Roles and Challenges of the Federal Regulator

Remarks by Peter Watson, Chair and Ceo, National Energy Board
Canadian Energy Research Institute Conference
April 20, 2015


Good Morning, and thank you for the invitation to speak here today. The theme of this year’s conference is particularly compelling for me and for the National Energy Board. The regulatory environment - as with the broader energy industry - is at a critical juncture where our role, and the evidence of the work we do, is being weighed daily against the results… economic results, safety and environmental results, social and political results.

I don’t think there has ever been a time, in the 50-plus year history of the Board, when the federal regulator has been so overtly positioned in the minds of the Canadian public as the representative of their expectations of the industry itself.

This is new ground for the NEB, and when I talk more about the challenges we face, I will tell you that this seismic shift in public perception is perhaps the biggest driver of how we are meeting our challenges, because they are all rooted in this.

The New Terrain

So, a public opinion-quake has happened, and here is where the NEB has ended up: we find ourselves in new territory. Primarily, we find that there is extraordinary demand for participation in our processes.

  • Kinder Morgan's TMX expansion application has over 400 intervenors - one of the largest in our history and an order of magnitude greater than what has been typical in the past.
  • For TransCanada's Energy East application, the demand for participation is also of a very high order of magnitude, because we had, when the process closed, 2273 applications to participate.
  • Even outside of project application processes, we find ourselves called upon more and more to explain our regulatory decisions and actions. In the case of Enbridge’s Line 9B, we have responded to an unprecedented number of public, media and municipal inquiries as to the conditions we have imposed and our methods of verifying those conditions.
  • And the heightened interest continues as we examine the Leave to open application.
  • Line 9B exemplifies, in my mind, the new normal in terms of engaging people throughout the lifecycle of our regulation - not just during the project application phase, but through construction and operation of facilities as well.

Our traditional processes are struggling to be able to meet these expectations and we are trying to be creative as a result - which is not easy at a time when some stakeholders, with policy agendas, are actively seeking to undermine or discredit the regulatory process to advance their agendas.

There is the increasingly vociferous public debate around fossil fuels - climate science, upstream and downstream GHG management, and energy development - which we are challenged to participate in and which, of course, lies outside of the mandate given to the NEB by Parliament.

This all leads to a level of scrutiny and attention - international attention - that was unheard of five years ago. You can ask some of our media relations folks, who used to respond to maybe a few dozen media inquiries a year, and who are now responding to hundreds. Or our Access to Information staff who are experiencing a similar surge in requests. We’ve never had as many requests to appear in front of Parliamentary committees to speak to all these issues, and none of this appears to be letting up anytime soon.

Now, in some cases, the more things change the more they stay the same. The core role played by the NEB in Canada has not changed. Our role is to hold the companies we regulate responsible for protection of the environment and the safe construction, operation and abandonment of energy infrastructure -the entire lifecycle. When projects are being built, we are present. When projects are being operated, we are present. And when a project has reached the end of its usefulness and is being abandoned, we are present so that the work is done safely, and in a manner that protects the environment and the public.

We will continue to do that job, and do it well.

But around that core purpose - things are changing, and we must respond to the changes or risk losing valuable opportunities to make the work we do and the outcomes we achieve even better. In fact I would say that we risk even more than that: we risk the complete loss of confidence in the energy industry - at a time when, from social and economic perspectives, we need it most.

Navigating Change

As I just mentioned the single biggest change I see in the regulatory landscape is the unprecedented interest being taken in how we regulate by the general public.

I don’t see that interest going away anytime soon, and that means that we, as regulators must be prepared to talk a lot more about what we do and how we do it - and engage the public better.

At the NEB, we are taking deliberate and measured steps to try and demystify our processes for people. That is the first strategy in navigating the change: Reaching Out to Canadians.

I have been travelling a great deal this spring, talking to our stakeholders across Canada, meeting with municipal leaders, first responders, environmental groups and so on. One thing I have learned from them is that regulatory processes aren’t OBVIOUS to everyone out there. When and how they may or may not get a chance to engage with us about a project is not perfectly clear to every stakeholder.

Some  worry that if they don’t weigh in on a project at the point of application they have to “forever hold their peace”, so to speak - hence the hundreds and hundreds of applications to participate on major projects.

Not everyone understands what we mean when we say - truthfully - that the NEB is there through every part of the construction and operation of a project. They don’t realize that they can, at any time, engage with the regulator, ask questions about and get support for issues they see happening. Regulatory literacy is critical for effective community engagement in the life cycle regulation of energy infrastructure.

Regulators must become a life cycle partner with communities. By a life cycle partner, I mean we need to share more information not just on how we get to a facility approval (or denial), but also, if an approval is granted, on what conditions we impose for construction and operation, and how we plan to hold companies accountable on every single one of the conditions.

We also need to be open to discussing things like emergency response plans with the very people who will actually be on the ground in the case of an emergency - not only to give them some comfort that there IS robust emergency response plans, but to tap THEIR knowledge of the local area, or infrastructure challenges or benefits, and how these things affect emergency response.

As an example I’ll refer again to Line 9B as the new normal: the NEB is working on a Memorandum of Understanding with the Communauté métropolitaine de Montréal - the Montreal Municipal Community - to better share information about regulatory activities and community concerns in the area.

We need to be sharing more information on project performance, demonstrating exactly how regulations, when adhered to, keep the product in the pipe, and how we work with companies towards the target of zero incidents. The NEB has in recent years made some great strides forward in being more transparent with our information - for example, posting enforcement actions online for public access - and we are taking steps to pull industry forward in the same fashion, particularly, as I mentioned, when it comes to critical pieces of information like emergency response plans, which so directly and substantially involve not only the company and the regulator, but the communities where these plans would be exercised.

Taking Action on Safety - Now

Helping people understand the actions we as regulators take to keep them safe is key. No one here will be surprised to hear that safety is the number one concern of everybody I speak with across Canada as it is certainly the number one concern of any regulator.

Work is on-going to refine our action on pipeline safety and environmental protection, and to demonstrate the link between our safety and compliance actions and the safety performance of companies we regulate.

We are putting increased focus on trending, root cause and systemic issues. And that focus is not just on preventing incidents - it is on fostering the development of industry safety culture so that incidents are less likely to occur.

Industry safety culture is becoming the point where the rubber hits the road for the companies we regulate. The rising awareness of the need to have robust, whole-of-business safety management systems in place is going to change the “business-as-usual” approach to construction and operations that is ingrained in much of the industry today.

I am telling companies flat out: the NEB expects to see safety managed with committed leadership at all levels, vigilance at all levels, empowered and accountable employees, and strategies in place to respond nimbly to any challenges that arise. Safety has to be integrated into the entire business culture of an organization, and lived out every day in every action of each employee.

And for us at the NEB, we need to foster this, to help the companies we regulate define safety culture and live it. So how do we do that? Regulatory development is a part of it: for example, we are proposing amendments to our Damage Prevention framework that will explicitly require pipeline companies to have a damage prevention program with a management system approach.

Planning and holding technical conferences to engage industry directly is another tactic. The NEB is hosting a Pipeline Safety Forum here in Calgary on June 2 and 3, and we are very much looking forward to this opportunity to talk about our stakeholders concerns, technical aspects of pipeline safety and to look at what both industry and regulators can be doing to better protect people and the environment.

And primarily, as I said, we will continue to improve the tracking of regulatory data and how we use it to drive the continual improvement of our programs - using a risk-based approach to determine regulatory actions, measure results and, ultimately, share that information with the public as well as our regulated companies.

Leading Regulatory Excellence

Of course, rising to meet the external challenges facing us with continual improvement and increased effectiveness also presents its own kind of challenge:  that is, to ensure that we have the framework in place INTERNALLY to support our own management systems for the kind of evaluation, assessment, innovation and resilience we need to drive continual improvement towards regulatory excellence.

Leading regulatory excellence at the federal level is our third strategy in meeting the challenges of the future head on. I recently had the pleasure of attending a summit hosted by with Mr. Jim Ellis of the AER, around defining and understanding what it means to be a “world class regulator” and how you know when you are achieving that as an organization. I will let Mr. Ellis talk to you some more about that as his team in the province has done some tremendous work in this area. We are working with our counterparts in Western Canada, nationally and internationally to learn from the experiences and adapt them to our situation.

Within the Board, we have been working hard to establish our indicators, benchmarks and evaluation structure, and this work will continue on throughout the coming year.

And it’s going to be a busy year - thanks in part to a couple of what our staff refer to as “mega-hearings” on the horizon.

But we are well-positioned for this, having an extraordinarily strong team of technical experts who are, as I learned quite quickly when I joined the Board in July, passionate about the work they are doing on behalf of Canadians, and having clear vision of both the challenges we face, and the approach we want to take to meet them - as an organization, and as a part of the broader regulatory community.

Thank you once again for having me here today... I hope you enjoy the rest of the conference.

Thank you.

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