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Section I: Organizational Overview

Raison d’être

The National Energy Board is an independent federal, quasi-judicial regulator 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 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 (NGL), natural gas, refined petroleum products and electricity.

Additionally, the Board has regulatory responsibilities for oil and gas exploration and production activities in Canada Lands[1] not otherwise regulated under joint federal/provincial accords. These regulatory responsibilities are set out in the Canada Oil and Gas Operations Act (COGO Act), and the Canada Petroleum Resources Act (CPR Act).

The NEB conducts environmental assessments (EA) during its review of 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 (CEAA 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 Alignment Architecture

The diagram below illustrates the NEB’s strategic outcome and program alignment architecture. The Board’s programs and sub-programs all contribute to achieving the strategic outcome.[2]

Strategic Outcome and Program Alignment Architecture
Text description of this graph

Description of Program Activity Architecture

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

Tier 1 is a statement of the strategic outcome:
Pipelines, power lines, energy development and energy trade are regulated in the Canadian public interest.

Tier 2 presents the three programs 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-programs of the Energy Regulation program activity:
Sub-activity 1, Energy Regulation Development
Sub-activity 2, Energy Regulation Implementation, Monitoring and Enforcement

Organizational Priorities

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

Priority - Energy Regulation - Continual improvement of safety and environmental outcomes
Priority Type[3] Strategic Outcome(s) and/or Program(s)
Continual improvement of safety and environmental outcomes. New Energy Regulation
Summary of Progress

The Action Plan on Safety and Environmental Protection continued to be implemented this year; as a result, information about enforcement actions is readily available to Canadians. Key actions included:

  • Released a plan for regulatory improvement for prevention of damage to pipelines by third parties.
  • Released guidance on compliance and enforcement for damage prevention.
  • Amended the Onshore Pipeline Regulations (OPR) to include a requirement for the designation of a company officer who is personally accountable for the management system and the achievement of outcomes related to safety and environmental protection.
  • Drafted Administrative Monetary Penalties Regulations.
  • Completed consultations on the Pipeline Crossing Regulations.
  • Completed six audits and conducted more than 150 inspections.
  • Initiated development of a framework for more in-depth and strategic analysis of compliance data.
Priority - Energy Regulation - A robust regulatory framework for the North
Priority Type Strategic Outcome(s) and/or Program(s)
A robust regulatory framework for the North. New Energy Regulation
Summary of Progress
  • Continued to engage northern communities, youth, governments, regulatory agencies, and land claim institutions.
  • Signed Memoranda of Understanding that will promote regulatory collaboration in the North with:
    • Nunavut Impact Review Board
    • Nunavut Water Board
    • Environmental Impact Screening Committee
    • Environmental Impact Review Board for the Inuvialuit
    • Mackenzie Valley Land and Water Board.
  • Conducted over 50 engagement sessions with Northerners and Northern institutions.
  • The NEB’s Chair and CEO, accompanied by the President of the Qikiqtani Inuit Association, visited several Baffin Island communities to explain the NEB’s role in regulating offshore seismic exploration for oil and gas.
  • The NEB continued to work with Natural Resources Canada and Aboriginal Affairs and Northern Development Canada, ensuring that continually improving regulatory requirements reflect the unique northern environment and improve safety and environmental outcomes in the North.
Priority - Energy Regulation and Internal Services - A flexible and efficient organization able to meet new and ongoing priorities
Priority Type Strategic Outcome and/or Program Activity(ies)
A flexible and efficient organization able to meet new and ongoing priorities. New Energy Regulation
Internal Services
Summary of Progress
  • Implemented legislated changes resulting from the passing of the Jobs, Growth and Long-Term Prosperity Act.
  • Continued to leverage the Land Matters Group (LMG) to increase the dialogue among members of the public, Aboriginal groups and industry who have interests in land matters and are impacted by the activities of NEB-regulated companies. The LMG:
    • identified current and emerging land matters issues impacting interested parties,
    • recommended improvements to regulating the facilities and/or activities of companies regulated by the NEB and,
    • recommended strategies for engaging Canadians on the Board’s damage prevenion framework and draft AMPs Regulations, among other initiatives.
  • The Board approved revised criteria for the Online Application System (OAS) Phase   project which will expand the types of non-hearing facility applications which companies may submit online. In order to implement OAS changes, the NEB would require additional funding.
  • Introduced the NEB’s Integrated Risk Management Policy and Framework, which sets out the principles, practices and accountabilities for integrated risk management at the NEB. These will support strategic priority setting and resource allocation, informed decision-making and improved results.
  • Continued to improve the integrated planning process to allow better assessment and understanding of current and future needs of the organization.

Risk Analysis

Risk Analysis
Risk Risk Response Strategy Link to Program Alignment Architecture Link to Organizational Priorities
Resource constraints
  • Monitored activity levels to ensure resource planning was strategically managed throughout the year
  • Regularly reviewed NEB priorities considering available staff resources
  • Reviewed the People Strategy and staffing plan during the year
  • Completed the Commodities Tracking System (CTS)

Risk identified in the 2012-13 RPP

Strategies were effective in reducing risk exposure

  • Energy Regulation
  • Energy Information
  • Internal Services

A flexible and efficient organization able to meet new and ongoing priorities.

Loss of reputation as a regulator
  • Employed transparent and consistent processes in dealing with applications
  • Employed a risk-informed compliance verification program that considers resource requirements to perform compliance verification activities and ensures activities are completed according to plan
  • Monitored corrective actions for compliance verification activities and analyzed emerging risks and trends within regulated companies’ operating environments
  • Prevented loss or improper disclosure of sensitive information through clear policies and review of processes

Risk identified in the 2012-13 RPP

Strategies were effective in reducing risk exposure

  • Energy Regulation
Continual improvement of safety and environmental outcomes.
Changes in expectations from Parliamentarians and the public
  • Monitored trends via reports, media and political debates and engaged stakeholders to ensure their views were heard

Risk identified in the 2012-13 RPP

Strategies were effective in reducing risk exposure

  • Energy Regulation

Continual improvement of safety and environmental outcomes.

A robust regulatory framework for the North.

Inability to recruit and retain staff
  • Measured employee engagement and work-life balance and effectiveness of improvement plans
  • Continued to provide training and development opportunities to ensure competent staff and a challenging work environment
  • Effectively used contracted/temporary/ term employees to fill gaps

Risk identified in the 2012-13 RPP

Strategies were effective in reducing risk exposure

  • Energy Regulation
  • Energy Information
  • Internal Services

A flexible and efficient organization able to meet new and ongoing priorities.

Inability to deliver effective internal services
  • To ensure a safe workplace, the Board has in place:
    • a threat risk assessment practice: assessments are performed for all external events and ensure appropriate security procedures
    • a suite of occupational health and safety policies and programs, including mandatory training for staff and managers
    • a Workplace Health and Safety Committee
    • a Policy Health and Safety Committee
  • Developed a three-year information management (IM)/information technology (IT) strategy to help guide future IT investment decisions

Risk identified in the 2012-13 RPP

Strategies were effective in reducing risk exposure

  • Energy Regulation
  • Internal Services

A flexible and efficient organization able to meet new and ongoing priorities.

Operating Context

The oil and gas industry experienced an increasingly challenging year in 2012, while consumers benefited from stable prices and ample supplies.

Canadian energy production increased in 2012 and growth in energy consumption slowed. Domestic energy production increased by about two per cent, with growth in petroleum and a decline in natural gas production. Domestic energy consumption grew slightly in all categories, and overall by 1.1 per cent in 2012 compared with 2.5 per cent in 2011. Electricity trade was at record levels in 2012. Exports increased to a 10-year high and imports fell to a 10-year low, driven by strong electricity sales in Bristish Columbia, Ontario and Quebec.

Canadian crude oil production in 2012 increased by about seven per cent compared to 2011, averaging an estimated 513 960 m³/d (3.23 MMb/d). The growth was largely attributable to increased in situ oil sands production and tight oil production. In 2012, estimated synthetic crude oil production increased by one per cent and non-upgraded bitumen production increased by 15 per cent over 2011 levels.

In 2012, Canadian gas production continued declining, falling to 144 109m³ for the year and averaging 392.7 106m³/d (5.1 Tcf annual or 13.9 Bcf/d). Gas production fell in all provinces and territories except British Columbia. Gas prices were too low to cover the costs of adding new production except for a handful of plays, largely those whose economics were supplemented by the production of NGLs, which receive a higher price than dry gas.

Electricity generation grew by 1.6 per cent in 2012 to 645 TW.h. About 900 MW of wind capacity was added in Canada in 2012, mostly in Quebec, Alberta and B.C. This represented an 18 per cent increase over 2011 and brought total wind capacity up to 6,195 MW.

Since 2009, net energy export revenues have been increasing and were about $57 billion in 2012. Also, net revenues have increasingly been derived from sales of crude oil and bitumen rather than from natural gas.

Parliamentarians and the public continue to show increased interest in the energy industry, the safety and environmental impacts of energy pipeline incidents, and the role of the public in influencing regulatory and political decisions regarding the development of Canada’s energy industry.

In addition, the NEB continued to be affected by a tight labour market for specialized skilled workers, increased work in the areas of safety and environment compliance and enforcement, more applications and public hearings, and requests under the Access to Information Act. As well, the NEB has acquired new responsibilities as a result of changes to the NEB Act by the passing of the Jobs, Growth and Long-term Prosperity Act. The passing of this Act resulted in the most significant changes to the NEB Act since its inception in 1959, including:

  • A fixed beginning-to-end time limit of 18 months for most NEB project hearings. From receipt of a complete application, the NEB will have 15 months to complete the project assessment. Then, for applications requiring a certificate, the Governor in Council (GiC) will have three months to make a decision;
  • The GiC will make the decision to approve or deny all major pipeline projects. The NEB’s report on a project will include conditions to be attached to any certificate issued. The Board makes the final decision as to what its recommendation will be, and what terms and conditions would apply;
  • The Chair of the NEB will set time limits for specific project reviews within the maximum 15 month time limit. The NEB Act provides the Chair with a variety of tools to make sure time limits are met and applications are dealt with in a timely manner;
  • Factors that the Board may consider when reviewing export licences for natural gas and oil have been changed. The requirement to hold a hearing for gas export licences has been removed;
  • Section 112 of the NEB Act now includes the option of pursuing criminal prosecution for unauthorized activity on NEB-regulated pipeline rights of way;
  • For major projects, the NEB must hear concerns from those persons or groups who are directly affected by the project. The Board may also hear from those who have relevant information or expertise about the project;
  • The restriction on the number of temporary Board Members has been removed; and,
  • Authorization for the Board to establish a system of administrative monetary penalties. AMPs will enable NEB to impose financial penalties on companies or individuals for violations related to safety and the environment.

Risk Implications and Strategies

In managing a changing environment and resource constraints, the NEB monitored activity levels to ensure resource planning was strategically managed throughout the year. The Board regularly reviewed NEB priorities considering available staff resources, in addition to reviewing its People Strategy and staffing plan during the year.

The skills and experience needed by the NEB continues to be in high demand throughout the oil and gas industry. In response, the NEB continued to focus on recruitment and retention initiatives. Human resources initiatives promote strong management practices, strategic recruitment, investment in people, training and development opportunities, and effective work-life balance.

To maintain public confidence in the Board’s actions, the Board continued to employ transparent and consistent processes in dealing with applications. The Board employed a risk-informed compliance verification program that considers resource requirements to perform compliance verification activities, and ensures activities are completed according to plan. The Board also monitored corrective actions for compliance verification activities and analyzed emerging risks and trends within regulated companies’ operating environments.

The NEB continued to strengthen its IT infrastructure in response to growing demand for services and business continuity requirements. Over the reporting period, major upgrades were carried out on the NEB desktop computing environment, email system, back-office servers, and remote access capabilities. A plan was developed to relocate the NEB data centre in advance of the NEB’s relocation in 2014.

The NEB continues to work closely with its partners at Shared Services Canada and takes advantage of centrally available IT services where it is cost effective to do so. Program demand for IM and IT service continues to grow. The NEB’s regulatory data management systems are antiquated and require replacement in order to meet regulatory reporting and planning requirements. New Treasury Board requirements will necessitate the replacement of the NEB’s financial and HR systems in the coming years. It is becoming increasingly difficult to balance sustainment efforts with replacement needs. To help guide future IT/IM investment decisions, the NEB has developed a three-year IM/IT strategy and enhanced its IM/IT governance model.

Summary of Performance

Financial Resources - Total Departmental ($ millions)
Total Budgetary Expenditures

(Main Estimates)

2012-13
Planned Spending

2012-13
Total Authorities

(available for use)

2012-13
Actual Spending

(authorities used)

2012-13
Difference

(Planned vs. Actual Spending)
59.1 62.5 74.4 69.6 7.1
Human Resources (Full-Time Equivalents- FTEs)
Planned
2012-13
Actual
2012-13
Difference
2012-13
393.6 398.1 4.5
Performance Summary Table for Strategic Outcome(s) and Program(s) ($ millions)
Strategic Outcome: Pipelines, power lines, energy development and energy trade are regulated in the Canadian public interest.
Program Total Budgetary Expendi-tures
(Main Estimates 2012-13)
Planned Spending Total Authorities
(available for use)
2012-13
Actual Spending (authorities used) Alignment to Government of Canada Outcomes
2012- 13 2013- 14 2014- 15 2012- 13[4] 2011- 12 2010- 11
Energy Regulation Program 32.9 35.6 38.6 38.9 44.8 44.1 34.9 26.9 Strong Economic Growth
Energy Information Program 6.6 6.7 8.1 7.8 8.0 6.0 8.2 6.3 Strong Economic Growth
Strategic Outcome

Sub-Total
39.5 42.3 46.7 46.7 52.8 50.1 43.1 33.2  
Performance Summary Table for Internal Services ($ millions)
  Total Budgetary Expenditures
(Main Estimates
2012-13)
Planned Spending Total Authorities
(available for use)
2012-13
Actual Spending
(authorities used)
2012- 13 2013- 14 2014- 15 2012- 13 2011- 12 2010- 11
Internal Services 19.6 20.2 20.2 18.8 21.7 19.5 21.3 25.6
Sub-Total 19.6 20.2 20.2 18.8 21.7 19.5 21.3 25.6
Total Performance Summary Table ($ millions)
  Total Budgetary Expenditures
(Main Estimates 2012-13)
Planned Spending Total Authorities
(available for use)
2012-13
Actual Spending (authorities used)
2012- 13 2013- 14 2014- 15 2012- 13 2011- 12 2010- 11
Strategic Outcome(s) and Internal Services 59.1 62.5 66.9 65.5 74.4 69.6 64.4 58.8
Total 59.1 62.5 66.9 65.5 74.4 69.6 64.4 58.8

The variance between the Planned Spending and the Total Authorities for 2012-13 ($11.9 million) is mainly due to the following changes during the reporting period:

  • Increase in authority ($5.9 million) due to approval of the Safety and Public Awareness Treasury Board submission
  • Increase in authority ($4.1 million) due to permanent allocation from Treasury Board Vote 15 (Collective Agreements)
  • Increase in authority ($1.0 million) due to year-end adjustment to statutory employee benefit plan expenditures
  • Increase in authority ($0.9 million) due to Treasury Board Vote 30 (reimbursement of eligible paylist expenditures).

The variance between the Total Authorities and the Actual Spending for 2012-13 ($4.8 million) is mainly due to the following changes during the reporting period:

  • Frozen - Reprofile of Participant Funding Program ($3.0 million). Funding was first approved for the Alaska Gas Pipeline project, which is no longer of concern for the NEB. Reprofiling of that amount over the next two fiscal years was approved in the NEB’s Supplementary Estimates (SUPP B) to fund the TransMountain Expansion project.
  • Lapse - Participant Funding Program ($1.2 million)
  • Lapse - Salary ($0.6 million)

Expenditure Profile

Departmental Spending Trend

Departmental Spending Trend
Text description of this graph

Departmental Spending Trend

This line graph shows the National Energy Board’s spending and planned spending for the fiscal years 2010-11 to 2015-16.

Total Spending and planned spending by period is as follows:

  • 2010-11: $58.8 million
  • 2011-12: $64.4 million
  • 2012-13: $69.6 million
  • 2013-14: $66.9 million
  • 2014-15: $65.5 million
  • 2015-16: $63.3 million

The increase in actual spending in 2012-13 ($5.2 million) is due to the NEB receiving $5.89 million to support an increased focus on pipeline safety and a lapse of $0.6 million of that amount. The decrease of $6.3 million over the planned spending for the next three fiscal years, 2013-14 to 2015-16, from 2012-13 spending is due the following:

  • Collective agreement allowances ($5.1 million) not included in the forecasted and planned amount since negotiations are still ongoing;
  • The NEB received as part of the Safety submission funding a one-time O&M implementation of $1.2 million in fiscal year 2012-13.

Estimates by Vote

For information on the National Energy Board’s organizational Votes and/or statutory expenditures, please see the Public Accounts of Canada 2013 (Volume II). An electronic version of the Public Accounts 2013 is available on the Public Works and Government Services Canada website.

Strategic Environmental Assessment

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

 

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