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Home > Speeches and Presentations > Speeches and Presentations 2009 > Energy Regulation in Canada - 50 years in the Public Interest

Energy Regulation in Canada - 50 years in the Public Interest

Presented by
Gaétan Caron
Chair and Chief Executive Officer
National Energy Board

Alaska RDC Annual Meeting
Anchorage, Alaska

19 November 2009

Good afternoon everyone. I am pleased to return to beautiful Anchorage.

I was very pleased to receive an invitation from the organizers of this very important annual event.

I believe there is critical information that the National Energy Board of Canada can bring to your attention and that indeed there is much we can learn from you as well.

Many of you may be unaware that your State and the NEB have something in common. In 2009, we are both celebrating our 50^th Anniversary. For nearly 50 years, we at the NEB and the many people and organizations who interact with us, have had the privilege of being at the very heart of energy debates in Canada, North America and in the world. I would like to spend the next few minutes speaking about our learnings gained from our 50 years of energy regulation, and share briefly our forward looking vision.

Role of the NEB

First though a few words of background about the NEB. The NEB is an independent federal agency established by the Parliament of Canada in 1959 with two broad responsibilities that are derived from the National Energy Board Act. The NEB is accountable to Parliament through the Minister of Natural Resources Canada.

The first responsibility is to regulate international and inter-provincial parts of the oil, gas and electric utility industries. The NEB Act provides for our regulatory role to include: oversight of the construction, operation and abandonment of international and interprovincial pipelines, as well as, international and designated interprovincial power lines; authorization of pipeline tolls and tariffs; and authorization of energy exports (oil, NGLs, gas and electricity) and imports of natural gas.

The NEB regulates approximately 45,000 miles (70,000 km) of pipeline in Canada. It is estimated that each year these pipeline systems ship over $125 Billion worth of natural gas, crude oil, petroleum products and natural gas liquids to the marketplace.

In addition to its role as a regulator, the NEB Act sets out an advisory role on energy matters. Our advisory work includes informing the government, industry and the broader public about developments in energy supply and markets through our Energy Information Program. This includes the production of reports such as Canada's Energy Future, with the most recent report released last month focusing on energy infrastructure and challenges.

Independent Decision Making

Learnings of the Past: Independent Decision Making in the Public Interest

Since 1959, the NEB has been a quasi-judicial tribunal with independent authority in making decisions within its mandate. The legislators at the time were visionary in use of language within the Act by using a phase "in the public interest".

What does decision making in the public interest mean? The NEB has defined "public interest" as "inclusive of all Canadians, and refers to a balance of economic, environmental and social interests that changes as society's values and preferences evolve over time. As a regulator, the Board weighs the relevant impacts on these interests when making decisions".

This is something NEB takes seriously and through our Reasons for Decisions we have communicated our thinking. We also recognize that the public interest has and will continue to evolve and so we need to be mindful of this.

Canada as an Energy Player

Learning from the Past: Canada is a major Energy Player

As I mentioned earlier, Canada transports a significant amount of energy products through pipeline systems.

Canada is in a unique position in the global economy as a major energy consumer, producer and exporter. Like Alaska, we have a large, cold country with a resource based economy. This results in Canada being one of the highest energy users in the world. Significant amounts of electricity, coal, crude oil, and natural gas are produced and exported every year and contribute to Canada's economy.

Canada exports 60%, or roughly 9.6 Bcf/d, of our natural gas to the United States. Canadian supplies meet 16% of American demand for natural gas. The Foothills pipeline is one of the pipelines exporting gas, carrying in excess of 3 Bcf/d through the pre-build portion of the system that was approved under the Northern Pipeline Act to carry natural gas from Alaska through Canada. It was felt at the time of construction in the early 1980's that pre-building part of the Northern Pipeline to export Canadian natural gas would be in the public interest.

In terms of liquids, Canada has become the leading exporter of crude oil to the US, and has the second largest oil reserves in the world, right after Saudi Arabia, but ahead of Iran, Iraq and Kuwait.

And recently shipments of LNG started to arrive at a LNG facility located on the East Coast of Canada allowing import of natural gas from foreign sources.

Energy is a global matter and the NEB has increased its participation in energy matter discussions to reflect this. We recognize that Canadians need to be involved in North American, as well as international events, such as this meeting to better understand the changes to energy policies.

Meaningful Engagement

Learnings: Meaningful Engagement

Moving to more current matters, the NEB is continually looking for ways to improve its regulatory processes as it produces top quality environmental assessments, Reasons for Decisions, energy information products, appropriate dispute resolution services, community engagement, to name a few of our business lines.

One area which requires ongoing attention is the meaningful engagement of key stakeholders where we can and we must learn from each other.

Three examples of what the NEB has done in this regard include:

Our Lands Matters Consultation Initiative. Some landowners have expressed concerns with potential socio-economic impacts of pipelines and pipeline abandonments. In 2007, the NEB decided to conduct consultation on these matters, and held meetings and workshops in 25 communities across Canada. As a result of the feedback that the Board received, the NEB concluded that it would extend its regulatory programs for safety, security and protecting the environment to encompassing respecting the rights and interests of those affected by NEB-regulated facilities and activities.

Our Environmental Non-governmental Organizations (ENGO) engagement project. Over the past few years, we've found an increasing demand from ENGO's to understand more about our processes. Through this initiative, we have worked to establish positive working relationships with ENGOs, in support of improved environmental outcomes from NEB regulated activities. We have met with a number of ENGO organizations over the past year to communicate our mandate, and to obtain feedback regarding how we might better communicate with this community. We have heard their concerns and recognize the value that they can bring to the energy debate.

Our Aboriginal Engagement efforts. The NEB has seen an increase in interest from Aboriginal people regarding the impact of energy projects on their communities. The NEB is addressing this interest through increased outreach to Aboriginal communities that may be affected by Board decisions to explain the NEB processes and duties; providing information on how to be engaged in the Board's processes, thereby better enabling Aboriginal participants to provide appropriate input into NEB deliberations; and gathering information on and respecting local community protocol so as to permit the inclusion of community practices in related NEB processes.

Regulatory Clarity and Certainty

Current Learning: Regulatory Clarity and Certainty

As a regulator, the NEB has recognized and heard from stakeholders that regulatory clarity and certainty were issues of high importance. The NEB has taken many steps and let me talk about two specific examples of where we have taken bold steps.

The first one is the concept of "goal oriented regulation". In 1999, the NEB adopted a goal oriented approach to regulation. Goal oriented regulation is a mix of the best from both goal based and prescriptive regulation, which allows a company flexibility in how to meet a particular goal. We specify the desired end result. A company chooses how it will achieve the desired end result. A company may then select an approach that is aligned with the location and type of facility they are proposing, the social and environmental context in which they operate and their organization structure and culture. The NEB is focused on end results and to date this approach has yielded far superior outcomes than prescriptive regulation.

The second example is on the transparency with our stakeholders that our regulatory process is timely. Informing Canadians on the time it takes to process applications is part of our commitment to transparency and regulatory certainty. Every year, we publish our service standards, and we inform Canadians of our performance under these service standards. Last year, you heard from our Natural Resources Canada representative about how the NEB completed its regulatory decision making process on four significant facility applications in twelve or less months each. In 2009 the NEB continues to strive to release its regulatory decisions within 13 weeks following the completion of a public hearing.

As well the NEB recently released its proposed schedule for advancing the Mackenzie Gas Project application upon receipt of the Joint Review Panel Report expected next month. In releasing this schedule, the NEB is demonstrating its commitment to providing both clarity and timeliness in terms of process. As this is an application in front of the NEB, I cannot speak to the merits of the project and so I limit my comments to process only

Regulatory Efficiency and Cooperation

Current Learning - Regulatory Efficiency and Cooperation

On my last trip to Alaska I spoke at length about our experiences at cooperation and partnership that produces results. I will not spend much time on the examples I provided then however, I do want to speak about one of our oldest examples of MOUs that we have with the US Federal Energy Regulatory Commission (FERC). I have been in touch with FERC people for about 25 years, as part our bi-lateral meetings with them. As of today, we have not had a pipeline project in Canada which ends at the border and does not connect, at exactly the same time as the Canada segment is completed, with the US component. There are no laws and regulations that ask that we do that, but the evidence shows that the ongoing and frequent collaboration even if only by way of exchanging publicly available information, is very supportive of getting to coherent and coordinated outcomes.

Another and more recent example is the Major Projects Management Office, (or MPMO) that was established in 2007 to improve coordination within Canada's regulatory system. The goal of the MPMO, which is operated through Natural Resources Canada, is to provide industry with a single, efficient point of entry into federal processes. Applicants for large federal energy projects are required to file their project descriptions with the MPMO, which then has the responsibility for coordinating the federal regulatory and environmental assessment process.

The NEB has participated from the start in the development of the MPMO. Every month, all the Deputy Ministers and Agency heads involved in natural resources projects meet in Ottawa to monitor the progress of these major projects. I sit on the MPMO Deputy Minister Committee and we met just earlier this week.

The key tool we use to hold each other accountable is the Project Agreement. The NEB has signed along with six other departments and another Agency a total of (keystone, gateway and ground birch) three Project Agreements in the past year. These agreements commit to top quality project assessments and to the meeting of specific timeframes to do this top quality work. This is more than a process improvement - this is a cultural change, which I observe happening every month in every one of us sitting at the MPMO table. All that is happening without new legislation.

Where is the NEB going?

Looking Forward - Our Vision

While it is important to learn, it is also important to look forward. I would like to speak briefly about how the NEB will ensure continued improvement. We have four key themes to our future action plan that I would like to share today.

• Focus on sustainable energy regulation
• Lead by dealing with tough issues
• Address the big picture
• Continue to keep our eye on the ball

In 1987, the Bruntland Commission, summoned by the United Nations, issued a report on sustainable development saying we (nations of the world) need to focus on sustainability. The words in that report are well known: "Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs". Sustainable development is the language used today by Canadians, but this is not a new focus of the NEB. The NEB Act has always read the Board "must be satisfied that the pipeline is and will be required by the present and future public convenience and necessity". In conformity with that, the Board has made its decisions in the public interest, typically considering other important factors like safety, environmental protection, social impacts, markets, and economic feasibility, and what the impact of the infrastructure would be on future generations.

Leading by dealing with tough issues is also not new for the NEB. We are looking at the financial issues related to the abandonment of pipelines. We are establishing relationships with key decision makers in Nunavut where there has been little oil and gas development but where there is potential for future supply. We continue with our international cooperation initiatives, like the one we have with PHMSA (Pipeline and Hazardous Materials Safety Administration) where we recognize that the physical regulation of cross border pipelines is shared and that compliance information is pertinent to our organizations regarding public safety and security.

Addressing the big picture is not a new focus for the NEB. In 1959, Prime Minister Diefenbaker's government thought that Canada needed an impartial and independent view on energy, and it proposed to Parliament a requirement that "the Board shall study and keep under review (energy) matters over which Parliament has jurisdiction". We will continue to publish a variety of Energy Information Products to help us and Canadians understand the energy system. All of our reports are on our website and we have many reports on the horizon to be released.

Meanwhile the NEB will continue to keep our eye on the ball by executing with high quality its day to day work to provide regulatory oversight on pipeline systems under our jurisdiction. Using our risk based lifecycle approach, the NEB provides the necessary regulatory expectations so that companies are better able to meet these demands and have safe systems, and achieve success in environmental outcomes. As you may know there have been recent pipeline ruptures in Canada, and we will continue to investigate and learn from these events, with the intent to prevent similar reoccurrences.

Alaska Gas Pipeline

What does this mean for Alaska Gas?

It would be remiss of me not to include this important topic to many of you in the audience with a strong interest in this particular topic.

You have heard me say before and I will repeat it here for you, the NEB and Canada will be ready for whatever is filed in regards to the Alaska Gas pipeline project

We are ready to process any project related to Alaskan gas, either under the NEB legislation, or under the Northern Pipeline Act in support of the Northern Pipeline Agency, to which we would be prepared to provide a great deal of technical support. As many of you may know, the Northern Pipeline Agency was created by the Northern Pipeline Act and is responsible for the expeditious design and construction of the Foothills project within Canada. That Agency has commenced staffing actions in recognition of the progress being made by Foothills on the project. In either case, we have the means, and the resolve, to put in place an efficient and effective examination for the Canadian portion. Full consideration will be given to all interests if and when a project is brought forward.

Our readiness stems from a long history of preparedness. For many years, we have been engaging people with an interest in the regulatory process that would need to be in place in Canada for the Alaska Gas pipeline project. I was an NEB staff member when I participated in discussions in June 2001 between a group of Canadian federal government officials in Whitehorse, Yukon.

Since 2001, meetings and discussions have continued to take place involving a broad range of federal government officials, agencies and boards, industry and Aboriginal peoples. Relationships have been built and will continue to grow. What we have learned to date will be very helpful, irrespective of what is filed and how it is filed. In my experience, the early development of relationships, well in advance of a project filing, is the most important task to carry out when seeking to design an effective regulatory process for projects of significance.

This past May, the Minister of Natural Resources Canada announced that for the Alaska project there would be two single window agencies, the Northern Pipeline Agency or the MPMO, depending on which project moved forward. Both agencies are taking steps forward and therefore it is with a high degree of confidence that I say "we stand ready".

”It's getting better all the time”

Thank you for having me as your keynote speaker at your annual meeting. Before I leave I want to leave you with a phrase that reflects that the regulatory regime is not static, but rather very dynamic. It's getting better all the time. As we continue to be at the intersection of supply, infrastructure and the environment, regulators in Canada and around the world will need to continually update their tool kits, be creative, be extremely good listeners, be partners, be committed to continual improvement and be passionate about the pursuit of the public interest.

If you are interested in knowing more about the topics I discussed today, you can talk to me, or:

• try our website
• call us at 403-292-4800 or toll free at 1-800-899-1265
• drop by our Library in Calgary
  National Energy Board
  444 Seventh Avenue SW
  Calgary, Alberta

 

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Date Modified:

2011-10-28