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Home > Speeches and Presentations > Speeches and Presentations 2010 > NEB Approach to natural gas pipeline regulation

NEB Approach to natural gas pipeline regulation

Presented by
Lyne Mercier
National Energy Board

Interstate Natural Gas Association of America

15 July 2010

• Good morning, and to those of you visiting today – welcome to Canada and to Calgary.
• I am very pleased to be here today, and look forward to this opportunity to talk about the approach of the NEB in our regulation of natural gas pipelines in the Canadian public interest.

Role of the NEB

• The National Energy Board is an independent federal agency established by the Parliament of Canada in 1959 to regulate the construction and operation of international and interprovincial pipelines, international power lines and designated interprovincial power lines; to authorize pipeline tolls & tariffs; and to authorize energy exports (oil, natural gas, natural gas liquids and electricity) and imports (of natural gas).The National Energy Board Act provides the authority for how the NEB conducts its business.  The NEB reports to Parliament through the Minister of Natural Resources Canada.
• In addition to its role as a regulator, the NEB occasionally provides energy advice to the Minister. The NEB reports to the public on specific energy issues, holds public inquiries when appropriate, and monitors current and future supplies of Canada's major energy commodities.

Role of the NEB

• For the benefit our American visitors, I thought this simple chart would be a useful frame of reference to give you a better sense of the NEB’s role in regulation of Canadian natural gas pipelines and how this compares to the agencies with which you are used to dealing with in the United States. My apologies if I may have over-simplified the role of various agencies.
• In terms comparable to the U.S., the NEB mandate combines responsibilities of the Federal Energy Regulatory Commission (FERC), with many of the responsibilities of the U.S. Department of Transportation, Pipeline and Hazardous Materials Safety Administration (PHMSA) and the Energy Information Administration (EIA). For pipelines, the NEB’s role encompasses safety, environment and economics. This gives us the authority to inspect the facilities, to audit a company’s operations and safety programs, and to address issues related to abandoning a facility at the end of its useful life. We are a good example of single-window regulation, but we recognize that there is still room for further improvement in the regulatory process.

Memorandum of Understanding Between the National Energy Board And Federal Energy Regulatory Commission

• While we remain independent and have separate sovereign jurisdictions, there is a common interest to work together with our U.S. and Provincial/Territorial counterparts. Examples of cooperation agreements we have with U.S. authorities include:
• A Memorandum of Understanding (MOU) with the FERC which recognized that appropriate coordination can promote the public interest through increased efficiency and coordinated action on significant energy infrastructure projects. This cooperation does not extend to holding joint hearings, but we do keep each other informed. It is a form of conscious parallelism where we do our individual work, but are aware of what each other is doing. So far it has worked well, as we have no pipes coming to a dead-end at the border.
• Similarly, we also have an arrangement with PHMSA which recognizes that the physical regulation of cross border pipelines is shared and that compliance information is pertinent to both the NEB and to PHMSA. The MOU provides for, among other things: observation of audits, operational staff exchanges, annual meetings between senior staff, and cross border standardization. To date, we have observed several PHMSA audits whose results have been incorporated into our risk-based approach in providing compliance oversight. Although staff exchanges have not occurred to date, staff has participated in a number of cooperative learning and development opportunities.

Informed Goal-Oriented Regulation

• While our agencies and regulatory approach may sometimes differ. The objective that we strive for is the same – that the pipelines we regulate are safe, and are built, operated and abandoned in ways that protect the environment, people and property; and the rights and interests of those around it are respected. Focusing on these end results is the foundation to the NEB’s Goal-Oriented approach to pipeline regulation (which you may know as performance-based in the United States).
• The NEB uses a mix of goal-oriented and prescriptive regulation in its risk informed and full lifecycle approach. This means that regulatory agencies such as the NEB will stipulate, and hold regulated entities accountable for, specific outcomes, in other words the “what”, while the regulated entities (in this case, the pipeline operator) can meaningfully engage the broad range of stakeholders with whom they interact, to focus on “how” to achieve these outcomes. By regulating in a risk-informed way, regulatory agencies will continue to dedicate their limited resources to those areas most likely to contribute significantly to the public interest.

NEB Goal-Oriented Regulation

• The National Energy Board regulates about 72,000 kilometres of pipeline. We promote pipeline safety in its broadest sense - safety for the environment, safety for property, safety for the workers, and safety for Canadians. We do so by monitoring company compliance with regulations and the conditions of their project approval. We also ask the 104 pipeline companies that we regulate to report performance data on occupational injuries, leaks, spills, and incidents related to our pipeline and processing plant regulations.
• While we have specific tools, regulations and programs in each of these areas, our overall approach encompasses all of them as they are very much inter-related and inseparable.
• In general, the regulations and standards set out the minimum requirements. Companies are required to have safety, integrity and environmental protection programs and management systems to achieve the specified goals.
• At the center is the operator - who is accountable and has the onus to ensure safety and protection of the environment, people, and property since they are the ones that have the most direct influence over the condition and operation of their pipelines. Goal-oriented regulation can be used to assure that the prescriptive elements of standards (e.g. CSA Z662) are met, while enabling the pipeline companies to use improved technologies and knowledge of their own systems to develop best practices.
• To help companies develop and implement management and protection programs, the Board has recently issued a letter to all companies in which describes the protocol and evaluation methodology that is to be used in the Board’s audit process.

Pipeline Safety

• Safety is, and always will be, of paramount concern to the Board. The Board takes a proactive approach by sharing its information and knowledge on trends and clarifying expectations through updated regulations. The Board also strongly believes in building an effective reporting structure for safety and pipeline integrity information.
• Working safely around pipelines is in everyone's best interest. The NEB works with regional partners and stakeholder groups to raise awareness about safe work practices around pipelines and other buried infrastructure. Across Canada, the Board works towards the ongoing development and promotion of industry best practices to protect the public and the environment from damage to underground infrastructure.
• Each year, the Board publishes a report on the performance statistics and the trends observed in safety and environmental protection for the companies that we regulate. In our most recent report, while we can be encouraged by improvements in some areas, such as a decrease in occupational injuries and infrequency of pipeline leaks and spills; the occurrence of two work related fatalities in 2008 after ten years of having none indicates that there remains room for increased diligence and continued improvement.

Environmental Protection

• The Board uses a risk-based approach to ensure that NEB-regulated facilities and activities are safe and secure for their entire life cycle from the initial construction through to its abandonment. We are involved from the pre-application and application stages, throughout the construction and long-term operations, as well as the abandonment of the project.
• Environmental protection begins with a pipeline proposal that has addressed our extensive environmental filing requirements, and been found to be in the public interest. The finding is advised by extensive consultation between the project proponent, affected landowners and other stakeholders. If a project is approved, the pipeline must be constructed using equipment and techniques that minimize avoidable environmental impacts, and the right-of-way must be reclaimed to a stable and appropriately vegetated state. The NEB ensures the company continues to protect the environment, public health and safety by auditing and inspecting the company’s construction activities, maintenance programs, and monitoring procedures during the operation of the pipeline.
• Pipeline rights of way are the part of the environment which is most directly impacted by NEB-regulated facilities. During the operating life of the pipeline, reducing and eliminating ruptures, releases, leaks and spills is our primary focus in terms of protecting the environment. This is enabled through inspections, audits to ensure adequacy of pipeline damage prevention programs, and improving public awareness. At the end of the useful life of the pipeline, an abandonment order may be issued when the Board is satisfied that the environment is protected.

Land Matters

• There are clear expectations on the part of citizens that environmental impacts will be avoided or minimized, through design choices or mitigating measures. There is a desire by affected citizens to be meaningfully engaged in decision-making processes dealing with energy projects. In response to growing concerns about the impacts of energy infrastructure projects on the land, and on people who live on and off the land - the Board was recently engaged in a significant consultation initiative to address land-related concerns. With the goal of engaging interested parties to explore options to support the responsible development of the energy sector, while respecting the rights and interests of those affected by the NEB-regulated facilities, the NEB undertook an extensive consultation process called ‘The Land Matters Consultation Initiative’ (LMCI) and hosted 45 meetings and workshops in 25 communities across Canada.
• Specific actions which arose from the Land Matters Consultation Initiative (LMCI) included:
  • Clarification of our expectations for public engagement to improve stakeholder engagement.
  • Issuance of principles for the end-state of land – after pipeline retirement and reclamation.
  • Formation of a multi-stakeholder advisory committee to address gaps in knowledge related to the physical aspects of pipeline retirement and reclamation. The committee will report on its findings to the Board in March 2011.
  • Holding a hearing (RH-2-2008) to consider the financial issues of pipeline abandonment, which decided that pipeline companies regulated under the NEB Act must set aside funds for abandonment.

Possible Changes and Challenges to Canadian Natural Gas Infrastructure

• As we look at the ongoing developments in the natural gas industry, it is fair to say that the issues we’ve discussed today are not likely to go away.
• New supply development from shale and unconventional sources will likely lead to new applications for approval to build new infrastructure to connect with existing delivery systems.
• New gas resources and associated infrastructure in closer proximity to markets and people will present different risks.
• Competition will change the flows and utilization on existing pipeline systems. In more extreme cases, this may warrant pipeline companies to consider other options such as redeployment of facilities, flow reversal, or abandonment.
• Producers and pipeline companies are also exploring options to develop new markets, as indicated by the proposed Kitimat LNG export terminal.

Focus on Sustainability

• Finally as an over-arching objective - when we take decisions on energy infrastructure, we focus on sustainability. The NEB views sustainability as the integration of economic, social, and environmental factors in decision making in a way that reflects the public interest.

Thank You!

• To conclude, I would like to leave you, as leaders in your respective companies and in the industry, with the following question:
• "How has your organization embraced the onus and priority of ensuring safety, environmental protection, and respectful and responsible development?" Where can we improve and what more can we do?
• Thank you and please enjoy your time in Calgary and the Canadian hospitality!

 

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Date Modified:

2011-10-28