) to KMJF.



7.2 For each of the costs listed in 7.1, please provide for each of 2014 to 2019 the method of allocating the costs to KMJF.

Response:

With respect to general and administrative (“A&G”) costs from September 1, 2018 onwards, there are no administrative staff directly employed by KMJF. A&G costs are allocated by Kinder Morgan and KMC Services to KMJF using the Massachusetts Model ("Mass Model"), which is similar to the NEB allocation model used by Canadian entities to allocate general and administrative type expenses.

The Mass Model allocates general and administrative expenses of the corporation to operating entities within the corporation. Costs incurred in departments that support the entire business operations such as Human Resources, IT, AP, Accounting, Scheduling, Procurement, Legal, Audit, Insurance, etc. are generally coded into an account on the parent company and allocated based on three factors: PP&E (plant in service), Revenue, and Direct Labour. Ratios are averaged and calculated as a percentage of the total for all operating entities and that average is used to allocate costs to the KMJF Jet Fuel Line each month.

KMJF understands that for the period 2014 to August 31, 2018 costs were allocated by the owner of the Trans Mountain Pipeline to the Jet Fuel Line based on the methodology set out in the 2002 Allocation Study filed with the NEB.

[Footnotes omitted]

Exhibit B-13, PKMJF Response to VAFFC IR 25.2 Reference (ii):

At pdf p. 100, in its response to VAFFC IR 25.2, PKMJF stated:

25.2 Are employees of KMJF exclusively under employment for KMJF or are employees split between KMJF and other KMJF parent and/or subsidiary companies? In your response, please explain how labor and employee benefits are split between companies.

Response:

For Direct Field Expenses (Schedule 15), the employees included in these costs are employed by Kinder Morgan Canada Service Inc. (please also see the response to VAFFC 25.3).

Kinder Morgan Canada Service Inc. employees have the ability to work on multiple Kinder Morgan assets. Kinder Morgan Canada Service Inc. direct bills to KMJF actual time spent by its employees based on the time they work on the Jet Fuel Line. Employees’ labour and employee benefits are split based on their time allocation.

Exhibit B-33 (PKMJF’s March 12, 2020 letter regarding its request for Reference (iii):resumption of the proceeding)

At p. 3, pdf p. 3, PKMJF states:



10. PKMJF acknowledges that certain of Kinder Morgan Inc. and Kinder Morgan Canada Service’s costs are allocated to KMJF (now PKMJF) and form the basis of certain of the cost of service costs claimed in the Application.

11. PKMJF expects that direct field expenses costs will remain at a similar level, since for example, similar field personnel costs and similar outside services costs will continue being incurred to operate the Jet Fuel Line. No significant deviations are expected.

12. For administration and general (“A&G”) costs, the types of costs included in A&G, and the underlying groups, are noted in Schedule 17 of the Application. PKMJF reasonably assumes that it will be necessary for PKMJF to incur similar costs at similar levels of expected expenditures going forward, or at least during the applied for 2019 to 2021 tolling period. No significant deviations are expected.

13. PKMJF further notes that the Kinder Morgan Inc. and Kinder Morgan Canada Services entities are also large corporations, as is the case with Pembina Pipeline Corporation, who acquired KMJF and changed the name of KMJF to PKMJF. PKMJF for this reason does not expect that it will achieve any further economies of scale, not already reflected in the costs claimed in the Application. For these reasons, PKMJF will also rely on the costs of service amounts set out in the Application, where costs are allocated.

[footnotes omitted]

Preamble:

PKMJF has acknowledged that certain of the cost of service costs claimed in the Application are costs which were forecast to be incurred by Kinder Morgan Inc. and Kinder Morgan Canada Service, which were then allocated to PKMJF. PKMJF has now been acquired by Pembina Pipeline Corporation.

VAFFC is seeking additional information to evaluate these forecast allocated costs, in light of PKMJF’s change in corporate ownership.


17.1 Please confirm the dollar value of the costs claimed in the Application which reflected Kinder Morgan Inc. or Kinder Morgan Canada Service’s costs, which were allocated to PKMJF.

17.2 Please fully explain why PKMJF does not expect any significant deviations in allocated costs (including without limitation Direct Field Expenses and A&G Costs) arising from the acquisition of PKMJF by Pembina Pipeline Corporation – particularly given the significant fluctuations described in the IR below.

17.3 Please provide copies of all reports, studies, investigations or analyses which were conducted in relation to changes in allocated costs (including without limitation Direct Field Expenses and A&G Costs) arising from the acquisition of PKMJF by Pembina



Pipeline Corporation, or confirm that no such reports, studies, investigations or analyses were conducted.

17.4 Please fully explain why PKMJF does not expect that it will achieve any further economies of scale, not already reflected in the costs claimed in the Application.

17.5 Please provide copies of all reports, studies, investigations or analyses which were conducted in relation to changes in economies of scale, not already reflected in the costs claimed in the Application, arising from the acquisition of PKMJF by Pembina Pipeline Corporation, or confirm that no such reports, studies, investigations or analyses were conducted

18.0 Operating expenses, Staffing

Exhibit B-25, Appendix (Suppl.), VAFFC KMJF 22.1.4, pdf p. 50 Reference (i):

On pdf p. 50, PKMJF provides its A&G Allocations for direct staffing costs and allocated staffing and staffing-related costs from 2009 to 2018.

Allocated Staff costs increase from $564,493 (in 2009) to $2,051,724 (in 2016) and $2,353,333 (in 2017) and then drop to $925,956 (in 2018).

Direct Staff costs increase from $646,534 (in 2017) to $1,044,165 (in 2018).

“Direct Staff Costs” and “Allocations (net)” are also explained at pdf p. 50, as follows:

Direct Sta ff Costs

The Company operations staff includ ing 1 sha red supervisor with

TMPLP operations. Staff - Direct include payments for basic wages, overt ime, shift differential,

vacation payouts plus any directly assigned operating costs such as training, vehicles, travel,

etc. The ca lculat ion of staff costs and cost al location procedures follows TMPLP Cost Allocation

Study as flied w ith the NEB in 2002. This study has been applied to the Jet Fuel System operations

since its inception and reviewed with Shippers in previous toll fil ing.

Allocat ions (net)

There are no maintenance staff directly employed by the Jet Fuel System. Maintenance activities are

performed by KMC's maintenance staff located at TMPLP's Burnaby Terminal and by outside

contractors. Operational (transportat ion related) assistance is provided by KMC staff located at

TMPLP's Burnaby Termina l, which includes day to day operations activities, vacation re lief, sick

time coverage, etc. and the KMC's staff located at the Company's Westrldge Terminal site provide

assistance to TM PLP for unloading jet fue l barges and loading crude oil vessels. KMC's staff that

are shared between the Company and TMPLP record their hours on t ime sheets wh ich are charged to

accounts that enab le the Company to dist inguish between salaries related to full t ime staff and to

sha red staff hours.



Exhibit B-14, Schedule 17, A&G Costs, pdf p. 100 Reference (ii):

On pdf p. 100, PKMJF lists the total A&G costs forecast for 2019, which include Allocated Corporate Overhead of $15,000 and other staffing-related costs (e.g., payroll tax, employee benefits, etc.).

Preamble:

VAFFC is seeking additional information on the fluctuating staffing costs from 2009 to 2019 and specifically, how the accounting treatment change in 2018 may have affected staffing costs.

Information Request

18.1 Please explain in detail the cost increase in Allocated Staff costs starting in 2016 and 2017 when compared to previous years, including what components of operations and service expanded/changed to justify the cost increase. Please provide supporting documents to justify the cost increase.

18.2 Please explain in detail why: (a) Allocated Staff costs in 2009 were less than half of such costs in 2013;

(b) Allocated Staff costs in 2013 were approximately $1,000,000 less than such costs in 2017; and

(c) Allocated Staff costs in 2018 were less than half of such costs in 2017.

18.3 Please explain in detail the increase in Direct Staff costs from 2017 to 2018, including what components of operations and service expanded/changed to justify the cost increase. If the cost increase is solely due to a change in accounting treatment, please explain the rationale. In your response, please address:

(a) whether this increase in Direct Staff costs from 2017 to 2018 resulted in decreases to staffing in other areas. Please fully explain your response.

(b) how the explanation provided above in (a) explains Direct Staff costs in 2019, including on an FTE basis. In your response, please explain what the ‘Labour’ component in A&G for 2019 is composed of compared to ‘Direct staff’ for years 2009-2018, including whether there is double-counting. Please fully explain your response.

18.4 Why were no Common Staff Charges incurred from 2016-2018?

18.5 Why were no Common Asset Usage Fees incurred post-2011?

18.6 Are maintenance activities performed by PKMJF maintenance staff located at TMPLP’s Burnaby Terminal and by outside contractors?



18.7 Do PKMJF or Pembina-affiliated staff continue to provide (i) operational (transportation-related) assistance from TMPLP’s Burnaby Terminal, including day-to-day operation activities, vacation relief, sick time coverage, and (ii) assistance to TMPLP at the Westridge terminal for unloading jet fuel barges and loading of crude oil vessels? Are these tasks still recorded by timesheet entries?

19.0 Operating expenses, Fuel and power


In BCUC IR 4.4, at pdf p. 19, Commission Staff asked:

Please provide details of how KMJF has forecast the 2019 Operating Expenses including rationale for any assumptions made.

In its response at pdf p. 19, PKMJF stated, in part:

KMJF’s Application presented 2019 forecast operating expense in the four following categories: (1) fuel and power; (2) property tax; (3) direct field expenses; and (4) A&G costs. KMJF discusses each in turn.

Fuel and Power

The basis for 2019 forecast fuel and power expense was developed by the Kinder Morgan Inc. (“Kinder Morgan”) fuel and power group. Fuel and power costs are driven by projected throughput on the system. To develop this projection, the fuel and power group evaluated projected electricity usage and projected electricity prices for 2019 assuming that throughput in 2019 remained at comparable levels to that in 2018.

Preamble:

VAFFC is seeking additional information regarding the basis for PKMJF’s 2019 forecast fuel and power expense, and how it compared to PKMJF’s actual fuel and forecast expense for 2019.

Information Request

19.1 Please provide a detailed explanation, including calculations and all available supporting documentation, regarding the Kinder Morgan fuel and power group’s development of the 2019 forecast fuel and power expense. Please include details regarding the fuel and power group’s evaluation of projected electricity usage and projected electricity prices for 2019, and how that impacted the forecast 2019 fuel and power expense.

19.2 Please provide PKMJF’s actual fuel and power expense for 2019.



20.0 Operating costs, Outside services

Exhibit C2-3, VAFFC IR 22.1(d) to PKMJF Reference (i):

On pdf p. 33, VAFFC asked:

22.1 Please provide specific details, including supporting documents, on the following Direct Field Expenses for each year dating back to 2007, as well as the test period:

…

(d) A list of all outside services procured by KMJF in relation to the pipeline. For any outside services that exceed $10,000, please include a list of contracts and contract values.

Exhibit B-25, PKMJF Submitting Supplemental Responses to VAFFC Reference (ii):Information Request Nos 22.1 and 23.1

At pdf pp. 4-5, in its response regarding VAFFC IR 22.1(d), PKMJF stated:

Please see the attached Appendix (Suppl.) VAFFC-KMJF 22.1.5. The Appendix (Suppl.) VAFFC-KMJF 22.1.5 lists the outside services of KMJF related to the Jet Fuel Line. Some of the contracts are confidential. KMJF will further review which contracts require being provided subject to confidentiality terms. KMJF will then provide on the public record all contracts that can be provided without compliance with confidentiality terms and will request confidential treatment of the contracts that are subject to confidentiality provisions.

In Appendix (Suppl.) VAFFC-KMJF 22.1.5, at pdf p. 51, PKMJF stated:

Below is a list of contracts and contractors related to “Outside Services” set out in Schedule 16 of the Application that are expected to exceed $10,000…

Exhibit A-18, BCUC Order P-10-19 Reference (iii):

At p. 6, pdf p. 10, in response to VAFFC’s request for further and better IR responses, the BCUC stated:

However, the Panel agrees with VAFFC that a reasonableness review is a fundamental part of ratemaking and notes and that historical cost information as well as justification for certain expenditures is highly relevant and necessary to assess whether costs have been prudently incurred; if forecast costs are reasonable; and how costs, including those associated with accelerated depreciation of assets, should be appropriately recovered from shippers.

[Footnotes omitted]



Exhibit A-28, BCUC Order P-2-20 Reference (iv):

At p. 6, pdf p. 11, the BCUC stated:

With respect to VAFFC IR 22.1 (d), while the Panel agrees with VAFFC that KMJF has not provided a list of contracts and details for the “Outside Services” that exceed $10,000 for the years 2009-2018, the Panel is of the view that details of contracts over the historical 2009-2018 period may not be relevant if the forecast 2019 costs are based on existing contracts. KMJF has provided a detailed list of the outside services expenses for 2019 and filed the contracts on a confidential basis for review.25 The Panel directs PKMJF to provide the details provided in Confidential Exhibit to VAFFC, if not already provided.26

______________________

Footnote 25: Confidential Exhibit B-27-2

Footnote 26: Ibid.

Preamble:

PKMJF has provided a list of contracts and contractors related to “Outside Services” set out in Schedule 16 of the Application that are expected to exceed $10,000, and has provided copies of the contracts themselves on a confidential basis. However, PKMJF has not provided a list of the contract values it forecast for each of these contracts (i.e., the amount PKMJF actually forecast to spend relating to each contract).

The BCUC noted in Order P-2-20 that it is of the view that details of contracts over the historical 2009-2018 period may not be relevant if the forecast 2019 costs are based on existing contracts”. However, the BCUC also noted in Order P-10-19 that “historical cost information as well as justification for certain expenditures is highly relevant and necessary to assess whether costs have been prudently incurred; if forecast costs are reasonable; and how costs, including those associated with accelerated depreciation of assets, should be appropriately recovered from shippers”.

VAFFC accordingly seeks further information regarding the current and historical costs associated with “Outside Services” (as opposed to contract details) in order to evaluate PKMJF’s forecast of “Outside Services”.


20.1 Please provide a list of the forecast costs for 2019 included in the Application which were related to each of the contracts listed in Appendix (Suppl.) VAFFC-KMJF 22.1.5.

20.2 Please provide a list of the actual costs for 2019 which PKMJF incurred in relation to each of the contracts listed in Appendix (Suppl.) VAFFC-KMJF 22.1.5.

20.3 Please provide a list of the historical actual costs PKMJF incurred in each year from 2009 to 2018 in relation to contracts providing services similar to those provided under the



contracts listed in Appendix (Suppl.) VAFFC-KMJF 22.1.5 to help assess if the forecast 2019 and costs are reasonable.

21.0 Operating costs, Other expenses

Exhibit B-13, PKMJF Response to VAFFC IR 22.1(g) Reference (i):

In VAFFC IR 22.1, at pdf p. 94, VAFFC asked:

Please provide specific details, including supporting documents, on the following Direct Field Expenses for each year dating back to 2007, as well as the test period:

…

(g) Details related to “other” expenses that exceed $10,000 and justification for those expenses that exceed $10,000.


In Order P-10-19 at p. 7, pdf p. 11, the Commission directed that:

KMJF must provide a full and better response to each of the components [of VAFFC IR 22.1] (a to i), including a schedule for all Direct Field Expenses costs for each year from 2009.

Exhibit B-25, PKMJF Submitting Supplemental Responses to VAFFC Reference (iii):Information Request Nos 22.1 and 23.1

On pdf p. 5, in its response regarding VAFFC IR 22.1(g), PKMJF stated:

The Schedule 16 of the Application “Other” reflects Land and Right-of-Way Expenses. This reflects the estimated costs annually for local Land and Right-of Way contractor support. KMJF determined these costs were necessary because KMJF did not have any local staff support on site and KMJF must rely on contract staff for day-to-day issues related to Land and Right-of -Way. This would be outside of any Land and Right-of-Way support necessary for any Capital Projects. This annual costs assumes that the contractor will assist with rights-of-entry issues and day-to-day support to operations, Damage Prevention/Pipeline Protection.

Please see the attached Appendix (Suppl.) VAFFC-KMJF 22.1.2 Footnote 1 for information regarding “Other” Direct Field Expenses prior to 2019.



Exhibit B-25, PKMJF Submitting Supplemental Responses to VAFFC Reference (iv):Information Request Nos 22.1 and 23.1, Appendix (Suppl.) VAFFC-KMJF 22.1.2

Footnote 1 to the table provided by PKMJF in Appendix (Suppl.) VAFFC-KMJF 22.1.2 provides the following information regarding the “Other” category of expenses:

Prior to September 2018 Includes Fire Protection, Emergency Response

After September 2018, includes environmental remediation expense

Preamble:

PKMJF states that its forecast “Other” expense “reflects Land and Right-of-Way Expenses”, but the historical “Other” expense information PKMJF has provided relates to “Fire Protection, Emergency Response” and “environmental remediation expense”.

VAFFC is seeking additional information to understand the basis for PKMJF’s forecast of “other” expenses.


21.1 Please fully explain what “day-to-day issues related to Land and Right-of-Way” are addressed by the expenses included in the “other” category.

21.2 Please confirm that the “other” expenses listed for the years 2009-2018 in Appendix (Suppl.) VAFFC-KMJF 22.1.2 do not reflect Land and Right-of-Way Expenses.

21.3 If IR 21.2 is confirmed, please explain which cost category for the Jet Fuel Line accounted for Land and Right-of-Way expenses for the years 2009-2018. If Land and Right-of-Way expenses are not separately accounted for, please provide the costs for Land and Right-of-Way expenses for the years 2009-2018.

22.0 Integrity Costs


At pdf p. 21, PKMJF provided the following information regarding its historical Integrity Costs:



Exhibit B-14, PKMJF Amended Revenue Requirement and Final Tolls Reference (ii):Application for 2019-2021

At p. 23, pdf p. 24, PKMJF proposed including a yearly normalized amount of integrity costs based on the three-year average, as follows:

Response:

KMJF provides the details of actual Integrity Costs for the tolling period from 2009 to 2018 in the table below.

Table 4.5: KMJF Actual Integrity Spending Summary 2010-2018

Year

~ 2Q1Q. 2l!11 W2. 2lm ~ 2llli. 2ll12 2lllZ.

Description ($)

ILi Inspection - Pipeline 78,000 157,158 56,257 160,200 286,245

Studies, Risk Assessments. 7,571 15,000 27,000 1,081 13,333 13,047 48.485 16,738 8,572

Manaqement Plans, FIMP Field anomaly investigations 54,253 130,000 187,478 157,709 74,716 773,820 (includes Capital Dio Estimate) Natural Hazards, CP Program &

31 ,866 106,000 65,000 60,946 297,867 171 ,358 129,501 154,242 95,693 Weld Re-certs - Field Work

Tank Inspection (includes Capita l) 11 ,385 3,779 6 ,536 7,326 3,441

Total 93,690 251,000 170,000 418,048 472,688 247,198 177,986 413,222 1,167,771

Table 7: Normalized Integrity Costs32

($000)

2019 2020 2021 3-Year Forecast Forecast Forecast Total

ILi Assessment - Parkland to Airport $345 $345

ILi Digs (Estimate 8 Digs) $680 $680 DOC Sur.ey $62 $62 Dent Fatigue Analysis $50 $50 KMAP (7 Days) $20 S20 KMAP Digs (Estimated 3 @ $85k) $255 $255 ILi Assessment(s) Shel to Burnaby $0 ILi Digs (Estimate 4 Digs) $0 DOC Sur.ey $30 S30 Dent Fatigue Analysis $0 KMAP (Mnirrum Charge) $0 KMAP Digs (Estimated 2 Digs) $0 ILi Assessment(s) - Westridge to EUerslie $0 ILi Digs (Estimated 4 digs) $0 DOC Sur.ey $30 S30 Dent Fatigue Analysis $0 KMAP (Mnirrum Charge) $0 KMAP Digs (Estimated 2 Digs) $0 PODS/Risk/HCA $50 $50 $50 $150 Tolal $1 350 $222 $50 $1,622

3-Year Total Amortized 0\/ef 3 Years $541

.2QJJ!

30,544

5,196

154,497

60,038

250,275



PKMJF indicated that it estimated eight “ILI Digs” and three “KMAP Digs” in 2019 (for a total of 11 digs).

Exhibit B-13, PKMJF Response to VAFFC IR 26.3 and 26.4 Reference (iii):

At pdf pp. 102-103, in its response to VAFFC IR 26.3 and 26.4, PKMJF stated:

26.3 Please explain why certain line items are listed multiple times within Table 8 [equivalent to Table 7 reproduced in Reference (ii):, above]. For example, the DOC survey is listed three times in Table 8, with forecast costs of $62,000, $30,000 and $30,000 in 2020.

Response:

Table 8 lists the costs associated with different segments of the pipeline. The first six lines in Table 8 (starting with “ILI Assessment – Parkland to Airport) are related to the mainline of the Jet Fuel Pipeline (Parkland to the Airport). The next six lines (starting with ILI Assessment(s) Shell to Burnaby) are related to the lateral from Shell to Burnaby. The next six lines (starting with ILI Assessment(s) Westridge to Ellerslie) are related to the lateral from Westridge to Ellerslie…

26.4 For each category listed in Table 8, please provide the associated KMJF internal policies, regulations, or requirements. If no such documents exist, please explain the justification for incurring the costs in each of the forecast years.

Response:

KMJF performs assessments and remediation activities to ensure the pipeline is safe for operation, including compliance with CSA Z662, Kinder Morgan Integrity Management Procedures and recommended industry practices.

Exhibit B-25, Appendix (Suppl.) VAFFC-KMJF 22.1.2, pdf p. 9 Reference (iv):

On pdf p. 9, PKMJF lists Direct Field Expenses for the Period 2009 through 2018, including Anomaly Inspection costs:

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Preamble:

VAFFC is seeking additional information to understand and evaluate PKMJF’s integrity spending in the test years and in prior years in order to assess the prudence of integrity-related costs incurred for a pipeline that is anticipated to be retired.


22.1 Please confirm whether PKMJF has performed the eight “ILI Digs” and three “KMAP Digs” which it forecast it would perform in 2019. If not confirmed, please provide the number of “ILI Digs” and “KMAP Digs” which PKMJF performed in 2019.

22.2 Please provide all documentation relating to the results of any “ILI Digs” and “KMAP Digs” which PKMJF performed in 2019.

22.3 Please fully explain the justification for each of the “ILI Digs” and “KMAP Digs” which PKMJF performed in 2019, with reference to CSA Z662, Kinder Morgan Integrity Management Procedures and recommended industry practices.

22.4 For each year from 2009 to 2018, please provide the number of “ILI Digs” and “KMAP Digs” which PKMJF performed in relation to:

(a) the mainline of the Jet Fuel Pipeline (Parkland to the Airport);

(b) the lateral from Shell to Burnaby; and

(c) the lateral from Westridge to Ellerslie.

22.5 Please provide a list of all integrity-related activities that were ruled out and/or not undertaken in the last 5 years, given the anticipated pipeline retirement. In your response, please include estimated costs and supporting documents.

22.6 Please explain how integrity-related activities for 2017, 2018, and forecast 2019 that were carried out can be distinguished from those that were ruled out and/or not undertaken, as identified in IR 22.5 above.

22.7 What is the likelihood of failure with and without the amount of integrity spending as proposed over the forecast period?

22.8 Please confirm there is no overlap between “Anomaly Inspections” costs identified in Reference (iv) and the integrity-related costs identified in Reference (i), which specifically include “Field anomaly investigations” as a subcategory. Please fully explain your response, and also address the following topics in your response:

(a) For 2017, please explain any field anomaly investigations undertaken, as referenced in References (i) and (iv) above, which combine to a total of over $1.3 million expensed to operating costs. As part of your response, please provide all supporting documentation to justify the costs and specific activities undertaken and the inspection results (including if it resulted in any further capital or maintenance activities).



(b) For 2018, please explain any field anomaly investigations undertaken, as referenced in References (i) and (iv) above, which combine to a total of nearly $570,000 expensed to operating costs. As part of your response, please provide all supporting documentation to justify the costs and specific activities undertaken and the inspection results (including if it resulted in any further capital or maintenance activities).

(c) For the forecast 2019 year, please fully explain where anomaly inspections are included, between all relevant cost categories.

(d) Please explain how anomaly inspection costs were allocated to different cost categories before 2019 and the resulting change for 2019 forecast costs of this nature.

(e) Please confirm that PKMJ undertakes a process to determine which anomaly inspections are necessary and exercises due diligence to ensure they can be conducted at least cost to tollpayers. If confirmed, please fully explain your response and provide any relevant supporting documentation. If not confirmed, please fully explain your response.

23.0 Capital additions, Leak detection equipment

Exhibit B-13, PKMJF Response to VAFFC IR 4.11 and Reference (i):

In its response to VAFFC IR 4.11, at pdf p. 26, PKMJF stated:

4.11 Please outline the rationale and process for decision-making for all capital additions that have occurred since the 2008 proceeding, given KMJF’s assertion that the pipeline is to be abandoned imminently.

Response:

KMJF believes the capital additions were undertaken to provide safe and reliable operations and is not aware of any unnecessary capital additions.

In its response to VAFFC IR 26.4, at pdf p. 103, PKMJF stated:

26.4 For each category listed in Table 8 [regarding Normalized Integrity Costs], please provide the associated KMJF internal policies, regulations, or requirements. If no such documents exist, please explain the justification for incurring the costs in each of the forecast years.

Response:

KMJF performs assessments and remediation activities to ensure the pipeline is safe for operation, including compliance with CSA Z662, Kinder Morgan Integrity Management Procedures and recommended industry practices.




In Order P-10-19 at p. 7, pdf p. 11, the Commission directed that:

KMJF must provide a detailed schedule for all capital expenditures from 2009, with an explanation for any expenditures that exceed a threshold of $50,000.

Exhibit B-22, PKMJF Further Information, Appendix (Suppl.) VAFFC-KMJF Reference (iii):4.11

In Appendix (Suppl.) VAFFC-KMJF 4.11, at pdf p. 13, PKMJF states:

In 2018, there were three capital additions that exceeded $50,000… [including] software [installed by KMJF] to provide a second leak detection technology to help better identify leaks on the pipeline (Leak Detection Equipment).

Exhibit B-11, PKMJF response to BCUC IR 6.9 and Appendix BCUC-KMJF Reference (iv):6.9-A

In its response to BCUC IR 6.9, at pdf p. 35, PKMJF stated:

6.9 Please provide the details of the actual capital additions and retirements made by KMJF from 2010 to 2018.

Response:

Please see Appendix BCUC-KMJF 6.9-A hereto setting out actual capital additions made by KMJF (or its predecessor) from 2010 to 2018.

Please see Appendix BCUC-KMJF 6.9-B hereto setting out actual retirements made by KMJF (or its predecessor) from 2010 to 2018.

In Appendix BCUC-KMJF 6.9-A, at p. 4 of 4, pdf p. 97, PKMJF provided the following table setting out capital additions in 2018:



Preamble:

VAFFC is seeking additional information regarding the justification for PKMJF’s investment in secondary Leak Detection Equipment in 2018.


23.1 Please explain why PKMJF invested $79,031.39 in additional Leak Detection Equipment in 2018, given PKMJF’s assertion that the Jet Fuel Line is to be abandoned imminently. Please answer with specific reference to:

(a) the original leak detection technology in place, including the name of the original technology and its capabilities;

(b) the new Leak Detection Equipment, including the name of the software installed by PKMJF and it capabilities; and

(c) provisions within any specific standards, such as CSA Z662, Kinder Morgan Integrity Management Procedures, and recommended industry practices, as applicable.

23.2 Please confirm the original leak detection technology used by PKMJF, prior to the installation of the new Leak Detection Equipment in 2019, remains in place.

23.3 Please confirm whether there is no “Company Asset No.” or “Tag #” associated with the entry for “Leak Detection Equipment” in Appendix BCUC-KMJF 6.9-A because it is an allocated corporate cost. If not confirmed, please fully explain your response.

23.4 Please identify:

(a) which other assets the “Leak Detection Equipment” is used with; and

Entity

0202

0202

0202

0202

0202

0202

0202

Fixed Assets Additions for 12 months ending December 31 , 2018 Transmountain (Jet Fuel) (0202)

Date Company

Entered Acq. Date Asset No. Tag# Description

February 01/0 1/20 18 160 1204 0441106 Mainline Repairs

March 01/0 1/20 18 1602991 0441106 Mainline Repairs

July 01 /01/2018 16083 17 0441106 Mainline Repairs

December 12/0 1/201 16 1 063 0441111 MAINLI E WORK CHEV-AI RPORT

December 12/0 1/2018 16 1 079 0441114 Tank A2 Coating

December 12/0 1/2018 16 1 070 044111 CATHODI PROTECTIO

December 12/0 1/2018 Leak Detection Equipment

Total (CAD Dollars)

Acq. \'aluc

(CAD)

59,905.43

17,4 7. 9

1,272.05

139. 1 I.I

78.40

4.607.13

79,031.39

302,363.47



(b) the basis for allocating the cost of the “Leak Detection Equipment” between those assets.

24.0 Revenue and cost information, Historical and forecast

Exhibit B-11, Appendix BCUC-KMJF 7.2, “Jet Fuel Line 2009 Settlement Reference (i):Application

At p. 5, pdf p. 103, Proposed Tariff No. 39 sets out Table 1 “Rates” as follows:

Exhibit B-18, Appendix B-7.3, Calculation of Net Income Divided by Reference (ii):Shareholder Equity

At p 1, pdf p. 33, PKMJF provided the following table:

Preamble:

In Reference (ii), PKMJF supplied a table tabulating Net Income and Owner’s Equity for the years 2009 to 2018. VAFFC seeks additional information and source documents to understand this table.

Table 1: Rates From onnected Locntions Connected Refinery

To Vancouver International Ai rport Burnaby Terminal

Fees Annua l Revenues al l ated by F rmula Gathering Line Fee ($/1113)

20 10 $6,789,000 $ 1.056 20 11 $5,836,350 $ 1.082 20 12 $5,982,259 $ I.I 09 20 13 $6, 13 1,8 15 $ 1.1 37 20 14 $6,285, 111 $ 1.165 20 15 $6.442,238 $ 1. 194

20 16 $6,603,294 $ 1.224

20 17 $6.768,377 $ 1.255 20 18 $6,937,586 $ 1.286

APPENOIX B ,7,3: CALCULATION OF " NET INCO ME OIVIOEO BY SHARE HOLOER EQUITY

Year

DMcription 1Q!!l! 2010 l2ll l2Jl 20n l2ll l!!ll ~ 2017 ~ ~

Ni;1l lnto111e fl/I $3,410,541 $1,731,503 $1,1){16, 1/3 $ 1,4?0,?58 $?5,470 S60?.98 1 $1 ,035.335 $545.768 $6 18 ,?5? $1 .434 ,3'1

C).m11;u·s t-qm1y 1:::-11 $14,5?8,939 $11 ,?80.44? $1?,358.8 15 $ 13,718.813 $13,80?,3<3 $ 13,100.38 1 $1?, 164.0?8 $13,??5,500 $18,507,338 $17,94 1,659

ActuolROE 23.471'. 15.38% 8.87% 10.31~. 0.18°. -4 .57% -8.51% 4.13°. .).75% 7.00°. 5.35%

1/ Per KMJF's Income Statements.

2/ Per KMJF"'s Balance Sheets.



VAFFC has also assembled revenue and cost information from the record and there appear to be discrepancies, per the “Unreconciled Amount” tabulated below. Accordingly, VAFFC seeks clarification of PKMJF’s historical and forecast revenue, costs, and returns.

The following Table VAFFC 2.24 has been created based on information provided on the record to date. To assist, an Excel spreadsheet has been attached for PKMJF to provide a response.

Missing information is highlighted in yellow. Calculated values are highlighted in green.


24.1 Please provide the total annual revenue collected from all tolls, fees, and any other revenue from 2009 to 2018 in Rows A to C of the attached spreadsheet.

(a) For any revenue entered in Row C, please provide a separate list or table describing the revenue source and amounts for each year from 2009 to 2018.

24.2 Please provide the total annual revenue forecast from all tolls, fees, and any other sources for 2019 to 2021 in Rows A to C of the attached spreadsheet.

(a) For any revenue entered in Row C, please provide a separate list or table describing the revenue source and amounts forecast for each year from 2019 to 2021.

24.3 Please provide the missing values for the years 2020 and 2021 in Rows E to M and Row O, based on PKMJF’s amended application.

24.4 Please indicate any additional costs PKMJF incurred from 2009 to 2018 by adding additional rows (labelled M.1, M.2, etc.) under Row M as necessary.

(a) For any additional costs added, please provide a separate list or table describing the costs and amounts incurred for each year from 2009 to 2018.

24.5 Please explain the discrepancy between the Net Return calculated in the table (Row P) and the Net Income reported by PKMJF in Appendix B-7.3 (Row Q).

24.6 Please give an account of the Unreconciled Amount (Row R) for each year from 2009 to 2018, listing the source(s) of the discrepancy and the amount.

Table 37 - Jet Fuel Line Revenue and Costs, Historical and Forecast (2009-2021)

Col. 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

2019F (Amended

Application) 2020F 2021F SourcesA Revenues from Connected Locations 6,789,000 5,836,350 5,982,259 6,131,815 6,285,111 6,442,238 6,603,294 6,768,377 6,937,586 Exhibit B-11, pdf p. 103, Tariff No 39, Table 1B Revenues from Connected RefineryC Other RevenueD Total Revenue (A+B+C) - 6,789,000 5,836,350 5,982,259 6,131,815 6,285,111 6,442,238 6,603,294 6,768,377 6,937,586 - - -

E Fuel & Power 157,188 194,991 203,580 228,439 218,476 245,380 240,988 287,781 344,220 337,279 304,000 Exhibit B-11, pdf p. 18, BCUC IR 4.3F Property Tax 149,726 149,768 154,831 161,464 167,896 177,785 173,978 171,996 158,243 148,270 153,000 Exhibit B-11, pdf p. 18, BCUC IR 4.3G Direct Field Expense 691,003 752,949 714,081 907,953 985,616 1,010,889 718,863 988,965 143,769 1,454,554 1,825,000 Exhibit B-11, pdf p. 18, BCUC IR 4.3H A&G Allocation 919,577 1,076,967 1,327,924 1,507,182 1,949,026 2,316,124 2,033,551 2,727,243 2,999,867 1,970,120 1,358,000 Exhibit B-11, pdf p. 18, BCUC IR 4.3I Total Operating Expense (E+F+G+H) 1,917,494 2,174,675 2,400,416 2,805,038 3,321,014 3,750,178 3,167,380 4,175,985 4,935,099 3,910,223 3,640,000 Exhibit B-11, pdf p. 18, BCUC IR 4.3J Plant Depreciation & Amortization 559,223 781,405 794,372 802,916 844,368 866,843 853,309 860,987 859,345 880,366 1,880,000 Exhibit B-13, pdf pp. 177-182, Appendix VAFFC-KMJF 4.13K Provision for Income Taxes 224,446 980,629 577,075 477,959 376,659 292,720 546,273 408,444 288,131 645,409 628,000 Exhibit B-13, pdf p. 90, VAFFC IR 20.2L Integrity Costs 93,690 251,000 170,000 418,048 472,688 247,198 177,986 413,222 1,167,771 250,275 541,000 Exhibit B-11, pdf p. 21, BCUC IR 4.5M Rate Case Costs - - - - - - - - - - 141,000 Exhibit B-13, pdf p. 104, VAFFC IR 27.1N Total Expenses (I+J+K+L+M) 2,794,853 4,187,709 3,941,863 4,503,961 5,014,729 5,156,939 4,744,948 5,858,638 7,250,346 5,686,273 6,830,000 7,293,000 7,439,000

O Applied for Return on Rate Base 320,146 Exhibit B-14, Amended Application

P Net Return (D - N) (2,794,853) 2,601,291 1,894,487 1,478,298 1,117,086 1,128,172 1,697,290 744,656 (481,969) 1,251,313

Q Net Income reported in Appendix B-7.3 3,410,547 1,731,503 1,096,173 1,420,258 25,470 (602,981) (1,035,335) 545,768 (618,252) 1,434,321 Exhibit B-18, pdf p. 33, Appendix B-7.3

R Unreconciled Amount (P - Q) (6,205,400) 869,788 798,314 58,040 1,091,616 1,731,153 2,732,625 198,888 136,283 (183,008)

I I



24.7 Please explain how the negative Net Income in Row Q, as reported by PKMJF in Appendix B-7.3 occurred for the years 2014, 2015, and 2017, especially in light of tolls continuing to grow each year over this time period.

24.8 Please provide the KMJF Income Statements and Balance Sheets for 2009-2018 as referred to by PKMJF in Reference (ii) above.

25.0 Other capital additions

Exhibit B-11, Appendix BCUC-KMJF 6.9A: Jet Fuel Line Actual Capital Reference (i):Additions (2010 to 2018), pdf pp. 94-97.

On pdf pp. 94-97, PKMJF lists various Chevron-related capital additions made by KMJF (or its predecessor) between 2010-2018.

On pdf p. 96, PKM lists specific capital additions related to “Chevron Slope Stabilization” for 2015-2016, for a cumulative total amount of $439,209.00.

Preamble:

VAFFC is seeking additional information on the Chevron-related capital additions made by KMJF between 2010-2018 in order to understand the justification for these capital additions and to assess their prudence.


25.1 Please provide the project justifications for each of the Chevron Slope Stabilization capital additions from October 2015, December 2015, and December 2016.

25.2 Please confirm that the Chevron Slope Stabilization capital additions are included in expedited depreciation over economic life rather than remaining life. If confirmed, please provide the cost impact of depreciating these capital additions over 3 years compared to if they were depreciated based on the average service life of the assets, assuming no retirement/abandonment. If not confirmed, please fully explain your response.

25.3 For each capital addition with “Chevron” in the title/description, listed from 2010-2018, please explain:

(a) where on the Jet Fuel Pipeline infrastructure or system the specific capital addition is located;

(b) the purpose of each specific capital addition, and how it relates to the larger Jet Fuel Pipeline; and

(c) whether the capital additions at each location provide service to any shippers other than Chevron/Parkland.




Exhibit B-11, Appendix BCUC-KMJF 6.9A: Jet Fuel Line Actual Capital Reference (i):Additions (2010 to 2018), pdf pp. 94-97.

On pdf pp. 94-97, PKMJF identifies various repairs conducted on the Jet Fuel Pipeline.

On pdf pp. 96-97, PKMJF identifies “Mainline Repairs” in 2016 ($49,428.77), 2017 (over $500,000), and 2018 (over $200,000 total).

Preamble:

VAFFC is seeking additional information on mainline repair-related capital additions made by KMJF between 2016-2018, in order to understand the justification for these capital additions and to assess their prudence.


26.1 Please provide the project justifications and the supporting documents (e.g., studies identifying need for repairs, cost estimates, detailed work orders, etc.) to justify each Mainline Repairs capital addition between 2016-2018.

26.2 In your response, please include any justification(s) and supporting documents that address (i) the need for mainline repairs at a time when PKMJF was planning for imminent full asset retirement, and (ii) whether the mainline repairs were the least cost alternative given the expected system retirement.

26.3 For each capital addition listed as a “repair” or “mainline work” from 2010-2018, please explain why these costs were capitalized and not expensed in the year incurred.


Exhibit B-11, Appendix BCUC-KMJF 6.9A: Jet Fuel Line Actual Capital Reference (i):Additions (2010) to 2018), pdf pp. 94-97.

On pdf p. 95, PKMJF lists tank-related capital additions in 2013, including: Airport Tank 4 Recoat ($318,232.46), Airport Tank 5 Swing Arm ($75,733.81), Airport Terminal Tank ($72,948.67), and Tank 4 Nozzle Repairs ($59,310.55).

Preamble:

VAFFC is seeking additional information on these tank-related capital additions made in 2013 in order to understand the justification for these capital additions and to assess their prudence.




27.1 Please discuss the expected future role and value of the noted tank assets within PKMJF’s proposed revenue requirement and after PKMJF’s anticipated termination of shipping on PKMJF’s pipeline. Please fully explain your response.

27.2 Please indicate the disposal value for specific tank assets, including salvage value assumed, and explain how this is credited within PKMJF’s proposed revenue requirement. If not credited, please fully explain your response.

27.3 What economic alternatives (including sale) did PKMJF consider in tank-related salvage or was ‘end of life’ assumed? Please fully explain your response.

28.0 Tank salvage

Trans Mountain (Jet Fuel) Inc. ~ Application for Approval of Tolls and Reference (i):Accelerated Depreciation ~ Project No. 3698466, Exhibit B-1, Trans Mountain (Jet Fuel) Inc.’s Application, pdf p. 107, Appendix F: Depreciation Study Report, pdf p. 107

In Appendix F, Kinder Morgan Canada provides a Depreciation Study prepared by Gannett Fleming in support of its 2007 application for approval of new tolls. On pdf p. 107, the Depreciation Study Report states:

The estimated costs for the de-activation and permanent abandonment of the jet fuel pipeline have been internally developed by Kinder Morgan. The details of the estimated costs are summarized in Table 1 on the following page.

The estimated costs of retirement require offset by expected sale proceeds for the sale of assets to third parties. As the majority of assets will be abandoned in place, there is no expectation of sale proceeds for the buried assets. However, Kinder Morgan does anticipate that the jet fuel storage tanks may attract some third party interest. As such the costs of retirement of the storage tanks have been offset by a $500,000 estimate for the potential positive salvage value proceeds. [Emphasis added.]

Preamble:

VAFFC is seeking clarification on whether the $500,000 estimate for potential positive salvage value proceeds for the jet fuel storage tanks which were identified in an earlier application have been accounted for in this current Application.


28.1 Please confirm that the $500,000 estimate for the potential positive salvage value for the jet fuel storage tanks has been incorporated in the current Application, or otherwise addressed in PKMJF’s materials, and provide a pinpoint reference. If not confirmed or no reference is available, please fully explain your response.

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