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Section I: Organizational Overview

Raison d’être

The National Energy Board is an independent federal quasi-judicial regulatory tribunal established in 1959 to promote safety and security, environmental protection, and economic efficiency in the Canadian public interest within the mandate set by Parliament for the regulation of pipelines, energy development and trade.

Responsibilities

The main responsibilities of the NEB are established in the National Energy Board Act (NEB Act) and include regulating:

  • The construction, operation, and abandonment of pipelines that cross international borders or provincial/territorial boundaries, as well as the associated pipeline tolls and tariffs;
  • The construction and operation of international power lines and designated inter-provincial power lines; and
  • Imports of natural gas and exports of crude oil, natural gas liquids, natural gas, refined petroleum products and electricity.

Additionally, the Board has regulatory responsibilities for oil and gas exploration and production activities on frontier lands not otherwise regulated under joint federal/provincial accords. These regulatory responsibilities are set out in the Canada Oil and Gas Operations Act and the Canada Petroleum Resources Act. These responsibilities apply to the west coast offshore, the Northwest Territories, Nunavut, the Arctic offshore, Hudson Bay, parts of the Gulf of St. Lawrence and Bay of Fundy, and onshore Sable Island.

The NEB conducts an environmental assessment (EA) during its review of facility applications for projects under its jurisdiction. For certain projects, an EA is also required by federal legislation such as the Canadian Environmental Assessment Act, 2012, the Mackenzie Valley Resource Management Act, the Inuvialuit Final Agreement or the Nunavut Land Claims Agreement. Certain Board inspectors are appointed Health and Safety Officers by the Minister of Labour to administer Part II of the Canada Labour Code as it applies to NEB-regulated facilities and activities.

The Board also monitors aspects of energy supply, demand, production, development and trade that fall within the jurisdiction of the federal government. The Board reports to Parliament through the Minister of Natural Resources.

Strategic Outcome and Program Activity Architecture (PAA)

The diagram below illustrates the NEB’s strategic outcome and program activity architecture. The Board’s program activities and program sub-activities all contribute to achieving the strategic outcome.

Strategic Outcome
Text description of this graph

Description of Program Activity Architecture

This chart presents the strategic outcome, program activities and program sub-activities as a three-tiered diagram.

Tier 1 is a statement of the strategic outcome:
Safe and secure pipelines and power lines built and operated in a manner that protects the environment and enables efficient energy markets.

Tier 2 presents the three program activities to which the strategic outcome applies:
Program activity 1, Energy Regulation
Program activity 2, Energy Information
Program activity 3, Internal Services

Tier 3 presents the two sub-activities of the Energy Regulation program activity:
Sub-activity 1, Energy Regulation Development
Sub-activity 2, Energy Regulation Implementation

 

Organizational Priorities

The following organizational priorities were the focus of the Board’s attention and resources during this reporting period. These priorities are aimed at continuing to deliver on the Board’s strategic outcome.

Summary of Progress Against Priorities

Priority - Provide a clear and coherent regulatory framework
Priority Type[1] Strategic Outcome and/or Program Activity(ies)
Provide a clear and coherent regulatory framework Ongoing Energy Regulation

Status:

In order to deliver on its strategic outcome, the NEB has put a regulatory framework in place to promote safety and security, environmental protection, and efficient energy infrastructure and markets in the Canadian public interest.

  • Completed a review of offshore drilling in the Canadian Arctic, as well as drilling requirements for offshore drilling in the Canadian Arctic.
  • Issued a notice of a Proposed Regulatory Change as a proposed amendment to the Onshore Pipeline Regulations, 1999 (OPR-99) to clarify the NEB’s expectations regarding the development and implementation of NEB-regulated company management systems.
    • NEB-regulated companies are expected to take a systematic approach to manage and reduce risks related to safety and environmental protection.
    • NEB-regulated companies are accountable for the effectiveness of their management systems.
  • Amended the Environmental and Socioeconomic Assessment section of the Filing Manual and completed nine other technical edits to increase clarity.
  • Identified key issues and developed a plan to achieve regulatory clarity for damage prevention.
  • Signed three Memoranda of Understanding with federal government organizations to improve efficiencies and share expertise.


Priority - Improve performance of regulated companies
Priority Type Strategic Outcome and/or Program Activity(ies)
Improve performance of regulated companies Previously committed to Energy Regulation

Status:

The NEB’s ability to influence the behaviour of NEB-regulated companies in key areas (i.e. safety, environment, public participation, financial integrity, emergency management, and security) significantly contributes to the achievement of its strategic outcome.

  • Launched an Action Plan on Safety and Environmental Protection to improve results in worker safety, integrity of installations, damage prevention and emergency preparedness and response.
  • Developed leading performance indicators to promote safety, security and environmental protection.
  • Published the Remediation Process Guide for spill clean-up.
  • Issued a direction to all oil and gas companies regulated under the NEB Act - Direction to comply with NEB Order MO-21-2010 - An Exemption Order Respecting Crossings by Agricultural Vehicles or Mobile Equipment.
  • Improved public accessibility of information about NEB programs and the performance of regulated companies.


Priority - Provide timely regulatory decisions in the Canadian public interest
Priority Type Strategic Outcome and/or Program Activity(ies)
Provide timely regulatory decisions in the Canadian public interest Previously committed to Energy Regulation

Status:

The Board’s ability to provide timely regulatory decisions is a cornerstone of delivering on its strategic outcome by helping to ensure that the rights and interests of those affected by NEB-regulated facilities and activities are respected and to enable efficient energy markets.

  • Met 16 of the 21 regulatory service standards.
  • Issued 14 hearing decisions on major applications, compared to six in the previous year.
    • The NEB met its service standard target for Reasons for Decisions.
  • Met four of four landowner complaint service standards.
  • Continued implementation of the Participant Funding Program and approved funding for nine applicants.


Priority - Provide relevant, neutral and credible energy information
Priority Type Strategic Outcome and/or Program Activity(ies)
Provide relevant, neutral and credible energy information Previously committed to Energy Information

Status:

Through its Energy Information Program, the NEB provides a range of energy information products to help Canadians better understand energy use in Canada and the Board’s regulatory role.

  • Streamlined the Energy Information Program to better align work activities within the NEB’s mandate.
  • Published a range of energy information reports and energy market information such as: Canada’s Energy Future: Energy Supply and Demand Projections to 2035; Short-term Canadian Natural Gas Deliverability 2011-2013; Tight Oil Developments in the Western Canada Sedimentary Basin; Ultimate Potential for Unconventional Natural Gas in Northeastern British Columbia’s Horn River Basin; and the annual Canadian Energy Overview.
  • Started the redesign of the energy information web pages to improve accessibility.


Priority - Ensure the NEB has the capacity to effectively deliver on its mandate
Priority Type Strategic Outcome and/or Program Activity(ies)
Ensure the NEB has the capacity to effectively deliver on its mandate Ongoing Internal Services

Status:

Effective management and leadership support the achievement of the NEB’s strategic outcome by enhancing organizational performance.

  • Updated the People Strategy with a renewed focus on work-life balance, engagement and leadership.
  • Began the design of an integrated planning process that links the Board’s strategic and business planning processes to a Human Resources plan for the organization.
  • Developed the Regulatory Resourcing Framework, a new approach for the effective use of resources while maintaining a healthy and productive work environment.
  • Enhanced the monitoring and reporting of corporate performance by the adoption of a quarterly balanced scorecard.

Risk Analysis

Operating Context

The NEB operates within an evolving economic, environmental and social landscape. Dynamics such as high levels of sovereign debt in industrialized economies worldwide and an abundant energy supply in North America have impacted energy markets. Energy production, led by growth in petroleum and electricity generation sectors, is estimated to have increased by 3.0 per cent in 2011 compared to 1.1 per cent in 2010. Reduced energy use in industry and transportation slowed Canadian secondary energy consumption growth to an estimated increase of 1.8 per cent in 2011, down from 2.2 per cent in 2010.

Canadian crude oil production increased by six per cent in 2011, compared to five per cent in 2010. The increase is largely attributable to additional oil sands activity. Mined bitumen production, in situ bitumen production and upgrading all reached new highs in 2011.

Canadian natural gas production in 2011 was about equal to production in 2010, while natural gas consumption increased by eight per cent compared to 2010. Natural gas exports fell 14 per cent in 2011 compared to 2010. The impact on natural gas prices of rising U.S. shale gas production was offset for part of the year by additional demand from a cold winter and hot summer. Prices declined later in 2011 as milder weather arrived to moderate demand. The decline in prices made most new dry natural gas drilling uneconomic, pushing producers to target liquid-rich natural gas where the natural gas liquid revenue supplemented the reduced revenue from produced gas.

Renewable electricity generation increased by 7.7 per cent in 2011, and led to an estimated 3.2 per cent increase in total electricity production over 2010. The increase in renewable generation was partially offset by a 9.7 per cent decrease in thermal generation as Ontario retired coal units and reduced the output of several remaining units. Canadian electricity demand is estimated to have increased by 1.3 per cent in 2011 compared to 0.5 per cent in 2010. Electricity demand increased by about three per cent in the western provinces, while demand in some eastern provinces such as Ontario and New Brunswick declined.[2]

Parliamentarians and the public have shown an increased interest in the energy industry, the safety and environmental impacts of energy pipeline failures, and the role of the public in influencing regulatory and political decisions regarding the development of Canada’s energy industry. In addition, the NEB was considerably affected by a tight Calgary labour market for skilled workers, increased applications, public hearings and requests under the Access to Information Act.

Risk Implications and Strategies

The Board’s top priorities are the protection of the environment, and the safety of the public and the people who build and operate NEB-regulated pipeline facilities. The Board has taken action to hold those we regulate accountable for results in the public interest with a rigorous compliance monitoring and enforcement program. As part of its Action Plan on Safety and Environmental Protection, the NEB remains committed to public access to information on the performance of industry with respect to safety and environmental protection. Information available to the public is clear, relevant, easy to understand, and accessible. Currently, information about the NEB’s safety and environmental protection programs is available in the NEB’s Annual Report to Parliament, other Board publications, the NEB’s website, and on request.

The number of requests under the Access to Information Act continued to remain high in 2011-12. To help improve service, the NEB recruited and trained new Access to Information and Privacy Analysts, and examined its information management processes. It is expected that, with more training, compliance rates will increase in future reporting years.

NEB staff are the organization’s foundation. The skills and experience needed by the NEB are in high demand throughout the oil and gas industry. The NEB has experienced increasing attrition rates and difficulty staffing, highlighting a potential return to the very competitive hiring environment for skilled staff within the energy sector of recent years. To mitigate this risk, the NEB initiated a strong and strategic focus on recruitment and retention. The human resources management focus of the NEB is on ensuring it has the right people, at the right time, for the right jobs.

The Board also developed a new approach for dealing with resources on regulatory matters. The Regulatory Resourcing Framework was developed to ensure resources are used more effectively while maintaining a healthy and productive work environment. These steps have helped the NEB manage its increased workload.

Summary of Performance

2011-12 Financial Resources ($ millions)
Planned
Spending
Total
Authorities
Actual
Spending

* Received $2.8 million at year end for Collective Agreement in allowances to cover the period from 1 November 2011 to 31 March 2012. As well, a further $1.6 million was received from Natural Resources Canada for the Arctic Review

** Participant Funding Program under-spent by $1.1 million; salaries under-spent by $1.1 million; Hearing budget under-spent by $0.8 million

63.1 68.0* 64.4**


2011-12 Human Resources (full-time equivalents [FTEs])
Planned Actual Difference
393.6 393.0 (0.6)

Summary of Performance Tables

Progress Toward Strategic Outcome

Strategic Outcome: Safe and secure pipelines and power lines built and operated in a manner that protects the environment and enables efficient energy markets.
Performance Indicators Targets 2011-12 Performance[3]
Frequency of serious injuries and pipeline failures 0 serious injuries and 0 pipeline ruptures; assessed via reported incidents and year by year improvement

Serious injuries: Four. This is an increase from zero serious injuries in 2010-11.

Fatalities: Two. This is an increase from one fatality in 2010-11.

Pipeline ruptures: Zero. No gas pipeline ruptures occurred. This is a decrease from one rupture in 2010-11.

Frequency of major releases into the environment (Major release = greater than 100 m³ of liquid hydrocarbon) 0 releases; assessed via reported incidents and year by year improvement Major releases >100m³: Two. This is an increase from zero major releases in 2010-11.
Canadian energy and transportation markets are working well Adequate oil and natural gas pipeline capacity in place based on pipeline utilization; similar Canadian and US energy markets have equivalent pricing; pipeline companies provide services which meet the needs of shippers

There was some apportionment on Canadian crude oil pipelines in 2011-12, indicating reduced capacity. This was due to strong crude oil supply growth, pressure restrictions imposed by the NEB and planned maintenance resulting in capacity restrictions.

There was spare capacity on most natural gas pipelines as throughputs declined.

Overall, oil and gas prices continue to track North American price benchmarks.



Performance Summary, Excluding Internal Services
Program Activity 2010-11
Actual
Spending
($ millions)
2011-12 ($ millions) Alignment to Government of Canada Outcomes
Main
Estimates
Planned
Spending
Total
Authorities
Actual
Spending
Energy Regulation 30.8 36.0 37.4 38.8 34.9 Strong Economic Growth
Energy Information 7.2 4.6 5.0 8.2 8.2 Strong Economic Growth
Total 38.0 40.6 42.4 47.0 43.1  


Performance Summary for Internal Services
Program Activity 2010-11
Actual
Spending
($ millions)
2011-12 ($ millions)
Main
Estimates
Planned
Spending
Total
Authorities
Actual
Spending
Internal Services 20.8 19.3 20.7 21.0 21.3


Strategic Environmental Assessment

The NEB is in compliance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals.

Expenditure Profile

The NEB is funded through parliamentary appropriations. The Government of Canada recovers approximately 90 per cent of the appropriation from the regulated industry. The revenues are deposited directly into the Consolidated Revenue Fund. This process is regulated by the National Energy Board Cost Recovery Regulations under the NEB Act.

Spending Trend

Spending Trend
Text description of this graph

Departmental Spending Trend

This line graph shows the National Energy Board’s four-year spending trend. It includes total authorities and actual spending for the fiscal years 2008-09 to 2011-12.

Total Authorities by period is as follows:

  • 2008-09: $55.0 million
  • 2009-10: $63.9 million
  • 2010-11: $63.6 million
  • 2011-12: $68.0 million

Actual Spending by period is as follows:

  • 2008-09: $50.4 million
  • 2009-10: $56.2 million
  • 2010-11: $58.9 million
  • 2011-12: $64.4 million

Total Authorities increased due to a receipt, at year end, of $2.8 million in allowances for the Collective Agreement to cover the period of 1 November 2011 to 31 March 2012. A further $1.6 million was received from Natural Resources Canada for the Arctic Review.

Actual Spending was less than the total authorities due to the Participant Funding Program under spending by $1.1 million, a competitive hiring market resulting in salary under spending by $1.1 million, and rescheduling of planned hearings resulting in $0.8 million in under spending.

Estimates by Vote

For information on the NEB’s organizational Votes and/or statutory expenditures, please see the Public Accounts of Canada 2012 (Volume II). An electronic version of the Public Accounts 2012 is available on the Public Works and Government Services Canada’s website.

 

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