Oeb Model Franchise Agreement

The Union Gas Limited/Norwich (Township) case arose out of a dispute between the gas supplier and a municipality over whether the parties should share the costs of setting up part of the gas work required by the municipality for the construction of drainage work. Under the provisions of the Drainage Act, the distribution company is required to bear the full relocation costs. However, the terms of the municipal franchise agreement between the parties show that the municipality is obliged to reimburse the distribution company 35% of the costs of relocating the gas required by the municipal services. In a decision issued on January 10, 2018, the Ontario Court of Appeal ruled in favour of Union Gas on whether the cost-sharing rules for a standard franchise contract apply to the installation of a pipeline required by drainage work. The Court found that the provisions of the municipal franchise agreement null and further null and further the drainage act required a municipality to share the moving costs with the gas supplier if the transfer to drainage work resulted. The Court of Justice found that the communal agreement on the franchising of cost-sharing rules functioned as an exception to the Drainage Act. In that conclusion, the Court held that the parties may award a contract under the benefits conferred by a statute, unless it is contrary to public policy or the text of the statute expressly prohibits it. The Court reviewed the cost-sharing rules in the municipal franchise agreement (which is to apply in Ontario) and found that they superseded the distribution company`s obligation to bear all costs. In this conclusion, the Court held that the municipal franchise agreement “describes the cost-sharing mechanism in plain language and clearly applies when a municipality requests the establishment of a gas system to take into account municipal works.” While it is unlikely that the facts of Union Gas Limited/Norwich (Township) are likely to be frequent, the debate on the impact of the municipal franchise agreement is instructive. As the Court recognized, the purpose of the cost-sharing mechanism of the municipal franchise agreement is to deter municipalities from requiring the relocation of pipelines. This case confirms the expectation that a municipality will be responsible for some of the associated costs, even in a situation where a statute seems to require something else.

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