Part B, Step 1 of the 2021 ACE Calculation Method

Provisions for Abandoned Pipelines for pipelines already abandoned in place

Part B, Step 1 of the 2021 Abandonment Cost Estimate (ACE) Calculation Method estimates financial provisions for future monitoring activities and addressing potential unforeseen events related to the lengths of a company’s pipelines that have already been abandoned in place. These provisions are calculated such that the annual cost (adjusted for inflation) will be available forever – that is, in perpetuity. This is achieved by multiplying the annual cost by an annuity factorFootnote 1.

The Provisions for Abandoned Pipelines cost category is split into two cost sub-categories:

  • Provision for Monitoring of Abandoned Pipeline (Monitoring Provision); and
  • Provision for Addressing Unforeseen Events Associated with Abandoned Pipeline (Unforeseen Event Provision).

Learn more about each provision, the associated Base Case 2021 costs and factors, and the calculation method used for each:

  • Monitoring Provision

    Description of cost category

    • Monitoring patrols of abandoned pipeline
    • Maintaining signage on right-of-way
    • Administration, including:
      • Maintaining and updating database of abandoned pipelines
      • Third-party crossing administration (e.g., one-call services, costs to administer third-party inquiries and requests)
      • Management fees paid to external parties to manage monitoring obligations for abandoned pipelines

    Calculation method and finding this calculation in an ACE

    There are two costs that are calculated as part of the Monitoring Provision:

    • administrative activities and signage maintenance costs; and
    • monitoring patrol costs.

    Monitoring Provision costs are reported in the first table of Part B, Step 1 of an ACE. The Monitoring Provision table provides a breakdown of both costs by pipeline diameter categoryFootnote 2 and also reports the total overall cost for the Monitoring Provision. If a company does not have pipelines already abandoned in place in particular pipeline diameter categories, those categories will not be shown in the table.

    Administrative activities and signage maintenance cost calculation

    1. For each pipeline diameter category, the lengths of pipeline, in kilometres (km), already abandoned in place in a company’s geospatial data are summed. These totals are reported in the Monitoring Provision table in Part B, Step 1 of an ACE. 
    2. For each pipeline diameter category, the applicable Base Case 2021 annual cost of administrative activities and signage maintenance ($/km, as shown in the table below and in the Monitoring Provision table in Part B, Step 1 of an ACE) is multiplied by the total length of already abandoned in place for that pipeline diameter category. This calculation determines the total annual costs for administrative activities and signage maintenance for each pipeline diameter category.
    3. The resulting total annual costs for administrative activities and signage maintenance, by pipeline diameter category, are then multiplied by the Base Case 2021 annuity factor (as shown in the table below and in the Monitoring Provision table in Part B, Step 1 of an ACE). This calculation determines the total costs of perpetually conducting administrative activities and signage maintenance for the lengths of pipeline already abandoned in place for each pipeline diameter. The resulting costs are reported in an ACE as subtotal costs for administrative activities and signage maintenance, by pipeline diameter category.
    Base Case 2021 unit costs for Monitoring Provision Annual cost of administrative activities and signage maintenance ($/km).
    ACE pipeline diameter category Base Case 2021 unit costs
    Monitoring Provision
    Annual cost of administrative activities and signage maintenance ($/km) Annuity factor
    Very small diameter (not steel) $400 80:1
    Very small diameter (steel) $400 80:1
    Small diameter $400 80:1
    Medium diameter $400 80:1
    Large diameter $400 80:1

    Monitoring patrol cost calculation

    1. For each pipeline diameter category, the lengths of pipeline (in km) already abandoned in place in a company’s geospatial data are summed. These totals are reported in the Monitoring Provision table in Part B, Step 1 of an ACE.
    2. For the medium and large diameter pipeline categories only, the applicable Base Case 2021 cost of single instance of monitoring patrols ($/km, as shown in the table below and in the Monitoring Provision table in Part B, Step 1 of an ACE) is multiplied by the total lengths of pipeline already abandoned in place for those pipeline diameter categories. No monitoring patrol costs are applied to very small and small diameter pipelines.
    3. The resulting values are then divided by the assumed number of years between monitoring patrols (as shown in the table below and in the Monitoring Provision table in Part B, Step 1 of an ACE). The resulting values are the total annual costs for monitoring patrols, by pipeline diameter category, for those pipeline lengths.
    4. The total annual costs for monitoring patrols, by pipeline diameter category, are then multiplied by the Base Case 2021 annuity factor (as shown in the table below and in the Monitoring Provision table in Part B, Step 1 of an ACE). This calculation determines the total costs of perpetually monitoring the lengths of pipeline already abandoned in place for each pipeline diameter. The resulting costs are reported in an ACE as subtotal costs for monitoring patrols, by pipeline diameter category.
    Base Case 2021 unit costs and factors for Monitoring Provision – monitoring patrol cost, by ACE pipeline diameter category.
    ACE pipeline diameter category Base Case 2021 unit costs and factors
    Monitoring Provision – monitoring patrol cost
    Cost of a single instance of monitoring patrols ($/km) Assumed number of years between monitoring patrols (frequency, in years) Annuity Factor
    Very small diameter (not steel) - - 80:1
    Very small diameter (steel) - - 80:1
    Small diameter - - 80:1
    Medium diameter $150 5 80:1
    Large diameter $150 5 80:1

    Total Monitoring Provision calculation

    1. Those sub-total costs are then summed to obtain the total cost of the Monitoring Provision for the lengths of pipeline already abandoned in place. This cost is shown in the last column of the Monitoring Provision table in Part B, Step 1 of an ACE.

    Refer to this example ACE see where Monitoring Provisions for the lengths of pipeline already abandoned in place are reported in an ACE.

  • Unforeseen Event Provision

    Description of cost category

    • Provisions necessary to address any unforeseen events regarding the abandoned pipeline
    • Events could include (but not be limited to): ground subsidence; soil erosion; pipe displacement at slopes or water crossings; discovery of contamination; loss of depth of cover; tile drainage issues; formation of water conduits; and other problems caused by the presence of an abandoned pipe

    Calculation method and finding this calculation in an ACE

    Unforeseen Event Provision costs are reported in the second table of Part B, Step 1, of an ACE. The Unforeseen Event Provision table provides a breakdown of the costs by pipeline diameter categoryFootnote 2 and also reports the total overall cost for the Unforeseen Event Provision. If a company does not have pipelines already abandoned in place in particular pipeline diameter categories, those categories will not be shown in the table.

    1. For each pipeline diameter category, the lengths of pipeline (in km) already abandoned in place in a company’s geospatial data are summed. These totals are reported in the Unforeseen Event Provision table in Part B, Step 1 of an ACE.
    2. Those lengths of pipeline, by pipeline diameter, are then multiplied by:
      1. the applicable Base Case 2021 cost to address an unforeseen event ($/event, as shown in the table below and in the Unforeseen Event Provision table in Part B, Step 1 of an ACE); and
      2. the applicable Base Case 2021 assumed number of events per year per 100 km (frequency in years/100 km, as shown in the table below and in the Unforeseen Event Provision table in Part B, Step 1 of an ACE), divided by 100 so that the resulting unit applied is events per-year per-kilometre.
      The resulting values are the total annual costs for unforeseen events per year, by pipeline diameter category, for those pipeline lengths.
    3. The total annual costs for unforeseen events, by pipeline diameter category, are then multiplied by the Base Case 2021 annuity factor (as shown in the table below and in the Unforeseen Event Provision table in Part B, Step 1 of an ACE). This calculation determines the total costs of perpetually addressing unforeseen events related to the lengths of pipeline already abandoned in place for each pipeline diameter. These costs are reported in the Unforeseen Event Provision table as subtotal costs, by pipeline diameter category.
      Base Case 2021 unit costs and factors for Unforeseen Event Provision by ACE pipeline diameter category.
      ACE pipeline diameter category Base Case 2021 unit costs – Unforeseen Event Provision
      Cost to address an unforeseen event ($/event) Assumed number of unforeseen events per year per 100 km (frequency in years/100 km) Annuity Factor
      Very small diameter (not steel) $1,500 0.1 80:1
      Very small diameter (steel) $6,000 0.1 80:1
      Small diameter $50,000 0.1 80:1
      Medium diameter $75,000 0.5 80:1
      Large diameter $125,000 0.7 80:1
    4. The sub-total costs for each pipeline diameter category are then summed to obtain the total cost of the Unforeseen Event Provision for the lengths of pipeline already abandoned in place. This cost is shown in the last column of the Unforeseen Event Provision table in Part B, Step 1 of an ACE.

    Refer to this example ACE to see where Unforeseen Event Provisions for the lengths of pipeline already abandoned in place are reported in an ACE.

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