JP05

Rollout of the JP05 occurred February 2 in a half-day session at the Westin. Presentation materials from the roll out are available here.

Executive Summary
The Company-to-Company (C2C) Dispute Resolution Task Force, as part of its recommendations to industry in 2004, suggested that the issue of the appropriate method for calculation of fees be readdressed. The belief of that task force and of the EUB was that fees had become a significant part of industry disputes and that the current guideline for fee determination (JP-90/95) was not being used effectively.

As a result, a new task force was formed with representatives from CAPP, GPAC, PJVA, and SEPAC, along with participation from the EUB. This task force decided to create an entirely new document rather than a revision or addendum to JP-90/95. The goal of this recommended practice is to improve the negotiating process and so result in more outcomes that are mutually acceptable to the parties with fewer disputes. However, the practices recommended remain suggestions.

A primary recommendation of JP-05 is that the basis of any fee be disclosed to the parties, as is relevant to the negotiation. The task force believes this recommendation is more practical than under JP-90/95 due to the simpler nature of the fee calculation and the reduced breadth of the range between the upper and lower limit proposed.

The recommended fee formula is

20% * Rate Base + Operating Costs + Lost GCA

where

• the rate base is a negotiated number from original cost to replacement cost,
• operating costs are the same as for facility owners, and
• lost GCA reflects the reduced royalty credits on unused capacity capital.

There are a number of situations for which the application of JP-05 is not appropriate:

• any case where the fee is partially a financing arrangement
• existing contracts
• new midstream facilities
• regulated facilities

The JP-05 report recommends appropriate dispute resolution practices and describes how tools for dispute resolution can be sourced from industry. There are sections in the report on regulatory issues and the linkages between JP-05 and Alberta oil and gas regulatory guides.