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Home > Safety > NEB Forum 2009 > NEB Forum Proceedings

NEB Forum Proceedings

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NEB Forum Proceedings - 27-28 May 2009 [PDF 7650 KB]

May 27-28, 2009

Calgary Telus Convention Centre

Copyright/Permission to Reproduce

Table of Contents

Introduction

Plenary

Keynote Presentation, G. Caron
Keynote Presentation, B. Kenny

Regulatory Initiatives

Panel Discussion on Goal-Oriented Regulation
Online Application System
Damage Prevention Regulation
The Board's Regulations and CSA Z662

Drilling and Production Regulations

Canada Oil and Gas Operations Act
Overview of Some Changes in CSA Z662-07
Renewal of the Onshore Pipeline Regulations, 1999

Compliance Processes

The NEB's Risk-Based Life Cycle Approach
Compliance Tools
Security Management
Technical Program Audits
What to Expect: A Company Story
Emergency Management

Respecting Rights and Interests

Respecting Rights and Interests
Today's Public Participation Expectations
Crown Consultation on Major NEB Projects
Enhanced Aboriginal Engagement

Safety

Panel Discussion on Safety - Discussion on trends in pipeline safety and control measures

Case Study - Safety

Overview of Pipeline Safety Incidents

Case Study - Emergency Management

Kinder Morgan Burnaby Incident

Case Study - COGOA and Northern Frontier

Continuous Improvement in the Mackenzie Delta

Case Study - Integrity

Cromer Meter Manifold Over Pressure

Introduction

Alan Pentney, Co-Chair
Ken Paulson, Co-Chair

The 2009 NEB Forum was held May 27-28, 2009 at the Calgary TELUS Convention Centre, Alberta, Canada. The Forum brought together NEB staff and stakeholders to discuss technical and regulatory initiatives, especially a number of new and improved regulatory tools and documents. The Forum provided an opportunity to discuss goal-oriented regulations and the new Respecting Rights and Interests regulatory program, as well as compliance processes. A variety of case studies was also reviewed.

The sessions focused on the following themes:

• Goal-Oriented Regulation
• Regulatory Initiatives
• Compliance Processes
• Respecting Rights and Interests
• Case Study - Safety
• Case Study - Emergency Management
• Case Study - COGOA and Northern Frontier
• Case Study - Integrity
• Panel Discussion on Safety

The Forum attracted 323 registrants representing 90 organizations including: industry; municipal, provincial and federal agencies; consultants; Aboriginal groups; and the general public. The accompanying pie chart provides a graphical depiction of registrant demographics. This distribution is very similar to the 2005 Workshop attendance.

The Forum was the NEB's fourth major event to inform NEB stakeholders and gather their input on a variety of topics^[1]. The last event in 2005 was evaluated, and based on feedback, the following changes were made for 2009. The event was shortened from three days to one and a half to accommodate people's busy schedules and focus on key topics. The workshop approach was not well received, perhaps due to its survey/issue gathering format so it was replaced with a Forum approach.

[1] The first three NEB workshops were held in June 2002, December 2003 and June 2005 in Calgary.

Some constructive feedback themes from the 2009 Forum were:

• Provide more technical information or core details and less NEB process information
• A desire for some interaction (perhaps in a pre- or post-conference setting)
• Presentations were so interesting that there should be less concurrent sessions
• Use of industry speakers and review of case studies of incidents were invaluable
• Consider a basic and advanced stream
• Engage other regulators in collaborative discussion with industry such as the joint TSB and Kinder Morgan discussion of the Burnaby pipeline rupture in 2007.
• Allow more time for questions or interaction.

The NEB would like to thank all the participants for their interest and assistance in making the 2009 Forum a success. The NEB will be incorporating the feedback received in designing future events. It also will be providing more focused outreach events and consulting with stakeholders as its moves forward in developing and modifying its regulations, documentation and programs.

NEB Forum 2009 Abstracts

Plenary

Keynote Presentation

Gaétan Caron, Chair and Chief Executive Officer, NEB

Mr. Caron welcomed the attendees and provided an overview of the pipeline industry from a regulatory point of view. He noted that the NEB has gained comfort in risk-based compliance evaluation since the last forum held four years ago in 2005. Goal-oriented regulation, a blend of prescriptive and goal-based systems, which began about a decade ago, is here to stay, he said. He also pointed out that the NEB now has a 50-year history taking on responsibilities in the pipeline industry related to safety, engagement, environment, energy efficiency and quality assurance. Ensuring the rights and interests of the public and stakeholders is also becoming an important goal, as well as promoting leadership in the energy industry. Mr. Caron underlined the need for the NEB to listen to the people attending the forum and how important it was for the NEB to partner with industry.

The year 2008 was busy. The NEB received more applications in 2008 than in any other year previously. Seventeen public hearings were held. Every application had to consider a number of issues, including the sustainability of the project, and its social, environmental and economic impacts. Pipeline construction was also busy, with many inspectors and auditors involved in 250 compliance events. All of this work had to be conscientiously documented.

Increasing comprehensiveness of the regulatory and decision-making processes was another trend. Mr. Caron referred to the NEB "double integration" approach where the integrated risk-based lifecycle approach is overlaid on the integrated sustainability approach to decision-making. Mr. Caron also noted that the initial phase of the Land Matters Consultation Initiative has been completed. Among other impacts, by 2014, companies will be required to show how funds will be set aside for abandonment costs.

Mr. Caron said that while the industry and regulators are on the right path, they cannot afford to be complacent with success to date. While the industry is a safe place to work, especially compared to other sectors, safety is still not as good as it should be. There has been a growing number of accidents involving workers. Other areas of focus are:

• Enforcement
  With third party damages increasing, it is important for the NEB to have an effective enforcement tool kit. This Forum provides the opportunity for industry to offer its thoughts.
• Regulatory approach
  It is clear that goal-oriented regulation is here to stay. Continuing effort is needed to manage the balance required between prescriptive and non-prescriptive approaches.
• Technology
  The industry is dependent on technology for continual improvement and increased productivity. The use of new technology requires ongoing scrutiny.

Keynote Presentation

Brenda Kenny, President, Canadian Energy Pipeline Association

Ms. Kenny noted that she has had the benefit of participating on both sides of the industry - as a regulator and representing operators. She commented that over the past two decades there have been some remarkable changes:

• New technology, e.g., SCADA, inline inspection, environmental mitigation, directional drilling
• Community consultation, where dialogue has become more effective and ideas about solutions are being shared.
• Drive toward 'real results' and continuous improvement. This focus has been assisted by the Total Quality Movement.

Noting that this is a unique point in time "a crossroads, as it were" Ms Kenny was pleased that the NEB is utilizing goal-oriented regulation as a path forward.

Canadians want and need energy, she said, but we need to protect the things we care about. Canadian energy companies are living with the vestiges of old regulations that are not working well. There are nearly $100 billion worth of projects now in the MPMO. These private sector projects are crucial to the country's job recovery. The industry has $80 billion worth of projects on our books - this is twice the size of the stimulus package offered by government.

Many of the delays are caused by overlapping jurisdictions and complex rules, often out of scope for the NEB itself. Both industry and regulators are frustrated. The current approach is not working well for stakeholders either - they don't feel they are listened to and mitigative opportunities have been missed.

We need transparent regulations, said Ms. Kenny. We often think too small. A risk-based approach is the way to succeed. Industry and regulators should work collaboratively to develop this approach. There needs to be a stronger focus on 'leaders' rather than 'laggards'.

Ms. Kenny cited the Kinder Morgan project near Jasper, which required 125 streams to be crossed with a 36-inch pipe. This project had many challenges, and many interested stakeholders. However, the hearing took less than two days. So anything is possible if you think big.

Ms. Kenny also touched on the importance of accountability. "We can do better and I think we will," she said, "building on existing tools to set timelines, and to remove duplication and overlap among regulators. There needs to be a whole of government approach, not silos."

Other jurisdictions such as Australia have been successful in developing clear decision-making processes and timelines. Canada can develop something similar or better.

We must be diligent, she noted. The public's trust in regulation must not be taken for granted.

Regulatory Initiatives

Panel Discussion on Goal-Oriented Regulation

Bob Vergette, Board Member, NEB
Gary Bunio, Vice-President Operations, MGM Energy Corp.
John Gerez, Vice-President Engineering and System Integrity, Enbridge Pipelines Inc.

Each of the panel members gave short presentations, summarized below, and followed by a question and answer period on the topic of goal-oriented regulation (GOR).

Bob Vergette

Goal-oriented regulation is mix of prescriptive and goal-based regulation. Mr. Vergette discussed the importance of management systems to support GOR. Management systems give senior executives the assurance that all programs are operating safely and reliably. He gave a brief history of GOR, outlined its advantages and gave some thoughts about the future.

Origin of GOR

The genesis of GOR was after the 1988 Piper Alpha North Sea oil platform explosion which killed over 60 people. The Lord Cullen inquiry recommended a new safety regime. Anyone who wanted to operate an oil or gas facility in the UK had to submit a safety case to cover all aspects related to safety and environment issues because prescriptive regulations could not cover all the possible risk mitigation required on a site-specific basis.

NEB regulatory reform to promote GOR began in 1999. The following are key dates in its development.

• 1999 - Onshore Pipeline Regulations, 1999
• 2003 - Processing Plant Regulations
• 2005 - Smart Regulation Report
• 2007 - Directive on Streamlining Regulations

The results of more than 27 audits conducted by the NEB since 1999 indicate that the majority of companies have programs, and in some cases, comprehensive management systems, in place. Companies are becoming better enabled to deal with hazards through these programs and the appropriate resourcing to implement, monitor and maintain the programs has been put in place.

Advantages of GOR

The advantages of GOR for both the NEB and industry are: efficient and effective resource allocation; performance measurement; and transparency of information to maintain public trust.

For industry, the risk management focus introduced by GOR encourages flexibility to adapt to new standards and technology; the ability to employ multiple risk management strategies; and the ability to take responsibility for compliance. Some of these aspects can give companies a competitive edge during challenging economic times.

Future of NEB Regulation with a GOR Focus

For the future, Mr. Vergette predicted the following:

• Increased reliance on management systems;
• Expanded requirements for reporting and self declaration;
• Improved transparency in performance reporting;
• Canadian and international regulatory consistency; and
• Improved risk-based methods for compliance assurance

Gary Bunio

For Mr. Bunio, GOR is essentially synonymous with management systems. He believes that management systems achieve better results, change relationships between parties from adversarial to aligned; and offer continuous improvement, rather than just compliance.

While business has adopted management systems in many areas, environmental regulation is one of last areas that does not employ management systems comprehensively. Mr. Bunio cited the NEB's Ken Vollman's management systems model of 2000.

Mr. Bunio then explained the consequences of GOR using Toyota as an example. He noted that Toyota has figured out that it cannot build 10 million perfect cars, but that it is possible, with diligent effort, to build a perfect factory. In the ‘old' days, the regulator specified tire types, sizes and rubber composition. Under GOR, the regulator checks whether the tires and suspension are designed by competent people and that the accident rate is not too high. If the regulator wants different tires, delays may occur. If a regulator goes so far as to set the design, and there is a failure, who is responsible? Legal issues may result. He reiterated that in the end, under GOR, the company is accountable for all actions.

Mr. Bunio noted that there is a big variation in company competence, and that some companies have no management systems, and perhaps not even goals and plans. These companies need prescriptive measures.

He reviewed the pros and cons of prescriptive, performance based, and goal-oriented approaches, noting that the least effective combination is a company using management systems with a prescriptive regulator. He also explained the concept of alpha and beta risk in assessing risks, ensuring regulators understand both sides of the risk highway and not create certain risks by over-protecting others.

He said that GOR will improve regulatory outcomes and is best achieved through management systems and best practices. In the long run, GOR will reduce direct and external costs to companies. This approach will also position the NEB as the lead regulator of the energy industry, although to be successful, the other regulators will need to adopt the same philosophy.

John Gerez

In his discussion about GOR, John Gerez noted that pipeline construction and operation have to include a focus on safety and environmental protection. Both regulators and companies are aligned in wanting safe and environmentally responsible pipeline systems. GOR includes prescriptive components and outcome or goal based elements, thus allowing a combination of standard requirements and the flexibility to optimize operations. This approach also encourages innovation and the use of technology.

From an operator's perspective, the company is expected to establish systems that will deliver agreed on results in a practical, efficient and economic manner. The company retains the latitude to develop its own programs and criteria. Internally, the company must develop programs and procedures to comply with its own policies, manage risk and provide internal assurance that it is meeting its goals.

Operators believe that as long as agreed safety and environmental goals are achieved, how they are achieved should be secondary. Compliance with legal and regulatory requirements is a minimum. Evaluating compliance requires professional judgment on the part of the regulator and auditors. It is important to have a dialogue, notes Mr. Gerez, as well as a clear definition of goals. The focus should be on outcomes and overall effectiveness, with the ability to distinguish between legal and regulatory compliance and conformance to company procedures.

Monitoring and auditing requirements include clarity of criteria and consistency of terminology; consistency in approach on audits; assurance of confidentiality (competitiveness); clarity of appeal processes; ongoing dialogue and collaborative attitude.

GOR is the best way to meet the goals of both operator and regulator, according to Mr. Gerez. An ongoing dialogue is required to optimize processes and systems to achieve common goals.

Following the presentations, there were a few questions from the floor. One audience member wondered about the audit process and the need for ‘due diligence'. Is the audit part of the 'due diligence' process?

Mr.Vergette discussed the first audit under the new PPR regulation and how the auditor had tried to apply guidance notes, which were never intended to be mandated. We are trying to determine how to achieve a balance, he said.

A clear definition of due diligence and how it applies to meeting goals is needed within the company. There are different management systems being employed by different companies, but the audits are carried out in the same way for everyone. There needs to be clarity going into the process for all parties so that expectations can be met.

Another audience member noted that for GOR to work well, all regulators have to be on same page, including the United States Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA). It was noted that one of the advantages of GOR is that if a company develops a management program, it is more likely to satisfy many regulators. However, it was noted that there is a different attitude in the United States - a more prescriptive approach.

Another audience member asked about dealing with all the paper work. One company representative noted that some companies produce more binders than oil. However, standards must be met and documented. It was suggested that documentation should be very brief. In an exercise in the UK to document all processes, all the information was contained in 14 pages. Reports can be ‘staged' to be as detailed as someone wants. The key is not to write anything that will not be read.

Online Application System

Margaret Barber, Team Leader, Applications, NEB

Margaret Barber provided some background on the Online Application System (OAS) - what it is and how it works. The project is currently moving into phase two. Ms. Barber provided a mini tutorial for the system. She also requested input and feedback from the audience and ideas for improvement.

The 2004 NEB Filing Manual raised the expectations of companies to file applications electronically. With an increasing number of information requests, the NEB saw opportunities to make the application process for low-risk, smaller-scale facility projects more effective and efficient. Now the OAS has been created to allow companies to build their s.58 applications. This applies to facilities only. It went live in June 2008.

Once a pre-application meeting with the NEB and a particular company has taken place, essentially all elements of the application, and future applications, can be done online. Accessed from the NEB's home page, OAS lets users know what they need to file once they describe the project. The application is comprised of a check list of low risk criteria and exceptions, as well as filing requirements.

The OAS has been designed to allow companies and the NEB to focus on areas where there is some element of risk, with less scrutiny of more routine matters. If a company cannot meet the low risk criteria, the system will identify what is needed. The goal of the OAS is that the details in the application match the complexity of the project. Companies can provide feedback on the system using a feedback function.

Once complete, the application is sent electronically and applicants receive notification within 10 days. Companies do not send supporting documentation, but rather keep the files in case the NEB wants to review them.

Ms. Barber noted that the system is user friendly and she ran through how to set up an account onscreen. A company can share one account or a number of accounts. Once an account has been created, a company can access OAS's forms page, where the forms needed for the application and their status are presented. When the forms are complete, they can be filed. The OAS is intuitive, easy to use, and has lots of explanation of what things mean and what is required.

Ms. Barber noted that feedback is being collected on the pilot, and planned improvements are already underway, such as:

• The ability to view criteria without creating an account
• The ability to print partially completed forms
• Clarification of some wording and guidance

New sections on security, emergency management and Aboriginal matters are being added. Applications already in the system are grandfathered so that changes do not apply for a month. If the application is not completed within the month then information must be filed again.

An audience member asked if an application that was started in the older version would be automatically transferred to the new one. The response was that the application would have to be retyped into the newer version.

Ms. Barber concluded her remarks with a brief outline of Phase Two of the project. Work being considered includes a front-end filter of questions to help companies determine the appropriate filing method and requirements. There will be an expansion of functionality to include additional facility application types.

One audience member commented that other people often want to see what the application looks like so adding 'draft capability' was a great idea. He has had experience with filing two applications and was not clear about what happens when the application is complete and the sender hits 'file'. Ms. Barber suggested that answers to these types of questions can be easily found in the tutorial.

Another audience member noted that the OAS is a great tool for efficiency. "It is the way of the future," he said. He wondered whether this was a transition point, speculating that filing will eventually be totally online, eliminating the need for paper documents. Perhaps the online application will become mandatory for s.58 filings.

Ms. Barber responded that they have not gone to the NEB Board to make this mandatory. She noted that some companies are very small, and the NEB would need to do some consultation to see if that switch would be helpful to everyone.

Another audience member wondered if an application was not complete in certain areas, what happens at the NEB. Is someone from the NEB reviewing it or does the NEB wait until the application is complete? Ms. Barber indicated that NEB doesn't see any content until it has been submitted by the company. The OAS system just monitors whether something is attached that is supposed to be attached.

What would prompt the Board to ask to look at any of the retained documentation, wondered an audience member. If this occurred it would likely be part of a compliance activity, it was noted, and could relate to a variety of things, e.g., a geographic issue.

Damage Prevention Regulation

Patrick Smyth, Team Leader, Operations, NEB

There has been a long history in the development of the Damage Prevention Regulation (DPR) - since 2002. A draft of the proposed regulation has been completed, and is being presented at this Forum, after which there will be an examination by the Department of Justice and the Treasury Board.

The speaker outlined the purpose of the DPR, who it applies to, and other key elements. The purpose of the DPR is to:

• Ensure the safety and security of the public and NEB-regulated pipelines
• Ensure the protection of property and the environment

It applies to pipeline companies regulated by the NEB and "persons" planning to undertake an activity that has the potential to damage a pipeline - persons being an individual or an entity.

The DPR defines a safety zone of 30 metres or 100 feet on either side of the centreline of the pipe. A one-call centre must be utilized where there is one. All pipeline companies will be required to be members of the centre. All "persons" will need to contact the centre prior to any activity such as disturbing the ground or excavating, to allow the pipeline company to assess the impact of the activity and arrange for certain conditions depending on the type of activity and its potential impact. Where a one-call centre does not exist, the pipeline company must be contacted directly to locate a facility.

Pipeline companies must:

• Respond within 10 days
• Have standards for locates
• Maintain records of qualified locators
• Determine if excavation activities will damage pipe
• Locate pipe, place surface markings, make a locate report and date the locate report
• Provide the NEB and person making request with immediate written reasons if access is refused

Persons planning activities must:

• Make locate requests to the one-call centre or directly to the pipeline company at least three days in advance
• Obtain written agreement from the company for any construction on the right-of-way
• Request permission for vehicles and mobile equipment

Another feature of the DPR is the requirement for pipeline companies to have a damage prevention program that involves: public awareness; monitoring the use of the land on which a pipeline is located and adjacent land, as well as monitoring changes in ownership; investigating conditions, activities, actions or omissions that might damage the pipeline; reporting to the NEB the results of these investigations; and maintaining an audit program.

Comments and feedback on the DPR were received by 19 organizations and have been posted on the NEB website. The common themes of these comments relate to: more than one one-call centre; locate standards; and excavation outside of the safety zone.

In the coming months, the NEB will meet with stakeholders to discuss their additional comments. A further opportunity to comment on the DPR will be available once it is pre-published in The Canada Gazette, Part 1.

An audience member asked about the impact on farming. For example, would there be an exemption for farming equipment? If the activity is not addressed in the regulation, permission from the company must be obtained directly, said the speaker. Also, as part of their damage prevention programs, companies must develop ways to deal with farming equipment. It is hoped that industry best practices would be followed.

Another audience member commented on CEPA's interest in this area and wondered whether the NEB has the authority to make regulations governing mobile crossings. The speaker responded that it is not just up to the NEB to decide, but also the Department of Justice and the Standing Joint Committee on Scrutiny of Regulations. All parties have to be on side.

Another audience member wanted to know if there were any real showstoppers out of the 19 comments that have been received so far. The speaker responded that the NEB and the industry were not as far apart as initially anticipated, although there were definitely areas where more discussion is needed.

Another comment related to the presentation on Rights and Interests, where the presenter had indicated that effective regulation requires enforcement. The audience member wondered why the DPR does not address enforcement. In response, the presenter referenced Board Chair Gaétan Caron who had acknowledged in the plenary session that the NEB needed a more comprehensive suite of tools to address in an overarching manner all of the NEB's regulations. While there were no specific details at this time, the speaker went on to state that the NEB is at a crossroads now. "There is a body of work that has taken place with industry recommended best practices. A fair bit of progress has been made. Our responsibility is to gather all this intelligence. It may require us to alter course somewhat and we're digesting that along with the comments too. We want to be sure that we complete our due diligence, that we are taking into account all of the considerations."

A final questioner wondered whether there was any consideration of this regulation for COGOA regulated facilities or underground facilities such as electric power lines or fiber-optic cable. The speaker noted that the NEB regulates pipelines and other regulators are responsible for overseeing other utilities.

The Board's Regulations and CSA Z662

Joe Paviglianiti, Technical Leader, Engineering, NEB

The Canadian Standards Association (CSA) is a not-for-profit, membership-based organization, with nine thousand members. Unless adopted by reference into legislation, standards are voluntary and may only be enforceable in the civil law context. The difference between a standard and a code is that a code carries the force of law while a standard is a document containing mandatory requirements

Z662 sets the standard for Canadian oil and gas pipelines. It does not set out legal requirements, but anyone building a pipeline would be expected to seek guidance from the standard. However, all provinces where oil and gas pipelines are regulated are required through regulations to follow Z662 for the design, construction and operation of pipeline systems.

A large number of organizations are involved in preparing a standard. Over 300 members are involved. The NEB is involved in creating many standards and sits on five of the nine technical sub-committees.

Z662 is considered a consensus standard, but that does not mean full unanimity. Consensus implies more than a simple majority, but some areas may lack consensus.

The speaker made the following observations about the standard and NEB regulations:

• Annex N is mandatory only for sour service pipelines under NEB
• Annex E is not mandatory
• OPR does not apply to CO₂ pipelines
• OPR-99 section 17 requires that all welds be x-rayed or UT'd for 100% of circumference.
• Inspection including NDE must be independent of contractor
• Company must show it is following welding procedure specifications
• Company must provide inspection plans to contractor for sour service
• Overpressure must never exceed 110% of the MOP
• Pneumatic test durations may have to exceed 24 hr - the NEB is asking companies to demonstrate how sensitive these tests are
• Change in class location must be monitored and managed
• Safety and loss management systems are required

An audience member asked if NEB has adopted any of the CSA standards as mandatory, noting that most annexes are not mandatory. The speaker responded that the NEB does not object to companies using the annexes. However, with Annex N, the NEB has a clause that requires an audit. Is Annex N like any other annex, it was queried. Yes, in all cases the regulation will trump the standard.

Another audience member wondered about the source of the limit for overpressure (110% of the MOP). The speaker noted that some companies have had some overpressure issues and may not understand the requirements to prevent this problem.

Drilling and Production Regulations

Canada Oil and Gas Operations Act

Jann Atkinson, Technical Leader, Environment, NEB

The speaker indicated that the NEB has been the first to move from a prescriptive to a goal-oriented approach with the Canada Oil and Gas Operations Act (COGOA). The NEB's frontier regulations address: installation, diving, geophysical operations, drilling, production and conservation, and operations. In addition, there is a Certificate of Fitness Regulations.

Under the current Regulatory Renewal Initiative, the drilling/production and conservation regulations are being modernized and amalgamated, with a goal to maintain a regime that is efficient and effective and allows for international competitiveness, as well as encouraging innovation, safety, and environmental protection. A number of organizations are involved in developing the new Drilling and Production Regulations which are expected to be promulgated in late 2009. Involved organizations include Natural Resources Canada, Indian and Northern Affairs, energy departments of Newfoundland and Nova Scotia, and regulatory boards involved in this area.

The new regulations will apply once they are in effect; no grandfathering will take place, so it is important for companies to be aware of the details. The new regulations will focus on a mixture of goal-based, performance-based and prescriptive styles; management systems; reporting; and spacing requirements.

For example, the old regulations set out a requirement for the depth of casing to avoid damaging the permafrost. The new regulations require that the operator ensure that the well and casing are designed to maintain the integrity of the gas hydrate and permafrost zones, thus leaving it up to the operator to determine the depth of the casing. The technical requirements have been converted into a goal. Other areas of the regulations are more prescriptive, such as the contents of the company's management system and safety plan. The speaker noted that guidance materials and stakeholder engagement requirements are currently under development.

An audience member wondered about the timeline for the remaining regulations under the Act. The speaker noted that there are plans to modernize them all. This initiative is just a beginning and once there is a plan, stakeholders will be informed and consulted. The Drilling and Production Regulations will provide a solid foundational structure.

Another audience member with plans to submit a drilling application once the new regulations are in effect expressed concern about what they may have to go through to prove they have everything in place before drilling next winter. The speaker commented that the requirement to obtain an authorization for a drilling program does not change because it is in the Act itself. If the application is filed before the new regulations are promulgated then the existing regulations apply. If it is filed after, the information requirements will reflect the new regulations. These have been in public forum for two years already, so hopefully the company has been paying attention. However, the applicant must have a management system in place before the application is filed.

A follow-up question was asked: if the application goes in shortly after new regulations are promulgated, is there a requirement for the NEB to evaluate all of the company's management systems in a short period of time. The speaker indicated that the company needs to initiate conversations with the NEB prior to the application be submitted.

Another audience member asked how enforcement will take place, noting that enforcement is much easier under a prescriptive regime. The speaker used the permafrost example and agreed that the old regulation lacks the objective - to protect the permafrost. Under the new regulations, the onus will be on the company to demonstrate everything that was done to meet the objective.

Another audience member wanted the speaker to comment on enforcement versus compliance verification. It was noted that enforcement is in the regulations already. With regard to compliance verification, it would be up to the inspectors to see if the company has done what it said it was going to do in the application. Then the inspector would determine if enforcement is warranted. If something is not working, the NEB wants to find out why and make sure it is corrected.

Overview of Some Changes in CSA Z662-07

Ken Paulson, Technical Leader, Operations, NEB

The speaker discussed some changes in the Canadian Standards Association's Z662-07 standard:

• Safety and Loss Management Systems (clause 10)
• Clause 16 - Sour Service (amalgamation)
• Integrity Management Programs

Companies operating pipelines in Canada are required to comply with this standard as amended from time to time. Employees and contractors should have access to this standard where necessary and reasonable.

Safety and Loss Management System

Clause 10.2.1 says that operating companies shall develop, implement, and maintain a documented safety and loss management system for the pipeline system that provides for the protection of people, the environment and property. This applies to the complete pipeline lifecycle. A management system such as this can take up to two or more years to develop. Phasing in is not allowed although there is some leniency.

The OPR does not specifically require companies to have management systems, but the NEB believes management systems are the primary way goals can be achieved.

Clause 10.2.2 outlines the requirements for what should be included in the safety and loss management system, including a communication plan, a document and records management process, a management of change process and a continual improvement process.

The speaker then outlined some commonly held beliefs that are not true:

• The belief that Safety and Loss Management Systems apply only to operators
• The belief that self audits are not required
• The belief that these systems are the same as Integrity Management Systems
• The belief that this is a future requirement

The bottom line is that any pipeline in Canada is required to meet the requirements of this clause, unless the regulator says that they are not required.

Sour Service Changes

Clause 16 specifies provisions for the design, materials, construction, operation and maintenance of sour service pipelines. Annex M and N are now rolled into Clause 16. There is also a change in the definition for sour liquids (Clause 16.2) - the kPa has been lowered from 0.35 to 0.30. As a result, some oil pipelines may now be sour by definition.

Clause 16.3.4 indicates that sour service pipelines must be designed to accommodate internal maintenance cleaning and inspection devices, regardless of the diameter of the pipe. It sets out the items that must be considered in the design of the pipeline.

Clause 16.5.1 addresses deviations, for example, changes during construction. Records, including photographs, must be kept.

Clause 16.5.2 requires companies to keep all records for the life of the pipeline.

Clause 16.5.3 sets out the Inspection Plan requirements.

The speaker noted that it is taking a while for these changes to take hold in industry.

Integrity Management Programs (IMPs)

IMPs were introduced in 1999 to establish effective procedures for managing the integrity of pipeline systems. The requirements for IMPs are found in Annex N. Annex N is mandatory for sour service in Canada, and mandatory in Alberta, British Columbia and some other provinces for all pipelines.

One questioner from the audience wanted to know if there was a technical basis for the 0.30 kPA. The speaker noted that this number was believed to be consistent with MR0175 (NACE).

Another audience member wanted to know who approves the Safety and Loss program. It was noted that there is no requirement for approval, but companies have to have one and audit it.

Can the Safety and Loss system be integrated with the IMP, wondered another audience member. The speaker noted that the IMP is an element of a Safety and Loss System so the two can be integrated.

Another audience member asked about the Protocols related to OPR 99. Are there any protocols that go through CSA? That would be redundant, responded the speaker. The NEB's regulations do not serve as interpretation documents for the CSA, but when it is specifically adopted into the regulation, the NEB can interpret the CSA.

Renewal of the Onshore Pipeline Regulation, 1999

Scott Gedak, Technical Specialist, Environment, Strategy and Analysis, NEB

The speaker provided some background on the NEB's first goal-oriented regulation, the OPR 1999. The OPR provides a regulatory text supported by non-mandatory guidance notes. It includes a mix of prescriptive and performance/goal-based requirements.

Since then, there has been a shift to a 'program approach' by the NEB for:

• Safety
• Integrity
• Emergency management
• Environment

Two amendments have been made to the OPR 1999. In September 2008 decommissioning requirements were added. Other changes were made at the request of the Standing Joint Committee for the Scrutiny of Regulations, the body that polices these instruments. The changes generally deal with consistency between English and French language and duplicative language.

The date, 1999, gives an idea of how old the regulation is. For example, there is no explicit management system requirement in the regulation. Regulatory programs must be kept current. The NEB is receiving more and more requests to deviate from the regulations, which is a sign that it should be reviewed. The NEB has made a commitment to the Standing Joint Committee to review it by 2010.

The NEB anticipates it will look at the regulations, guidance notes and audit protocols as a package to ensure that there are no gaps. It will also have to consider changes to the regulatory landscape, e.g., heightened security concerns, operation and maintenance activities, updates to Z662 and recommendations from the Land Matter Consultation Initiative.

At the public workshop in 2005, the NEB received the following feedback on OPR 1999 from audience members:

• Need for consistency
• Make more provision for goal or performance based measures
• Audit protocols - consistency

The NEB will build on the current regulation, not start from scratch. The goal is to develop one set of pipeline regulations for all pipelines/facilities regulated by the NEB. A concept paper will be developed. This paper will serve as a starting point for meetings with stakeholders. The timeline is ambitious with year one comprising the discussion paper and meetings, and year two, reporting and drafting. The speaker also indicated that the NEB was considering whether the Filing Manual needs revision and would like to receive comments from stakeholders.

There were no questions from the floor.

Compliance Processes

The NEB's Risk-Based Life Cycle Approach

Denis Gagnon, Program Manager, Operations, NEB

The risk-based life cycle (RBLC) approach to assessing compliance had its genesis in 1995. NEB audits were introduced in 2001 and the integrated compliance concept was introduced in 2003. Goal-oriented regulation and management systems were promoted at the NEB forum in 2005. Subsequently all risk-based initiatives at the NEB were consolidated in 2007.

The risk-based approach applies to all phases of pipeline or facility life cycle: planning/design phase, construction, operation, abandonment. The NEB sets out expectations through regulations and guidance. The NEB then develops a compliance plan, based on its risk assessment of regulated company facility consequences and system performance. The NEB is focused on measuring and improving its effectiveness as a regulator. In order to do that, it may consider changing expectations through changes in regulations.

The NEB is a strong proponent of management systems as the foundation to effectively manage risks and achieve goals. A risk-based approach also facilitates efficient use of finite NEB resources and promotes continual improvement through information sharing and deeper understanding of companies' systems and practices. Finally, a risk-based approach helps the NEB to further understand and assess risk to public and worker safety, and effective methods for environmental protection.

The NEB developed its RBLC approach in accordance with several principles:

• Companies are responsible for their own performance
• The NEB manages its resources to ensure that regulatory oversight is prioritized according to risk
• The NEB regulates according to risk throughout the life cycle of facilities within its jurisdiction
• The level of regulatory oversight is directly linked to company performance
• Risk is considered from the perspective of risk to the NEB's mandate.

The NEB has developed a model to assess risk and assign priority to company activities. The priority is a combination of probability (the likelihood of serious consequences; as a company's performance improves the probability rating decreases) and the severity of consequences.

Probability is a combination of adequacy, implementation and effectiveness of a company's management systems. Each of these factors is assessed using various compliance tools:

• Adequacy is assessed through audits
• Implementation is assessed through inspections, incident reviews, manual reviews and meetings
• Effectiveness is assessed through leading and lagging indicators.

Adequacy, implementation and effectiveness are each then assigned a score from 1 to 9, where 9 is a situation of non-compliance and 1 is a situation where there is no non-compliance. Note that a score of 8 indicates no or insufficient information for the NEB to assign a score.

Next, consequence receptors are factored into the risk assessment. These factors fall under the three broad categories of safety (product in the pipeline or facility, proximity of workers and proximity of the public); environment (land use, release area, proximity of water, product in the pipeline or facility); and security (impact of supply disruption, potential for collateral damage). Again, consequence is scored form 1 to 9, where 1 has the least consequence and 9 the greatest consequence.

Probability and consequence are plotted on a matrix. Companies, facilities or situations receiving a consequence score of 3 through 9 AND a probability score of 7 through 9 are considered high risk and are more likely to be subject to an NEB audit. Companies, facilities or situations with lower scores may still be subject to NEB audits but with a lesser priority.

Under goal-oriented regulation, the NEB expects project proponents to have an adequate and effective program that addresses risk throughout the full life cycle of a project. The NEB must test the adequacy, implementation and effectiveness of company programs, resulting in an annual compliance verification plan. When a new project application is received, the resulting project compliance plan will be integrated into the annual company compliance verification plan.

The NEB's objective in oversight is to learn as much as possible and to influence company performance and compliance. With increasing risk and complexity of a project comes increased oversight, using a variety of compliance tools.

The practical implications of an RBLC approach include reduced regulatory oversight for companies who pose a lower risk, thus freeing NEB resources to tackle higher priority, higher risk situations. This and other positive outcomes provide incentive for companies to be known good performers. RBLC is also a good measure of the regulator's ability to influence performance and to determine areas of compliance focus for a company. Finally, RBLC is a means to demonstrate the effectiveness of goal-oriented regulation.

One audience member wanted some elaboration on the statement: "Risk is considered from the perspective of risk to the NEB's mandate." He suggested that it is an odd way to define risk. The speaker noted that the NEB's mandate is to protect the public interest with respect to pipelines and facilities. The NEB must demonstrate to the public how that risk is being managed. In this respect the NEB and industry have common goals, that is, the effective management of risk.

Another audience member wanted to know how risk scores or ratings are shared with companies.

At the present time, risk assessment scores are not being shared with companies. However, there are many means for a company and the NEB to share information about risk, such as inspection reports, audits and other compliance activities. In future, the NEB intends to share its risk/performance assessment with regulated companies.

It is the NEB's intent to share the information as it develops greater knowledge in the area of assessing risk and the risk rating system matures. Once the NEB has confidence in using the system of risk analysis, it intends to share the assessment findings. The NEB sees and understands the benefit to companies to share the scores and acquired knowledge about the risks associated with a given operation or situation.

One questioner wanted to know how the NEB will change the mindset or focus of field inspectors away from prescriptive evaluations and toward a risk-based evaluation. How will the NEB ensure a consistent approach to risk evaluation among inspectors and auditors? The speaker commented that over the past two to three years, NEB training has emphasized risk evaluation. Inspectors were traditionally trained to observe and record, and while that skill is still important, they are now being trained to ask questions: why does a certain situation exist, what systems, programs or practices are in place? Inspectors are also encouraged to look at previous inspection reports and audits to understand a company's management systems. Newer staff are being trained in evaluating management systems with a risk-based approach.

Another questioner asked if the NEB is categorizing facilities and situations as having low, medium or high risk, or labeling companies as having greater or lesser risk. The speaker replied that a company may have some higher consequence facilities but overall may be a low risk performer. Risk is based on receptors. Therefore the consequence rating cannot be changed but the probability rating is within the company's control. Having management systems in place can reduce the probability rating.

Compliance Tools

Patrick Smyth, Team Leader, Operations, NEB

Key compliance drivers are:

Goal 1:	NEB-regulated facilities are safe and secure, and are perceived to be so
Goal 2:	NEB-regulated facilities are built and operated in a manner that protects the environment and respects the rights of those affected

Goal measures that help NEB staff in their decision making include:

Goal 1:	decreased number of injuries and fatalities; no pipeline failures; the public perceives that pipelines are safe; all companies regulated by the NEB have safety and integrity programs in place; all planned compliance audits are completed.
Goal 2:	all environmental conditions achieve the desired end result; rights-of-way are reclaimed within expected time frames; decreased number of major releases into the environment; rights are respected.

The NEB uses a variety of compliance tools to evaluate performance and verify compliance with requirements to achieve the goals. "Compliance" means the ability to demonstrate a state of being in accordance with established legislation or requirements that have been adopted by the board.

Prioritization (the result of a risk-based analysis) is a function of probability and consequence, and is the engine that drives compliance-related decisions taken at the NEB. Compliance verification activities are defined, planned and conducted in the areas of safety management, integrity management, environmental management, security management and emergency management, to an appropriate level of rigor based on risk and consequence, to influence company performance.

The NEB's compliance tools are applied at various life cycle stages. They include:

• Meetings - information exchange meetings establish NEB expectations (application phase); compliance screening meetings (construction); implementation assessment meetings (operation); assessment exchange meetings (abandonment).
• Inspections - an on-site snapshot of company performance.
• Audits - a systematic review and evaluation of company-wide systems and programs, practices, processes, manuals and documentation.
• Investigations - in the event of an incident, the NEB ascertains cause and contributing factors and ensures implementation of appropriate remedial measures to prevent a reoccurrence. Information is shared with the company and other stakeholders.
• Emergency exercises - observation of emergency exercises allows the NEB to evaluate a company's emergency preparedness.

Compliance is evaluated against the requirements of statutes and regulations; commitments made during an application; conditions on authorizations; requirements of codes and standards; company programs for managing technical areas that are required by legislation; and other direction provided by the NEB such as security letters, safety directives and operations and maintenance activities.

The NEB's practice is to apply the lowest level of enforcement available and work collaboratively with regulated companies and stakeholders to resolve issues such that the company brings an event or facility back into compliance. The NEB applies a standard of reasonableness, based on professional judgment and best practices, to determine whether an activity is safe, and the environment is protected. It is not the NEB's goal to "catch" companies in non-compliance but rather to encourage compliance.

One audience member wanted the speaker to elaborate on the absence of specific requirements for compliance. The speaker commented that using a goal-oriented approach means the regulations are not prescriptive. The NEB's staff are encouraged to ask questions and gain a common understanding. They are also trained to exercise judgment rather than being prescriptive. This is true of site inspections and audits.

Another questioner wondered whether there is an appeal process for site inspections, in the event the company's opinion differs from the NEB's. After a site inspection, the NEB inspector gives an inspection report to the company representative on site, who is asked to sign the report. There is a misconception that signing implies agreement with the report's findings but signing only means the company acknowledges receipt of the report. If there is an issue or concern, the company should contact the NEB team leader for that area to discuss the inspection's findings.

Security Management

Wes Elliott, Operations, NEB

In 2004, the NEB Act was amended to explicitly include security within the Board's mandate, providing the NEB with the basis for regulating security of energy infrastructure under its jurisdiction.

The NEB approached its new security mandate through a learning, collaborative process. Several pipeline security management assessments (PSMAs) were performed, allowing NEB staff to learn about issues pertaining to physical security, cyber and information security, and personnel security.

Security regulation will assure the NEB that regulated companies are implementing the appropriate measures to prevent and mitigate the occurrence of malicious acts that result in safety-related incidents, impact to the continuity of energy supply, or an adverse environmental impact.

In 2006 the NEB released Proposed Regulatory Change 2006-01. The PRC 2006-01 required all companies to have a pipeline security management program (PSMP) and provided guidance on NEB expectations for PSMPs. The NEB recognizes that PSMPs will vary from company to company depending on many factors such as the size of the company, the assets it is protecting, and their location. Companies need to understand their own level of risk and design programs accordingly.

Other security initiatives include a security brochure developed by the NEB in conjunction with industry and other government agencies. The brochure promotes the RCMP Tipline for reporting security incidents around energy infrastructure and provides general security awareness. The brochure was designed primarily for people living and working around pipelines. The NEB is also pursuing cooperation and partnerships with other regulatory agencies, and promotes communication and information sharing, especially with the RCMP and other enforcement agencies.

Compliance verification activities respecting security started in 2007 and are continuing in 2009. Verification assesses a company's security programs and plans, training, roles, reporting and tracking, and physical security measures.

In addition to the upcoming NEB regulatory changes, in 2006 the Canadian Standards Association began to develop a security management standard for the petroleum and natural gas industry, CSA Z246.1. The objective is to assist and guide the industry in the development and implementation of a security management program. The NEB intends to adopt the standard into their regulations.

One audience member wondered whether there is a role for law enforcement input in the standard development process. The speaker noted that there may have been law enforcement representation on the Technical Committee developing the standard but the security standard is regulatory in nature and does not address enforcement.

Another audience member wanted to know when the new regulation would be implemented and how NEB audits would be impacted. The NEB is still debating this question and looking for industry input. Estimated implementation ranges from six to 18 months (from the fall of 2009). Rolling security into NEB audit processes will take longer; once the standard is implemented, companies will need time to develop systems, processes and documentation around security.

Technical Program Audits

Ken Colosimo, Environment and Emergency Preparedness Specialist, Operations, NEB

Regulations including the Onshore Pipeline Regulations (OPR), Processing Plant Regulations (PPR) and COGOA Drilling Regulations all use a goal-oriented approach, supported through periodic audits. By the end of 2006, most regulated companies were audited by the NEB.

The OPR requires companies to develop and implement management and/or protection programs to anticipate, prevent, mitigate and manage conditions that have a potential to adversely affect the environment and public safety. These programs apply to the entire life cycle of a facility. Currently, areas that require active management systems include safety, environment, integrity, emergency management, security (proposed regulatory change) and pipeline crossings.

The NEB expects companies to manage their own circumstances. Management programs should be based on the hazards, risks and environmental aspects associated with the company's facilities and activities, as well as specific legal and regulatory requirements. Companies have discretion as long as management systems meet the NEB's requirement to actively manage hazards. The NEB expects programs will follow a management system structure and will demonstrate a senior-management-directed, top-down approach to managing safety and environmental protection. The goal is to protect people and the environment; there is no value in "catching" companies in non-compliance.

For evaluation purposes, the NEB management/protection program requirements are divided into five major elements and 15 sub-elements, reflecting commonly accepted management system structure. Elements and sub-elements correspond with legal requirements, resulting in a consistent approach to audits. The 15 sub-elements are:

1. Policy and commitment statements
2. Hazard and risk identification and assessment
3. Legal and other requirements
4. Goals, targets and objectives
5. Organizational structure, roles and responsibilities
6. Training, competence and evaluation
7. Communication
8. Documentation and document control
9. Operational control (normal operations)
10. Operational control (upset or abnormal operations)
11. Inspection, measurement and monitoring
12. Corrective and preventative actions
13. Records management
14. Internal audit
15. Management review and control.

During an audit, companies will be assessed and evaluated against legal requirements on the processes, procedures and standards identified as comprising its management program. The NEB recognizes that each company is unique and encourages development of appropriate programs to manage risk. Following an audit, the NEB develops an audit report containing findings. The goal is not to find non-compliance but to assure the NEB that an active management system is in place.

Findings include determinations of adequacy (compliance) and non-adequacy (non-compliance), recognizing two degrees of non-compliance: non-compliant-unacceptable and non-compliant-needs improvement. All non-compliant situations must be addressed by the company through development and implementation of corrective action plans.

Having largely completed its first cycle of audits, the NEB has identified a number of trends and observations:

• There is an increase in the development and implementation of formal management systems; it appears that many companies see the value in management systems, including due diligence demonstration, corporate and social responsibility demonstration, positive investor relations and other benefits.
• Implementation of management systems is often the downfall of many companies. When a company does not act in accordance with its own programs, this is identified as a situation of non-compliance.
• Many companies do not measure and track their performance.

The NEB is committed to a process of continual improvement and this applies to audits. Feedback from audited companies has revealed several areas for improvement, including definition of terms, clarity of process, consistency of messages, presentation of findings and consistency of tools and processes. The NEB will also work toward better definition of goal-oriented versus performance-based regulation; non-conformance versus non-compliance; consistency of audits across technical programs; recognition of some companies' use of "stretch" targets (going above and beyond regulations); and how to appropriately audit projects in the construction phase.

One audience member wondered whether the PPR audit process has improved. The speaker noted that processing plant audits are different from pipeline audits, so audits under the PPR don't necessarily follow the 15 elements (listed above). The technical requirements and consistency of approach for PPR audits is improving as the NEB gains experience and receives feedback.

Another audience member wanted elaboration in the case where a hazard is being managed that is not referenced in specific regulations - how does the standard of reasonableness apply? According to the speaker, risk management is based on hazards identified by the company and the companies management system must anticipate, manage and mitigate risk to an appropriate level. A company may have a difference of opinion from the findings in the audit report. In that case, the company is welcome to contact the NEB to discuss the issue.

But that implies the NEB can enforce "best practices," according to the audience member. The speaker noted that companies can adopt best practices, but the NEB does not enforce best practices unless they form part of the management system. The NEB applies the test of reasonableness and evaluates performance versus existing plans and systems. So if a company's programs demonstrate a commitment to meet a certain level of performance, the company's program will be evaluated against that commitment.

What is the process for resolution if a company disagrees with the audit findings, asked another audience member. The speaker replied that companies have a daily opportunity for discussion with the auditors during the audit process, so there should not be any surprises in the audit report. There are always non-formal ways to address disagreements, until the audit report is made final. After that, the company can write a letter to the NEB to address the issue and consider alternatives.

What to Expect: A Company Story

Neil Drummond, Imperial Oil Resources

Imperial Oil's Norman Wells facility was audited in November/December 2008. The presenter gave an insider's look at the audit process and offered several tips and advice.

The process began with a phone conversation between the NEB and the company, followed by a letter from the NEB advising that an audit would be forthcoming. During the audit, the auditors spent approximately five days in the head office and five days on site at Norman Wells.

From the company perspective, an audit is a significant task requiring extensive preparation and personnel involvement. The presenter advises:

• Assign a dedicated individual as the primary contact, because an audit crosses many corporate boundaries and departments
• Meet with the NEB audit team to:
  • obtain a clear understanding of the audit's scope; this, in turn, helps the company prepare appropriate resources, find documents, arrange interviews, etc.
  • determine what the audit team is interested in examining
  • define the audit protocol. What will you be audited against?
  • explain the company's structure, reporting relationships, present org charts; this helps the audit team determine the correct personnel to interview
  • identify key personnel responsible for managing and implementing the various systems to be audited
  • determine how confidential material will be handled
  • book interviews with senior management well in advance.
• Book a large meeting or board room for the audit team to use and bring all documentation to the team; try to conduct interviews there also.

The audit team will need:

• Descriptions of internal management systems
• Documentation of systems
• Documentation of system deliverables (tools, checklists, execution plans, etc)
• Field verification that system plans and programs are being executed.

Interviews with key personnel are an integral part of the audit. The audit team will interview managers responsible for systems, and key technical experts. Anticipate questions and have documentation ready for reference. Capture list of additional documentation required and try to provide those documents on the next business day. Close the interview with a summary of key issues and concerns.

During the head office portion of the audit, the presenter found a daily debrief between the corporate contact and the audit team to be useful. The corporate contact person could then keep key company personnel updated on the audit progress. For the site portion of the audit, ensure the audit team undergoes all required safety and security orientation, and has a dedicated escort in addition to knowledgeable staff and technical experts. Hold daily debrief meetings (by phone with the corporate contact person if that person does not come to the site).

After the audit, the NEB will issue a draft report, which the company has a reasonable time period to review. The company can edit the report for accuracy and clarity. The NEB then issues the final report, and the company prepares and submits correction action plans for areas of non-compliance. The company must also submit a final report documenting implementation of the corrective action plans.

Another company representative noted that Imperial had never had a comprehensive external regulatory audit. It proved to be a powerful opportunity to validate programs and systems, a valuable experience that supports continual improvement.

One audience member asked about the overall impact of the audit on the company. The speaker replied that the audit required interviews with about 40 individuals. Each took about half a day including preparation, although the interviews themselves lasted about an hour. The lead corporate contact was seconded full time to the audit for two weeks, plus additional time to develop and follow up the corrective action plans, requiring other staff to cover his usual work.

At Norman Wells, the audit required assistance from another 10 to 15 company personnel. This significant focus on the audit can be distracting and takes the focus away from the company's usual work, however the NEB is flexible. For example, the original time for the audit was during a scheduled winterization period, which could have put company assets at risk - so the audit schedule was amended.

Emergency Management

Robert LeMay, Emergency Management Specialist, Operations, NEB

A risk-based life cycle approach provides a framework for determining all NEB compliance activities including emergency management. Risk is assessed for each company and a risk priority is assigned based on probability and consequence.

Under the Onshore Pipeline Regulations,1999, a company must develop, regularly review and update, as required, an emergency procedures manual, and must submit the manual and any updates to the NEB. As a result, the NEB now manages some 150 emergency manuals and has developed a powerful new database to accomplish this task, called the Emergency Manual Management System (EMMS). This is an effective tracking tool that highlights potential problems outside of a formal audit, allowing the NEB and companies to take corrective action.

Using EMMS, the NEB has discovered missing or out-of-date emergency procedures manuals mostly from companies which sold assets without leave from the NEB. As a result, the NEB is requesting that these companies file a manual to be in compliance. Other requests to the companies include filing applications pursuant to section 74 of the NEB Act for updated regulatory instruments and updated facility data.

The NEB also participates in, or observes, emergency exercises.

Looking forward, the NEB is working on the following:

• updating the NEB application Filing Manual to include more information on emergency management and what is required in an emergency response manual;
• an audit protocol for emergency management, in order to be able to audit emergency management systems; and
• promotion and development of a proposed CSA emergency management standard. If the standard is adopted by the CSA it is expected to be incorporated into NEB regulations.

There were no questions or comments from the floor.

Respecting Rights and Interests

Respecting Rights and Interests

Michael Benson, Program Manager, Applications, NEB

Michael Benson provided some insight into the NEB's thinking about respecting rights and interests, related to industry as well as the public. He provided a regulatory context and then he discussed the regulatory program for respecting rights and interests.

The NEB strategic plan 2009-2012 articulates a revised Goal 4: the rights and interests of those affected by NEB-regulated facilities and activities are respected.

The NEB is in the process of developing and implementing a regulatory program to support Goal 4. Mr. Benson noted how regulatory programs in general help set expectations; monitor and verify performance against those expectations; and apply enforcement to improve performance.

The company focused portion of the regulatory program addresses the NEB's responsibility for company performance while the public focused portion relates to the ability of the NEB to fulfill its mandate through public engagement.

The underlying principles that are applicable to the company-focused portion of the regulatory program include:

• Continual improvement
• Consistency
• Responsiveness
• A proactive approach
• Meeting evolving societal expectations related to participation and accountability
• Effective use of regulatory tools
• Effective use of NEB resources
• Partnership in responsible development

In order to promote outcomes that are in the Canadian public interest, the NEB will conduct a voluntary review of the public involvement programs of companies in 2009-2010. This review will provide the NEB with a greater understanding of existing company public involvement programs and as well as additional feedback on NEB expectations. Mr. Benson also notified the audience that the NEB plans to share its 'draft expectations' for the preliminary information package in the coming weeks and will be seeking company feedback.

The public focused portion of the regulatory program relates to effective engagement by the NEB and its own outreach initiatives. The NEB is interested in the continual improvement of its own processes and is planning to expand its appropriate dispute resolution (ADR) program, as well as to provide additional support for participants, with the introduction of new mechanisms to help non-industry participants.

Mr. Benson expected that the development and implementation of the regulatory program respecting rights and interests would involve ongoing constructive and collaborative approaches with all interested parties and result in continual improvement for benefit of all Canadians.

An audience member asked about the overall process and level of awareness within the NEB of "certain landowner tactics". He noted that there is currently $100 billion worth of projects tied up in regulatory red tape. Following is a summary of his remarks:

• The process is not broken. The companies regulated by the NEB have good stakeholder engagement programs. But social expectations are changing... and there is less of an interest in the 'public interest'; there is more of a 'selfish interest' - 'what can I get out of it?'
• Cynical landowner groups hold projects for ransom. They understand that the regulatory process doesn't allow projects to proceed if they target specific areas, e.g., route hearing. I had a project held up because objections were filed with no specific issues, yet this required a detailed route hearing and resulted in substantial delay. Is there any interest by the NEB in addressing this kind of problem?

The speaker agreed that these types of issues are emerging and acknowledged that certain groups have attempted to use the regulatory process to their personal advantage. They may not be looking to improve the project, but have a more political focus. The NEB is aware that this potential exists and is trying to continually improve processes to make the most effective use of regulatory tools and the most effective use of NEB staff. The goal is ensure that the rights and interests of people are respected, so it is important to find the appropriate balance so that participants who have legitimate concerns can have their concerns appropriately addressed, but not cause undue delay.

The audience member maintained that these issues are a big concern for people in the room. He wanted to know if it was possible for the NEB to throw out an objection if it relates to nothing substantive. The speaker responded that the NEB is guided by what is in NEB Act in some of these circumstances.

Another audience member wanted to know how Aboriginal engagement might be affected by the new regulation. The speaker indicated that Aboriginal engagement is included in the regulatory program, and directed the audience member to a presentation on that topic taking place the following day.

Another NEB staff member commented that the NEB knows that timely access to land is important. There is a two-part approval process. In the first part, the corridor is approved and in the second part the detailed route is approved. It would be 'poor planning' on part of a company not to expect the second part not to happen, he said.

Today's Public Participation Expectations

Crystal Cassidy, Team Leader, Community and Aboriginal Relations,
Alberta Energy Resources Conservation Board (ERCB)

Alberta has two types of property rights: surface rights (owned by landowners) and mineral rights (81% Crown owned, 19% privately owned). Companies lease the right to extract minerals and pay royalties on production.

Competing rights can be a source of conflict, such as the landowner's right to quiet enjoyment versus the resource developer's right to access subsurface minerals. Knowledge is key to developing mutually beneficial relationships and resolving conflicts.

Public participation has evolved from simple notification to include consultation and collaboration as the public's expectations for involvement have changed and evolved over time.

With regard to resource development in the province, Albertans have a variety of concerns: impact of resource development on farming operations; well site selection; soil disturbance, noise and traffic; setbacks and impacts on the potential for future land development; water wells; flaring and air quality; public safety and health issues.

Techniques for engaging the public include: written notification, one-on-one dialogue, open houses and presentations, small group meetings, community involvement, trade shows, websites. Each of these techniques can be more or less successful depending on the community and their concerns and how they wish to be engaged.

The best way for a resource developer to resolve issues is to be proactive and responsive. As a company, do your homework - understand the community's concerns and involve residents early. Be an active listener; follow up on the public's concerns and questions. Track commitments and actions to ensure follow through. Ongoing communication is vital, as is prompt clarification of misinformation. Know your area and learn about the potential resource development impacts that are of concern to community residents.

The ERCB is seeing more land use conflicts and growing overlap between populations and industry development. Currently in Alberta there are some 80 active landowner groups. Synergy (www.synergyalberta.ca) is a coalition of representatives from these groups, plus industry and government.

There were no questions or comments following the presentation.

Crown Consultation on Major NEB Projects

Scott Clausen, Director of Policy Coordination and Aboriginal Affairs,
Major Projects Management Office

Enhanced Aboriginal Engagement

Carla Osborne, Aboriginal Engagement Specialist, Applications, NEB

Part 1 Scott Clausen

The Major Projects Management Office (MPMO) Initiative is a five-year, $150-million undertaking to improve the regulatory system for major natural resource projects. The initiative has many components, including increasing the technical capacity of key federal departments and agencies; developing timelines and service standards for the efficient and effective delivery of regulatory mandates; creating a senior-level Deputy Minister's Committee to oversee and uphold accountability of the initiative; and creating the MPMO itself - to oversee implementation of the initiative.

The MPMO's mandate has two key components:

• Improve regulatory performance within the existing legislative/regulatory framework
• Identify regulatory and legislative solutions to deliver performance improvements to the overall regulatory system over the longer-term

Key elements in the MPMO approach include process clarity, project management and policy leadership. The outcome being sought is a more accountable, predictable, transparent and timely regulatory review process.

Under the MPMO initiative, the Crown will take a whole-of-government approach to Aboriginal Crown consultation by discharging the legal duty to consult through a good governance approach that upholds the honour of the Crown, engages Aboriginal groups early, and integrates Aboriginal Crown consultation obligations for project reviews within the established EA and regulatory process, to the extent possible.

For all NEB projects under the MPMO initiative, the Crown will rely on established NEB processes, to the extent possible, to discharge the federal Crown's duty to consult for the proposed project. The coordinator for these consultations will vary. For NEB review panels under MPMO, the Canadian Environmental Assessment Agency will act as the environmental assessment manager and Crown consultation coordinator. For NEB screenings and comprehensive studies under MPMO, the NEB will assume the lead role as environmental assessment manager and federal environmental assessment coordinator (FEAC), but the Crown, through the MPMO, will monitor the NEB process for its sufficiency to discharge the duty.

The Crown consultation process for NEB projects will consist of the following steps:

• Proponent submits a consultation plan
• The NEB and other potential responsible authorities offer to meet with potentially affected Aboriginal communities and groups early in the process
• Aboriginal groups will be asked to bring their concerns forward to the NEB hearing.

Part 2 Carla Osborne

As outlined above, the Crown will rely, to the extent possible, on the NEB process to satisfy the duty to consult with Aboriginal communities and groups on NEB projects. Components of this process include:

• Proponent's activities
• Early engagement by the NEB and responsible authorities
• Regulatory and permitting processes
• The Crown will determine whether additional consultation is required to address issues outside the mandate of the NEB.

Some of this process already exists, for example in the Filing Manual. The proponent will provide project information to Aboriginal groups, including anticipated impacts on rights and interests. The proponent will provide Aboriginal groups with the opportunity to express concerns. Subsequently, the proponent's application will provide a summary of consultation activities and outcomes, information about potential impacts and how these will be addressed, and benefits to Aboriginal communities and how these will be realized.

Provisions for enhanced Aboriginal engagement have recently been introduced by the NEB. Enhanced engagement will be initiated after the project description documents have been filed. The NEB will send letters to all potentially affected Aboriginal groups, offering to meet with these groups to discuss the NEB process and how the groups can bring their concerns forward. Note that the NEB intends to cast a wide net at this stage but just because an Aboriginal group receives a letter does not mean that group will be affected by the development, only that there is potential for impacts. The Aboriginal groups themselves will determine whether or not they are affected.

If an Aboriginal group requests a meeting with the NEB, other responsible authorities will be invited to attend. Aboriginal groups will be encouraged to discuss their concerns with the project proponent; any outstanding concerns can be brought forward to the NEB through the hearing process. If the project is approved, the decision may include conditions to accommodate Aboriginal interests or to mitigate negative impacts. Other responsible authorities may issue permits or authorizations once a determination has been made that Crown consultation obligations have been discharged. If issues outside the NEB's mandate are raised, the Crown will determine what other consultation is required.

Part 3 Questions

Some 40 to 50 major project applications are current, noted one audience member. Can you comment on the MPMO's progress in assessing them?

The MPMO had (at the time of the Forum) one PA signed with five more ready for imminent signature (now signed). Many more are under discussion, development and negotiation.

One audience member asked if the interim approach for major projects is not that different from the existing NEB process. Once the MPMO is established, how will the process be different?

The speaker replied that the Crown and the MPMO have formally stated that they are relying on the existing NEB process. Early engagement of Aboriginal groups is a departure from the existing process. The MPMO process is expected to be more consistent and explicit regarding Aboriginal engagement and the consultation steps that are to be followed.

Another audience member asked if the MPMO process will apply to projects proposed for north of 60. The answer was that the process will apply to projects south of 60.

Another audience member asked with regard to the scope of the duty to consult, what level is appropriate? The speaker indicated that the MPMO and the NEB will expect early engagement. The preliminary list of potentially affected communities and groups generated by the NEB will be assessed for adequacy by the Crown and sent to the proponent prior to the NEB issuing letters. The Crown will then assess the adequacy of the NEB process to discharge the duty.

Should the NEB process not be adequate, the Crown will work to conduct any required consultations outside the NEB process.

A final audience member noted that scheduling of construction could be affected by the ongoing consultation process, putting assets and finances at risk. Normally once a company receives NEB approval, construction begins, but under MPMO there may be a wait for the Crown to determine the need for additional consultation. Companies need more certainty.

The speaker responded that the Crown can determine what parts of the NEB process may not satisfy Crown needs and take appropriate steps to keep the process moving. It is possible then that the process might be timelier under the MPMO initiative. Efforts will be made to integrate and rely on the NEB process and its timelines.

Safety

Panel Discussion on Safety
Discussion on trends in pipeline safety and control measures

Dr. Alan Murray, Professional Leader, Operations, NEB;
Gordon Simmonds, Keysone Project Manager, TransCanada Pipelines Ltd.;
Tom Lassu, President, Ledcor Pipelines Ltd.

Dr. Alan Murray

Developing a safety culture means engaging people in a goal and result they can support. Safety will only improve when people take responsibility not only for themselves but also for one another, when workers are mindful and interested in others' behaviours and safety. He urged the audience to observe on-the-job practices and speak out against all unsafe actions; on the job site, we are our brothers' keeper.

There are two basic approaches to creating a safety culture: impose a set of rules, or engage workers in adopting safe practices. Dr. Murray offered a quote to illustrate his point: "If you want to build a ship, don't drum up people to collect wood and don't assign them tasks and work, but rather teach them to long for the endless immensity of the sea." In other words, creating a safety culture is not about slavish adhering to rules and procedures but about truly supporting and engaging in the end result: an injury-free workplace.

Knowledge transfer from experienced workers to new workers is essential to developing a vibrant safety culture, but so is taking action and being outspoken. It's important to use correct procedures and learn from mistakes or near misses. However, it takes courage to speak up when you see unsafe practices; you can and should intervene.

Many changes have come to the pipeline world, including regulation, technologies, materials and equipment, but has safety changed? Overall, Dr. Murray believes safety performance has not improved, but medical response has. Workers are still getting hurt on the job, but treatment and therapy are reducing injury severity, a trend that tends to mask poor safety performance. The point is: develop a safety culture to ensure workers are not injured in the first place.

Gordon Simmonds

In contrast to Dr. Murray's closing message, Gordon Simmonds offered the opinion that safety has, in fact, improved as attitudes have evolved.

In the 1980s, the "cowboy" attitude predominated on most work sites ("I will do what I want") and work-related injury frequency was high. A decade later, management edicts ("I do it because you tell me to") generated the beginning of a change in safety attitude, resulting in a downward shift in work-related injuries and incidents. More recently, self-awareness has become the dominant safety attitude ("I do it because I want to be safe") and workplace injuries have continued to decrease. Currently, we are in a phase of growing interdependency ("I do it because I care, not only about myself, but about you too"). Compared with safety performance 30 years ago, injury frequency and severity have decreased, largely due to this attitude shift.

The speaker used TransCanada PipeLines' Keystone projects to illustrate the point that safety culture is now squarely in the arena of engagement, visible senior leadership, continuous improvement and sincere caring. The Keystone pipeline projects kicked off with more than two full days of safety discussions and sharing ideas among 16 major contractors. Sharing ideas, programs and knowledge was a key to success: safety is one area where there should be no proprietary secrets. We're all aiming for zero incidents; we all want every worker to go home safe every day. There should be no barriers to this goal.

Mr. Simmonds' remarks supported Dr. Murray's key message that a true safety culture is based on engaged workers who look out for one another, but Mr. Simmonds believes attitudes across the industry are steadily moving in this direction; albeit, slower than hoped, while Dr. Murray cautions us about the current state of safety culture in the pipeline industry.

Tom Lassu

Mr. Lassu proposed that while safety awareness and attitudes are improving, many barriers prevent workers from being safe on the job. For example, companies frequently value the bottom line more highly than worker safety.

Similar to Dr. Murray's arguments, Mr. Lassu maintained that the construction side of the pipeline business is still full of traditionalists who have done the same thing the same way for many years. This status quo is not good enough. To illustrate his point, Mr. Lassu spoke about the rollover protection system (ROPS) on pipe laying equipment.

Over the years, numerous rollover incidents have resulted in serious injuries and fatalities. Ledcor subsequently made changes to pipe laying equipment and continues to lobby the pipeline industry and equipment suppliers to make standard equipment upgrades. Mr. Lassu has encountered a variety of arguments against installing ROPS, including, "It's not needed; accidents are due to operator inexperience not the lack of protective equipment; we can't afford it; the equipment is grandfathered so we're not required to upgrade it; there are so many makes, models and ages of pipe layers that rollover protection doesn't work on all equipment."

Ledcor has undertaken to install ROPS on all its pipe layers, regardless of age, type or model, at an average cost of approximately $20,000 per unit. In so doing, Mr. Lassu believes Ledcor has been able to disprove or discount all the arguments against installing ROPS, and the installation of ROPS has contributed to worker safety - the ultimate goal.

The benefits - saving lives and preventing injuries - are more than worth the expense.

Following the panel members' remarks, there were no questions and no discussion. One audience member made a short statement of support, that a safety culture is vital to successfully sending workers home safely at the end of every shift.

Case Study - Safety

Overview of Pipeline Safety Incidents

Ken Paulson, Technical Leader, NEB

The speaker noted that pipelines are a comparatively safe industry and have come a long way in past 20 years in that regard. Given that approximately 60,000-70,000 kilometres of pipeline are regulated by NEB, it is inevitable that some incidents will occur. An incident includes a death or serious injury, a significant adverse effect on the environment, an unintended or uncontained release of gas or hydrocarbons, and the operation of a pipeline beyond its design limits. The incidents that the NEB has been involved with have all been preventable.

The NEB has a mandate over pipeline safety. The purpose of the NEB is to promote safety and security, environmental protection and efficient energy infrastructure and markets, in the Canadian public interest within the parameters set by Parliament.

Within that mandate, the NEB's first goal is to ensure that the facilities it regulates are safe and secure, and perceived to be so. There are five measurable targets associated with that goal:

1. No fatalities and a decreasing number of disabling injuries
2. No pipeline failures - not just ruptures but all body failures (There were 11 pipe body failures in 08. There were no ruptures in 08, but one has already taken place in 09.)
3. The public perceives that pipelines are safe (This is not formally measured; however, the 08 incidents are the highest in last ten years)
4. All companies regulated by NEB have safety and integrity programs in place
5. All planned compliance audits are completed

It has been 10 years since goal-oriented regulation was first introduced. During that time, 27 audits were conducted by the NEB. Most companies have programs for safety and integrity - many have management systems which enable them to deal proactively with hazards. Implementation at the worker level is where most gaps exist.

The speaker gave a partial summary of recent pipeline events and reviewed two case studies.

Case Study One -
Oil Pipeline Fatalities (US)

The incident occurred on November 28, 2007, when two maintenance workers who were replacing a section of pipe were killed. A leak had ignited via a heater in the ditch. The NEB observed the investigation that was conducted by the US Department of Transportation's Pipeline and Hazardous Materials Safety Administration. (PHMSA). An agreement was signed in November 2005 to notify each other when there is an incident and possibly share aspects of the investigation, in order to reduce the regulatory burden on some companies.

The NEB reviewed the chain of events that followed. PHMSA was onsite the following day, and NEB was onsite December 1, 2007 as an observer. PHMSA issued a notice of probable violation in October 2008, with a proposed fine of $2,405,000 and eight remedial requirements. Even though this event took place in the US, the NEB took this event very seriously and issued a safety advisory in April 2009.

Case Study Two -
Pipeline Construction Project

The speaker noted that the pipeline industry is statistically very safe; statistics are comparable to the banking industry!

However, three major incidents took place within one year on the same project. In October 2007, a pipeline foreman with more than 30 years of experience lost his leg when he was run over by a side boom. In January 2008, a marked gas transmission pipeline was struck by a drill operator, resulting in a 12-hour outage of gas service to an adjacent town of more than 1,000 residents. In August 2008, a side boom operator sustained a cracked pelvis, cracked ribs, broken nose and laceration to the face when she attempted to stop a side boom from rolling. The investigation into these incidents is still underway.

Incidents Rising

The speaker asked, "Is the NEB responsible? Are we accountable for this record?" The target for injuries has to be zero, he said. The NEB's statistical data show that incidents are on the rise; pipe body leaks and ruptures are continuing; and injury frequency rates are rising. The speaker noted that there was an increase in lost time injuries in , compared to 2006. There were 1.9 lost time injuries per 100 people in 2007. There were also two fatalities reported to the NEB in 2008.

The speaker then reviewed some of the possible drivers that could be associated with increased incidents.

• Workplace complacency, leading to lack of proper protection and unsafe work practices, and including unsupported and strongly held beliefs
• Worker experience, an aging workforce with cyclical challenges
• Market demand, rigid construction schedules, cost reduction focus and declining revenues

Saying the industry is safe enough is not an option, according to the speaker. He cited the need for effective training, enhanced safety awareness programs, non-subjective and meaningful reporting and the need to put safety first.

From the floor, one audience member wanted more information and data on leaks. Does the NEB look at leak rates versus the number of barrel miles? The speaker responded that a better way to measure is based on throughput or on the interior surface area, e.g., interior surface area compared to the number of leaks. However the rate of leaks is measured, it does not affect perception. It may help us manage our integrity better if we looked at some of the other measures.

Another questioner asked if there are any safety issues associated with the Alberta gas system, given that there is a different mix of piping and pipe with smaller diameters. The speaker noted that the NEB has have created a new team to deal with the transition for regulation of the Alberta gas pipeline system.

Another question was asked about 'unsupported and strongly held beliefs' that result in worker complacency and how those beliefs could be mitigated by non-subjective and meaningful reporting. The speaker noted that when he was at ATCO, there was a very low incident rate. No subjectivity was allowed by the regulator. If there is an influx of reporting that is unmanageable the regulator needs to deal with it. Companies have to meet with the regulator, even when there is no reporting.

Case Study - Emergency Management

Kinder Morgan Burnaby Incident

Lawrence Gales, Transportation Safety Board;
George Fowler, Transportation Safety Board;
Hugh Harden, Kinder Morgan Canada

On July 24, 2007, a third party line strike occurred when KMC's 24-inch Westridge Dock Line in Burnaby, B.C was hit by a contractor. The ruptured line, under a main commuter route through a residential area, released 1,400 bbl of crude oil onto the road and into Burrard Inlet via the storm sewer. Forty-four residents were affected. There were no injuries or fire and more than 90 percent of the oil was recovered. The incident resulted in $22 million in damage and significant media attention.

Speakers from both the Transportation Safety Board (TSB) and Kinder Morgan Canada (KMC) described their involvement.

The TSB conducts independent investigations or public enquiries, identifies safety deficiencies, and makes recommendations and reports publicly. Its objective is to mitigate risks and advance transportation safety through independent accident investigations for rail, pipeline, marine and air transportation modes. The TSB speaker noted that the TSB is not a regulatory agency but an independent body that investigates all events/incidents/accidents for all pipes, except water and sewer, including all collateral equipment.

Information about the Burnaby incident is contained in TSB report P07H0040, on its website (www.tsb.gc.ca). In this occurrence, there was a conflict with the KMC line and the design location of a new storm sewer being installed by the contractor. The contractor contacted KMC on the morning of July 16, and early that afternoon KMC began to locate the section of pipe in the area. KMC had only 45 minutes to locate the line - and only identified 30 metres of it. There was no written or verbal request by the contractor to mark other sections, nor did KMC offer to do so. The contractor marked where he was going to excavate and began to dig the sewer line trench. He requested an inspector on July 20 for July 25, when the sewer line would be laid. Between the 16th and the 24th, the contractor's superintendent was onsite and the consultant made daily visits to ensure compliance. Despite all this, the line was struck.

The TSB determined six factors that contributed to this incident:

1. The field location of the KMC line was not accurately indicated on the design drawings
2. The KMC line location was not verified either by hand digging or by a hand-held pipeline detector, resulting in the discrepancy between its location on the design drawings and its actual field location not being discovered prior to construction
3. The KMC line was struck five times and punctured twice while the storm sewer trench was being dug according to design
4. Inadequate communication within KMC and between KMC, the consultant and the contractor resulted in no common understanding or acceptance of the project work plan and the contractor's construction schedule
5. Conditions of crossing agreement and Parts I and II of the NEB Pipeline Crossing Regulations respecting a pre-construction meeting, location of the pipeline and construction supervision were not adhered to
6. Stopping delivery to the tanker instead of isolating the gravity feed from the terminal increased the volume of oil released at the site - this was not in conformance with shut down procedures

In brief, the contractor excavated too close to the pipe without following prescribed crossing agreement conditions and regulations.

The KMC representative discussed the company's emergency response system. An Incident Command System (ICS) was set up almost immediately. This system was developed in the '70s to provide the organization with a consistent response to emergency situations. Individuals' roles are fixed. Everyone knows what they are supposed to do.

The company made extensive use of contractors, using the spill response co-op. Aerial, water and ground patrols monitored free oil and directed cleanup. A variety of recovery techniques were used - skimmers, absorbents and excavation. All free oil and contaminated soil were removed from residences and roadways. Sewers were flushed to remove free oil and shoreline cleanup was completed. A long-term monitoring plan is being reviewed by stakeholders, including First Nations.

For its community and public relations programs, KMC maintained a single point of contact for residents. There were municipal meetings and phone calls. An open house was held for residents. A website was set up with frequent updates. There was onsite media availability. Government officials toured and were briefed. With the unified command, the company found it relatively easy to work with the City and others. Decisions were made as a group at daily meetings.

The speaker noted he was pleased to hear that safety is a key priority for the NEB. Everyone working near pipelines has to follow the regulations and there has to be enforcement. There needs to be more teeth in the regulation, he said. Mr. Caron's toolbox needs a 'hammer'. Another issue, he noted, is mapping underground infrastructure. As built maps are not accurate, he said. All pipelines must be located and exposed before any excavation can begin.

There were a number of questions from the floor. First, why was the City of Burnaby or PEP not involved? The speaker indicated that they were invited but chose to be observers.

Another question related to long-term monitoring. How long is long-term monitoring? The speaker replied that long-term is 10 years.

Another audience member offered congratulations to all parties who came together to give this presentation. It was really helpful. He also had a concern regarding enforcement. He believed that some provincial agencies focusing on safety are becoming "sort of free enterprise" and can fine companies for noncompliance, specifically in B.C. and Ontario. Is anyone interfacing with them, he asked, to see if the 'enforcement hammer' can be offloaded?

The KMC representative responded that BC WorkSafe (Formerly Workers Compensation Board) has not taken any action to date. The NEB representative indicated that the NEB is just beginning to peel open its 'tool box'. CEPA has been invited to provide its perspective on enforcement options. The NEB will look at more possibilities.

Another audience member wondered if the Community and PR programs had all been planned in advance and how effective they were. The speaker responded that some of them had been contemplated in advance, and others developed on the fly. He noted that 'you can't communicate too much'. The programs were very effective. People want to know what's going on. Otherwise things get made up.

Case Study - COGOA and Northern Frontier

Continuous Improvement in the Mackenzie Delta

Doug Ashford, Drilling Manager, MGM Energy Corp.

This presentation provided an overview of MGM Energy Corporation's 2008-2009 drilling project in the Mackenzie Delta. It showcased the approaches MGM took to continuous improvements in its HSE management systems and programs, and in particular, demonstrated through the practical example of a near-miss barging incident how the company used learnings from such events to strengthen its HSE programs.

This presentation also described the productive relationship MGM has developed with NEB staff, and how that relationship has benefited MGM's operations, although the company has some questions about how the new goal-oriented regulatory system will affect both the relationship and its operations going forward.

MGM is a small and relatively new Canadian exploration and development company currently focused on exploration in the Mackenzie Valley. Its assets include numerous discoveries as well as oil and gas prospects in the Mackenzie Delta and Central Mackenzie Valley, and an extensive land and seismic database. Although its key objective is to amass energy resources in Northern Canada which are expected to increase in value once the Mackenzie Valley pipeline proceeds, its secondary objective is to develop prospects which can be delivered to market in the absence of the Mackenzie Valley pipeline.

When the company was formed two years ago, one of the first projects to be initiated was an HSE management system. It currently consists of 16 elements, all with key actions identified that are compliant with ISO 14001. An HSE handbook and manual have also been developed, and project assurance plans are developed for each year's activities. MGM has both corporate and operations specific emergency response plans which are revised and updated each time a project is reactivated. Before a project begins, the company delivers company-wide and contractor community-wide orientations. MGM also conducts hazard identification sessions on each operational phase prior to each one starting as well.

MGM's 2008-2009 drilling program included drilling three wells - Ellice J-27, North Ellice J-17, and North Ellice J-25 - and locating 17 barges, a staging area, two barge camps, and an air strip at its Ellice Base Camp. The rig move started December 6, 2008, the first well was spudded December 25, and complete demobilization was accomplished by March 31, 2009.

One of the significant challenges the company faced during its winter operations was the impact of storms. A two-day storm caused a six-day shut-down that included four days to recover. This issue became a focus for the company's continuous improvement activities.

One of the company's HSE initiatives in the fall of 2008 was to prepare for weather shut-downs during the winter 2009 operations. MGM prepared a permitted operations guide that identified a range of operational activities cross-referenced and color-coded against a range of weather conditions. Items identified in red in the guide could not proceed without the field gaining supplementary approval from the Calgary office. Blue items could proceed, but only with additional mitigation. While the guide has been a work in progress, its use has nevertheless helped MGM learn that risk mitigation measures enable work to proceed in much colder wind chill temperatures than expected. MGM has yet to determine what the minimum wind chill temperature is to require a shut-down.

The same permitted operations guide addresses drilling-related activities, and prescribes what activities may or may not take place, depending on the availability of Medivac services in given periods of time. For example, the more accessible Medivac services are likely to be during a storm, the wider the range of permitted activities, and the less accessible Medivac services are likely to be, the narrower the range of permitted activities. This information makes it possible for the company to make better judgments about when normal operations may resume.

The focus on the impact of storms also helped the company learn that there is a common misconception among engineers, geologists, and others with northern experience: that the weather forecast coming from Barrow, Alaska, is an accurate indicator of what the weather will be like on the Delta in two days. MGM learned that storms sometimes come in from the south rather than the northwest. The company responded by hiring its own weather forecasting consultant who gave MGM daily updates on the specific weather conditions in the operating area. The presenter gave an example of how on a particular day, the forecasting consultant was able to predict that a storm would abate for approximately three hours, a window within which the company was able to schedule and co-ordinate aspects of its work that might otherwise have been delayed.

The presenter then turned to the topic of the barging near-miss incident that occurred in the spring of 2008. Although described wryly as an "unplanned spring sailing", the incident provided MGM with a good test of its emergency response plan. The presentation focused on the company's HSE investigation of, and subsequent learnings from the incident.

On June 2, 2008, 17 empty NTCL barges and the Wurmlinger barge staged at Atik broke free of their moorings and floated down river 17 kilometres before becoming grounded. All of the barges and the Wurmlinger were recovered and returned to Inuvik by June 7, and no injuries were incurred, nor were there any releases to the environment. The HSE investigation of the incident revealed that the barges had been moored adjacent to the shore line in low water the previous fall. In the spring, however, during peak flow conditions when the water is deeper and the channel wider, the barges floated towards the middle of the channel. Water and ice rubble piled up adjacent to the barges, creating enough force to shear the tie lines.

One of the outcomes of the incident and subsequent investigation was that MGM conducted a much more thorough risk assessment of barge staging areas in preparation for the 2008-2009 winter and spring. The company realized it had relied too heavily on local expertise in selecting a staging area, and instead, used the fall period to assess much more closely the surface geology as well as where water and ice hydraulic forces would have the most effect. The company scouted staging areas much more in advance, particularly during high water conditions, and also placed personnel on the barges this spring to monitor break-up. A Horizon North barge master and wildlife monitor are currently (at the time of the presentation being delivered) monitoring the break-up of the river, and Geological Survey of Canada personnel are also on board, measuring and evaluating water flow conditions in the channel. As an outcome of this incident and corrective response, MGM has learned to treat break-up time as part of its operational plan.

The presenter then turned to the subject of MGM's relationship with the NEB, during which he emphasized the positive, co-operative nature of that relationship, and how the company values the quality of the relationship. He also acknowledged the NEB's introduction of goal-based regulations, and indicated that the company had some questions and concerns about the potential impact of this regulatory approach on the relationship and on company operations.

MGM is satisfied with the approval timeline process, noting that the DPA and ADW approvals on its first two wells were received in 17 business days. The ADW application for the third well was approved in 18 days. The company found the Letter of Credit aspect of the process to be confusing, and was unclear about the purpose of the Letter of Credit and the amount to be paid.

The presenter noted that regular communication with the NEB occurs at least once daily, beginning with the e-mailed morning reports. MGM made particular note of the number of times throughout the project where the company asked for and received permission for changes from the original plan, assisted by the co-operative relationship the company had with the NEB.

The presenter also commented on the fact that dealing with the range of visitors to the operations site has been an ongoing learning experience. The visits have included inspections by the NEB and INAC, as well as visits by other government departments such as DFO, ENR, and the WCB, and visits from the Environmental Impact Screening Committee and the Inuvialuit Regional Corporation. As much as MGM has welcomed the visits and the visibility the visits have afforded it, its approach has been to co-ordinate these visits through the NEB as the lead regulator.

Although MGM did not raise these issues as "concerns" per se, the company questioned some aspects of the process for their impact on the efficiency of the company's projects. He gave the example of how the company was unable to execute downhole injection of drilling fluids when approval to do so was rescinded by the Water Board at the eleventh hour, and it was unclear to MGM if the company had approval to proceed or not.

MGM also had questions about how goal-based regulations would affect its timelines, and expects that the implementation of the new approach will be a learning process regarding what the company will and will not need approval for.

One audience member asked how oil and gas get to consumers. The speaker responded that first of all, the company has close to one tcf of resources. The Mackenzie Valley pipeline is still under review, but once the pipeline goes ahead, it will get product from a gathering system from our wells and it will bring the product to market.

A second question was to explain the spudding process. In terms of the spudding process, the speaker said, the company starts by drilling a conductor hole with a smaller rig called a rathole rig to set the first 20 metres of pipe. It's just like a large auger. That puts in a large casing, we cement that in place, and then we mount our diverter system and then position our drilling rig and start drilling from there.

Another audience member commented that the slides seem to indicate that MGM started construction before the DPA and ADW were approved: is that correct?

The speaker responded that was correct. The company's INAC license permit came into force on November 15 and the company was out on the barges a week in advance of that. MGM has a land use permit which enables it to do preparatory work and that NEB (COGOA) regulation activity started after receiving the ADW authorization.

Another question from the floor focused on local regional authorizations, environmental impact screening committees or any other local government approvals in addition to the NEB. The speaker responded that, in terms of overall process, it really starts with putting together a proposal that goes to the environmental impact screening committee who reviews and then passes it on for further environmental review if needed. Most of subsequent regulatory approvals require proposals to be previously screened. The INAC permit, Water Board, NEB approvals, and smaller permits from the Department of Transportation are all triggered in this initial screening process. MGM applies in summer for winter projects. An NEB representative indicated that it is a parallel process: the screening committee decision goes to NEB, and the NEB waits for the committee's decision as a courtesy before proceeding to its regulatory evaluation and decision.

Another audience member wanted to know if the downhole injection was subject to the screening. Yes, it was. It was part of the project description and the Water Board application. The company applied for downhole injection and received Class B approval. Subsequently, when problems were identified, the question was raised as to whether a Class A permit was needed, rather than a Class B permit. This is why it was unclear if the company had received regulatory permission. The questioner from the floor queried: "So, despite having permissions, the regulators still took exception - correct?" The response was yes.

There was another question from the floor regarding the waste aspect of program, specifically the cuttings and fluids. The speaker was asked to explain some of the other waste aspects such as sanitation, camp waste, any oily waste, etc. How were they managed given the infrastructure of the North. The speaker noted that camp effluent is treated onsite and that they went through the process of receiving approval to spread the effluent on their roads. Before the sewage treatment was operating at full specifications, the company was hauling sewage to a lagoon in Inuvik. There were incinerators for the burnables and that was done on location, and oils and other more hazardous waste were placed into containers and sent to Alberta disposal facilities licensed to accept them.

A Water Board representative added that MGM's regulatory processes only apply in the Inuvialuit Settlement Region.

Case Study - Integrity

Cromer Meter Manifold Over Pressure

Scott Ironside, Manager, Facilities Integrity & Operational Risk Management,
Enbridge Pipelines Inc.

Enbridge Pipelines' Westspur system gathers oil from feeder pipelines in Saskatchewan and delivers it to the terminal in Cromer, Manitoba, through a 16-inch pipeline. On November 8, 2006, a 16-inch scraper pig diverted into the delivery piping and got stuck in the smaller-diameter piping. Pressure built up in the higher-rated piping behind the stuck pig, but when the pig dislodged, an instantaneous overpressure in the delivery manifold resulted, a strainer lid failed, and approximately 126 m³ of oil was released.

The normal practice is to have only two pigs in the receiving trap at any one time. However, in October, the maintenance crew failed to remove the two existing pigs before putting in two more, resulting in four pigs at the trap. While removing the pigs, the crew discovered that one of the four pigs had broken apart. The crew shut the line down, and piping to the meters was pulled apart to try to locate the fourth scraper pig. Because they were unable to find any sign of the pig, they believed the pig had broken up in the main line and brought through into the trap the next time a pig was run.

Shortly thereafter, the overpressure incident occurred. The pig had not broken up but had broken off, and had been in the 16-inch delivery pipe for 16 days. During that time, it was carried along to the 10-inch piping where it eventually lodged, it is believed, on a thermowell, a part of the instrumentation. The scraper pig blocked the flow to the manifold, causing the downstream pressure control valve to close. The operator received high pressure and low flow signals and initiated an emergency shutdown. The build-up of pressure pushed the scraper off the thermowell into the 18-inch inlet header. This pent-up pressure instantly released into the 18-inch header and the manifold system itself, causing the relief valve to open for approximately 23 seconds, at which point the strainer failed.

Before being put back into service, the system was pressure tested. A number of pieces of equipment were replaced including meters and gaskets. The strainers were all replaced. There was a review of piping information, which showed that the pipe and fittings were of sufficient strength for the pressure experienced. The fittings, flanges, and valves were assessed to ensure there was no deformation, cracking or other types of failure.

The adequacy of the manifold pressure control system design was also assessed. This was a situation of significant overpressure, so the company tried to understand how this could occur and why the system wasn't able to protect against it. Using terms from CSA Z662 Cl. 4.18.1.1, pressure is controlled using a pressure control valve automatically operated to a setpoint pressure, pressure is limited by a SCADA system that shuts down the pumps at Alida based on a set maximum discharge pressure, and pressure is relieved by a relief valve activated at 210 psi.

Some of the key insights from this incident were that the system is designed for typical upset situations, which are generally know to be an accidental closing of a valve, or perhaps due to operator error, activating flow against a closed valve. In order to be effective, this design requires that there are no potential blockages between the facility inlet valve and the relief valve, but this was an incident where such a blockage occurred. The valve and piping were designed to handle twice the capacity of the 16-inch pipe, so its design was adequate. This incident was caused by a type of line blockage that is not necessarily practical to mitigate with relief or control equipment, because the pig could have hung up at many different locations and should not have been there in the first place.

Several recommendations were made to prevent scrapers or other items from entering the facility piping, including reviewing pigging procedures with field personnel; replacing the one-piece polyurethane pigs with steel-bodied scrapers; installing new scraper bars in the delivery piping; and replacing the existing receiver with a new barred tee, valves, and closure to allow the system to operate with the bypass valve closed.

There were no questions from the floor.

 

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Date Modified:

2011-10-28