CER decides on a Drag Reducing Agent Expense Allocation Methodology for the Keystone Canada Pipeline System

Press Release

March 11, 2025

The decision considers methodologies for drag reducing agent (DRA) expenses used for South Bow GP (Canada) Ltd.’s 2020 and 2021 tolls

The Commission of the Canada Energy Regulator (CER) issued its decision about South Bow’s Compliance Filing submitted under Condition 1 of Toll Order TO-005-2022 [Folder 4297632]. The Commission concludes that, with a modification, South Bow’s method for allocating DRA expenses (or costs) will result in just and reasonable tolls for 2020 and 2021.

South Bow’s methodology for calculating these costs aligns better with the transportation agreements and the Commission’s Phase 1 decision than the method suggested by Phillips 66 Canada Ltd. (Phillips) and Cenovus Energy Inc. (Cenovus). South Bow needs to calculate the tolls for 2020 and 2021 using the modified methodology and file them for the Commission’s approval.

South Bow’s Compliance Filing in April 2023 was in response to the Commission’s 14 December 2022 decision on Phase 1 of the RH-005-2020 [Folder 4297632] proceeding. The Commission decided that South Bow could charge to its shippers only a portion of DRA costs used in the Keystone Canada Pipeline System. South Bow was required to create a methodology for allocating DRA costs based on their specific applications, ensuring accurate cost allocation.

Not all shippers fully agreed with South Bow’s approach to allocating DRA costs. As a result, Phillips, Cenovus, and Imperial Oil Limited filed letters asking the Commission to establish a process to consider South Bow’s Compliance Filing, leading the Commission to hold a hearing. This hearing included written procedures, like information requests and written evidence, and oral procedures, such as cross-examination and final arguments made in person. The oral cross-examination occurred in November 2024, while the final arguments were presented in December 2024.

Quick Facts

• The Keystone Pipeline System comprises of 1,233 kilometres of pipelines and associated facilities in Canada.
• On 1 November 2024, the Commission approved an application from South Bow GP (Canada) Ltd. to amend its existing Certificates of Public Convenience and Necessity and Amending Orders from TransCanada Keystone Pipeline GP Ltd. to reflect its corporate name change to South Bow.
• Tolls are the fees a pipeline company charges its customers to ship products, such as oil or natural gas, on its pipeline.
• Pipeline companies use toll revenues to pay for maintenance, earn back the money spent to build the pipeline and provide a return to its investors. Tolls also allow pipeline companies to operate and maintain pipelines safely.
• The Canadian Energy Regulator Act says that tolls must be ‘just and reasonable’ and not unjustly discriminatory.
• Pipeline companies are responsible for providing shippers and other interested persons with enough information so they can determine whether the tolls are reasonable. If a complaint is filed, the Commission may establish a procedure or hearing to examine the tolls.

Associated Links

• Decision RH-005-2023 [Document C33714-1 in Filing C33714]
• Toll Order TO-001-2025 [Document C33714-3 in Filing C33714]
• Phase 1 Toll Order TO-005-2022 [Folder 4297632]

The Canada Energy Regulator (CER) works to keep energy moving safely across the country. We review energy development projects and share energy information, all while enforcing some of the strictest safety and environmental standards in the world. To find out how the CER is working for you visit us online or connect on social media.

Contacts

Erin Dottor
Communications Officer
Canada Energy Regulator
Email: erin.dottor@cer-rec.gc.ca
Telephone: 403-629-2732
Telephone (toll free): 1-800-899-1265
Facsimile: 403-299-3302
Facsimile (toll free): 1-877-288-8803

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