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Canada's Energy Challenges

Presented by
Sheila Leggett
Vice-Chair
National Energy Board

Canadian Offshore Resources Exhibition and Conference
(CORE Conference)
Halifax, Nova Scotia

6 October 2010

Thank you Minister Estabrooks, for your kind introduction. And thank you to OTANS for inviting me to speak at the opening of this year's CORE Conference.

This is the first time, I believe, that a representative from the National Energy Board has delivered a keynote address to the CORE Conference in Halifax, and I am delighted to be here to speak to you this morning.

While much of the responsibilities for the petroleum and energy sectors in Nova Scotia reside with the provincial government and the Canada-Nova Scotia Offshore Petroleum Board, Atlantic Canada and Nova Scotia in particular are very important considerations for the NEB. We regulate a number of pipelines, such as the Maritimes and Northeast Pipeline, the Emera pipeline in New Brunswick, and the pipelines related to the Sable Offshore Energy Project and EnCana's Deep Panuke project.

As a federal government agency, we draw on human resource expertise and knowledge from across the country. We are fortunate to have Sara Jane Snook, a Halifax resident, as one of our Board members. Her technical expertise as an engineer, her regional knowledge and her commitment to serving the Canadian public interest are important contributions to the NEB. Three of our employees live and work in Nova Scotia as they perform their professional functions via the NEB telework programme.

Regulatory Responsibily

The National Energy Board has the regulatory responsibility to oversee much of Canada's energy infrastructure, including oil and gas pipelines, international power lines, as well as non-Accord frontier oil and gas activities, which includes those in the Arctic.

We also have an advisory role, whereby the NEB's energy analysts serve as energy analysts to the Canadian public.

The Board's main responsibilities include regulating the construction and operation of interprovincial and international oil and gas pipelines, international power lines, and designated interprovincial power lines. Furthermore, the Board regulates the tolls and tariffs for the pipelines under its jurisdiction. With respect to the specific energy commodities, the Board regulates the export of natural gas, oil, natural gas liquids (NGLs) and electricity, and the import of natural gas. Additionally, the Board regulates oil and gas exploration and development on frontier lands and offshore areas not covered by provincial or federal management agreements.

In an advisory function, the Board also keeps under review and analyzes matters related to its jurisdiction and provides information and advice on aspects of energy supply, transmission and disposition in and outside Canada. In this role, the NEB publishes periodic assessments to inform Canadians on trends, events and issues which may affect Canadian energy markets.

It is in the fulfillment of these roles and responsibilities to the Canadian public that the NEB encounters many of Canada's current energy challenges. However, in the old tradition, I would like to flip that coin and put these challenges into contexts where they can be considered opportunities as well.

But first, a little bit more on who we are, what we do, and how we do it.

NEB Mandate Area

Since the early 1990's, we have regulated most onshore petroleum activities in areas north of 60 degrees latitude, including all offshore areas except for those which are governed under the jurisdiction of the Canada-Newfoundland and Labrador, and the Canada-Nova Scotia offshore petroleum boards.

Additionally, it is the NEB which regulates the export and import of energy, including international power lines - with the potential mandate to regulate designated interprovincial power lines - and all interprovincial and international pipelines, including, as I mentioned, the Sable, the Maritimes and Northeast, and the Deep Panuke pipelines, and, in New Brunswick, the Emera pipeline.

Since 1990, most of the regulatory aspects of Nova Scotia's offshore petroleum industry are the responsibility of the Canada-Nova Scotia Offshore Petroleum Board, and I would like to take this opportunity to congratulate the CNSOPB on its twentieth anniversary, and its two decades of regulatory excellence and leadership.

NEB Mandate

Our mandate derives from the National Energy Board Act, initially established in 1959 and last year we celebrated 50 years as a regulator. Our mandate consists of two separate but related responsibilities; the first is to responsibly regulate aspects of the industry to which Parliament has given us jurisdiction; and the second is the provision of reliable energy information to the Canadian public, by which Canadians can make informed decisions on their energy choices.

In the fulfillment of this advisory mandate, we monitor a variety of data and information with the goal of providing Canadians with reliable, unbiased information and analysis on important energy matters.

We have defined our purpose in our Strategic Plan as; "We regulate pipelines, energy development and trade in the Canadian public interest."

The NEB defines public interest as "inclusive of all Canadians, and refers to a balance of economic, environmental, and social issues that change as society's values and preferences evolve over time."

It's an elusive and ever-changing ideal, and our challenge in everything we do is having a comprehensive understanding of what defines the Canadian public interest.

Critical in the achievement of our mandate to act in the public interest are the Board's three core values, which define the how we achieve our goals.

NEB Values

The first of these is Integrity, which refers to the fact that we always conduct ourselves in a manner which is fair, transparent, and respectful. As a quasi-judicial entity, we recognize that our processes must provide all interested parties practical levels of natural justice, due process and accessibility. We are committed to objectivity, and advocate for no political, ideological, or commercial interest.

NEB Values

The second value is Regulatory Leadership, whereby we are responsive, proactive and innovative in the delivery of our services. An example of this is the Arctic Review, which the NEB launched this past May. This review is a public and consultative process to review the regulatory challenges of safety and environmental drilling requirements in the Arctic offshore, and I'll mention a little more about it shortly.

NEB Values

And the third NEB Value is Accountability, which describes our commitment to delivering timely and high quality results. We understand and appreciate the difference between due process and regulatory leadership; we support and encourage processes that contribute to effective regulatory outcomes, and we implement learnings with vigour and commitment.

One way we hold ourselves accountable is through stringent internal service standards which are available on our website and in our Departmental Performance and Annual Reports.

The Board is accountable to Parliament through the Minister of Natural Resources.

Challenges

When we talk of both challenges and opportunities, one topic I would like to discuss is shale gas.

The huge resource developments in continental shale gas is increasingly looking like it will be a significant contributor to the economic reality of robust continental gas supply, which will in turn place downward pressure on prices for the commodity.

 This could still be a positive for the region. The development of shale and other unconventional natural gas resources is in no way exclusive to the United States. Atlantic Canada has significant potential to participate in the new gas resource phenomenon. Current natural gas price projections do not necessarily fall below the threshold for economic viability, be it for onshore conventional or unconventional, or offshore prospects.

The NEB is starting to assess the new unconventional resources in Canada on a play by play basis as sufficient data becomes available. The first of this series of reports, which is scheduled for release early in the New Year, will focus on the Horn River basin in British Columbia, and will include an up to date table of conventional gas resources in the country. That report will be on the NEB web-site in the coming months.

Challenges

The NEB must constantly be aware of the balance between the environment, the economy, and social concerns in order to ensure that the energy sector operates safely, responsibly, and in the interests of all Canadians. This is something paramount in the minds of NEB Board Members and staff.

I would suggest that finding this balance while meeting energy needs is a key challenge, and opportunity, which is the subject of much discussion within the broader context of Canadian society.

As I previously mentioned, it is the balancing of the concept of ‘public interest' which is one of the greatest challenges the NEB - or likely any regulator for that matter - faces.

Let me illustrate this with a current example.

Challenges

Each of us watched with grave concern the daily newscasts this spring and summer as oil leaked from BP's Macondo well in the Gulf of Mexico. Questions were inevitably asked about the possibility of such a disaster here in Canada. The state of our industry came under close scrutiny, and each of the regulators for Canadian offshore petroleum activities are under media and public examination. The Canadian Senate initiated a study on offshore drilling in Canada, to which the Chairs and senior officials from each of the NEB, and the Canada -Nova Scotia and -Newfoundland and Labrador Offshore Petroleum Boards appeared to answer their questions and address their concerns. The results of their enquiry were released in August, and are available on the Senate's website.

There are risks associated with exploring for and developing petroleum. Responsibly managing those risks in the public interest means properly regulating the development of Canadian resources while ensuring the highest level of environmental protection is achieved.

Arctic Review

As a result of BP's Macondo well incident, a particular focus was put on the regulatory regime in Canada's Arctic.

So, consistent with our Regulatory Leadership philosophy, the NEB on May 11^th initiated a review of Arctic safety and environmental offshore drilling requirements.

A draft scope of topics for the review was released on June 10th, and the revised scope reflecting the numerous comments provided to us was released on September 20^th.

The three phases of the project will include fact finding and information gathering, an examination and consideration of the facts, and, finally, a public report.

The review is fully open to the public and will take many months to conclude, which I believe is a clear indication of the careful and considered attention that the Board is giving to this important matter.

The review will involve a thorough an examination of the best available information concerning the hazards, risks and mitigation measures associated with offshore drilling activities in the Canadian Arctic. It will also look at the measures to both prevent and respond to accidents and malfunctions. In doing this, the Review will have to balance the protection of the Arctic ecosystem with Canada's interests in the responsible development of its northern territories' natural resources, and arrive at conclusions which best advance the Canadian public's overall interests.

In order to facilitate the public's participation, funding will be available to cover some of the direct costs associated with participation in the review, with further details to come.

Regulatory Oversight

We take safety and the protection of the environment very seriously. The National Energy Board has the mandate to regulate decisions and to ensure that companies carry out their activities in a manner that safely protects the environment. Promoting safe and secure energy facilities is the NEB's primary goal.

To ensure a full level of environmental protection, the NEB takes a lifecycle approach to the management of a regulated facility, from planning and application, to application assessment and public hearing, to construction and post-construction, through operations and maintenance, and finally to abandonment.

Sustainable Energy Future

Again referring back to the NEB's Strategic Plan, our Vision states that "The NEB is active and effective in Canada's pursuit of a sustainable energy future".

A helpful analogy is that of a three-legged stool, whereby environmental, social and economic considerations must be appropriately balanced in the public interest.  Too much or too little consideration given to one element over the other two can result in a less-than-optimal- situation for current and future generations of Canadians.

I acknowledge that this is the pursuit of conceptual ideals, and properly defining them constitutes a very significant challenge for the Board. The opportunity here, however, is the achievement of a better balance between environmental and safety stewardship with social and economic interests within our mandate.

We recognize that we don't have all the answers. To assist us in finding them, we are prepared to benefit from best practices and performance measures - both current and historical - from Canada and around the world.

Greenland Observation

Let me return to the Arctic to demonstrate how this can work. Consider, for example, that the last petroleum well drilled in the offshore Canadian Arctic was in 2005. Before that, there hadn't been a well drilled in Canada's Arctic offshore since 1989, which pre-dates the NEB's mandate for petroleum activities North of the 60^th latitude.

In order to learn as much as possible about current Arctic drilling best practices, the NEB has had observers on the rigs at Cairn Energy's drilling program off western Greenland throughout the summer. Our observers' primary points of interest were safety and environmental issues, and also included observations on regulatory requirements, oversight approaches, processes, and guidelines within a relevant energy policy context.

And we - like the Nova Scotia and the Newfoundland and Labrador offshore petroleum boards - are active participants in the International Regulators Forum, whose next conference is scheduled to take place in Vancouver later this month.

The Vancouver conference, which will be attended by NEB senior officials, will hear from leading experts from around the world, including the United Kingdom, the Netherlands, Norway, and the United States, to discuss lessons learned from recent offshore incidents, including BP's Gulf of Mexico well, in an effort to improve the management and reduction of risks and to share best practices for offshore safety.

Conclusion

In conclusion, as Canadians, we are fortunate to live in a country which has an abundance of energy resources. A key challenge we face is to determine how we will integrate the concepts of a sustainable energy future – as I have described today – into our societal decisions now and in the future.

The National Energy Board is committed to doing its part.

Our organisation, with its high calibre, professional staff takes seriously its role as an energy advisor, including its responsibilities as a quasi-judicial regulatory body. Our technical expertise, coupled with our quality management systems and processes, positions us well to address these challenges.

Please take the time to visit our website for further information on our regulatory work and other initiatives, as well as our latest energy information publications.

I am happy to take your questions, but before I do, let me wish you all the best success during the conference.

I look forward to attending a number of the sessions myself, and am looking forward to meeting and talking with you during the remainder of the week.

Thank you very much.

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Date Modified:

2011-10-28