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Chapter 10
National Energy Board
lifespan regulation

The National Energy Board is committed to doing all it can in overseeing every stage of this project, if it is built. This means that the National Energy Board will to see to it that the Proponents keep their promises and that all conditions attached to the approvals will be implemented. If people of the Northwest Territories have any concerns with the project, the National Energy Board will be there to resolve those concerns. The National Energy Board will be there to inspect, audit and work in collaboration with Northern agencies while the pipeline is operated and will still be there many years from now when the pipeline needs to be abandoned. Abandonment will be approved when it can be done safely while protecting the environment.

If people have concerns throughout the life of the project, and cannot resolve a matter directly with the company, they can speak to a National Energy Board inspector or call toll free, 1-800-899-1265. Regulatory documents including those filed as a result of National Energy Board conditions can be found on the National Energy Board's website at: www.neb-one.gc.ca. On the right side of the page under the heading “Regulatory Documents” click on “View”.

Details on the National Energy Board's lifespan approach to regulation follow.

10.1-Regulation under the National Energy Board Act

The National Energy Board is responsible for assessing applications for pipeline projects to determine if they are in the public interest. If a project is approved, the National Energy Board then regulates it throughout its entire lifespan, from the application phase, through construction and operation, and finally to the abandonment phase (see Figure 10-1).

The primary tools used by the National Energy Board to regulate the over 71,000 kilometres of pipeline within its jurisdiction are the Onshore Pipeline Regulations, 1999, the National Energy Board Processing Plant Regulations; the National Energy Board Pipeline Crossing Regulations Part I and Part II; the Toll Information

Regulations, and the Gas Pipeline Uniform Accounting Regulations or Oil Pipeline Uniform Accounting Regulations. These regulations require that a number of programs, plans and manuals be established and information be provided. As part of its overall responsibility for regulating energy facilities the National Energy Board also:

  • issues safety advisories;
  • conducts inquiries or formal investigations into safety issues;
  • addresses landowner complaints;
  • inspects; and
  • conducts financial, safety, environment and security audits.

In addition to the regulations, the National Energy Board's Filing Manual provides guidance to companies on what information must be filed in a project application and in financial surveillance reports.

10.1.1-The application stage

Applications for major projects are generally heard by way of oral public hearing. This allows the company proposing the project, and any other interested people or groups, a chance to provide information on the project and to provide input in support of or against a project. A hearing gives all of the people interested in a project an opportunity to provide evidence, ask or answer questions and express their point of view on the project. It also provides the National Energy Board with the information needed to make a fair and objective decision.

When assessing an application the National Energy Board considers what additional measures should be required of a company during construction and operation of the project if it were to be approved. These measures become conditions to an approval issued by the

National Energy Board. The company must meet all of the conditions set by the National Energy Board. Some examples of conditions include:

  • restrictions on the timing of construction;
  • imposing measures which limit impacts on the land;
  • requiring a noise level report;
  • conducting a rare plant study; and
  • requiring the filing of a joining program.

During the hearing, the National Energy Board considers all information that is relevant to the question of whether or not the application should be approved.

10.1.2-Monitoring and enforcement

Pre-construction and construction

If the National Energy Board approves a project, its oversight is directed toward ensuring that the project is built in compliance with regulations and the conditions that were placed on the

Figure 10-1 Regulation by the National Energy Board throughout a project’s lifespan

Figure 10-1 Regulation by the National Energy Board throughout a project's lifespan

approval. Conditions of approval are project-specific and based on the hearing's evidentiary record and the experience of the National Energy Board in dealing with pipeline matters. The company is obligated to follow through with all of these conditions and the National Energy Board makes sure it does through various means including the review of submitted plans, reports, and manuals. If input is required from another party the nature of that input is specified in the conditions and regulations. The company is expected to confirm that this input has been received and incorporated as appropriate. The company's submissions and the correspondence of the National Energy Board are accessible from the regulatory repository.

During the construction stage, the National Energy Board conducts inspections to verify that approved facilities meet the requirements of the Acts, regulations, and conditions associated with approvals. National Energy Board inspectors document the results of the inspections, follow-up on outstanding issues, and provide feedback on observations in the field.

The frequency and type of inspections depend on several factors, including the:

  • complexity of the project;
  • safety and environmental issues identified during the application and the construction phase;
  • observed compliance history of the company; and
  • the performance of the company on the specific construction spread at hand.

 

Inspections are focused on the right of way and above-ground facility locations. Inspectors work in collaboration with other regulators to ensure that there are no regulatory gaps and to minimize regulatory overlap.

Inspections and monitoring activities by the National Energy Board include:

  • verifying compliance with, and assessing the effectiveness of, mitigation measures, conditions, and environmental protection plans;
  • verifying compliance with the appropriate standards and regulations; and
  • monitoring construction and operations, including verifying construction progress reports.

If inspectors find that the company is not meeting the conditions or the regulations, the National Energy Board takes action to enforce them.

The National Energy Board enforces safety and environmental commitments and requirements. If we find a company is not meeting its commitments and requirements we immediately ask the company to voluntarily correct the situation. If a situation cannot be corrected immediately, or if additional information is required from a company, the National Energy Board's Inspection Officers may ask for a written assurance of voluntary compliance from the company. The company must later confirm that compliance was achieved.

Inspection Officers appointed under the National Energy Board Act can also issue an order where there are reasonable grounds to believe that a hazard to the safety of the public or employees of a company, or a detriment to property or the environment, is being or will be caused by the construction, operation, maintenance or abandonment of a pipeline. The order may direct the company to undertake certain work or stop its construction until that work has been completed. These orders may be converted into court orders to be enforced in the same manner as an order of that court if the company does not comply.

Public concerns can vary throughout the different stages of a project's life. For example, a potential environmental issue may be noticed first by people in the vicinity of the facilities. People who have concerns with a pipeline project may contact the National Energy Board at any time for information on how to work through their concerns with the company. The National Energy Board provides various ways that these concerns can be brought forward for resolution.

The National Energy Board's Complaint Resolution Program and the Appropriate Dispute Resolution process are options for resolving outstanding issues. Appropriate Dispute Resolution could take the form of

a meeting between a concerned person and the company, which may be facilitated by our National Energy Board staff or by another neutral third party. During construction, National Energy Board staff is often out in the field inspecting the project and can be contacted directly. As well, the National Energy Board can be contacted by phone, mail, fax or e-mail.

After completion of construction, the National Energy Board will continue to monitor the right of way to verify the ongoing success of environmental and geotechnical mitigation

Did you know?

Physical monitoring and surveillance program

A monitoring and surveillance program consists of two parts. The monitoring is aimed at identifying any issues or potential concerns that may compromise the pipeline, property, persons and the environment (e.g., pipeline integrity or erosion, and security). It may include methods for developing measures to prevent or mitigate the impact of the identified issue(s). The program may also dictate:

  • follow-up monitoring of sites where mitigative measures have been undertaken, in order to determine their success or failure;
  • a system for implementing additional mitigative measures as needed; and
  • a feedback system that allows for successful mitigation to be adapted to future pipeline projects.

The surveillance component of the monitoring program focuses on the company's activities, its contractors or the public. For example, ensuring that contractors adhere to the environmental requirements of a task, that encroachments upon rights-of-way are detected, and that adjacent construction activities are known. A monitoring and surveillance program can include aerial patrols, in-line inspection, soil-to-pipe surveys, erosion monitoring, and slope stability monitoring. Relevant environmental practices such as those for managing materials storage and waste, monitoring air quality and water quality can all be contained within the monitoring and surveillance program.

measures. This is usually done using inspections in the field as well as reviewing reports submitted by the company.

Operations

Requirements for companies operating National Energy Board regulated pipelines are set out in the Onshore Pipeline Regulations, 1999. As mentioned previously, specific programs, plans and manuals are required under these regulations. For example, creating and implementing a Monitoring and Surveillance Program and an Integrity Management Program are mandatory requirements of the Onshore Pipeline Regulations, 1999.

Monitoring activities by National Energy Board staff during the operations phase include:

  • inspections of the facilities and right of way;
  • conducting management system audits to verify that National Energy Board regulatory requirements have been and will continue to be met;
  • assessment of safety practices and procedures under the National Energy Board mandate as well as through the Canada Labour Code Part II on behalf of Human Resources Skills Development Canada;
  • review and assessment of a company’s integrity management and environmental protection programs;
  • conducting financial audits to verify compliance with financial regulations and other National Energy Board requirements; and
  • review of financial surveillance reports and annual filings.

The National Energy Board is as accessible to the public during operations activities as it is during construction, and will follow up on any issues that are brought forward.

10.1.3-Abandonment

When a facility under the National Energy Board's jurisdiction comes to the end of its useful life the company must apply for permission to abandon it. A public hearing is required for an abandonment application. This gives the public an opportunity to express their views about whether the proposed abandonment procedures would provide for adequate safety and protection of the environment. Before allowing the abandonment to proceed the National Energy Board must be satisfied that the abandonment will be carried out in a way that is safe, protects property and protects the environment. The National Energy Board expects that companies will discuss abandonment plans with landowners to ensure that concerns are dealt with at the planning stage.

In order to abandon a facility the company must comply with all regulations and conditions imposed by the National Energy Board. Abandonment procedures typically involve the removal of surface installations and the restoration of the land. Buried pipe may either be removed or left in place, depending on the best way of addressing safety and environmental concerns. The procedures are different for each abandonment depending on the location of

Did you know?

Goal-oriented regulation

Methods of regulation are often characterized as either prescriptive or goal-based. Both methods have strengths and weaknesses and both are in common use. The choice between them can depend on the nature of the activity being regulated.

Prescriptive regulation works well to set compulsory requirements, such as design or the reporting of incidents where, regardless of the circumstances or the location of the facilities, the requirements should not vary. The main weakness of prescriptive regulation is its inflexibility. It can block the introduction of innovative new ideas and technology and can be insensitive to unique or changing circumstances.

Goal-based regulation allows the company to adapt required programs and manuals to suit its business and the environment in which it operates. It also encourages innovation and can lead to safer systems. Weaknesses include higher costs to enforce and the potential lack of transparency to the public.

The National Energy Board has taken the best from both methods and called it goal-oriented regulation. Prescription is used when compulsory means of compliance are desired. Goals are used when circumstances can differ greatly among the regulated companies or where superior outcomes are likely to be achieved through innovation or new technology. For example, the National Energy Board's Onshore Pipeline Regulations, 1999 rely on CSA Standard Z662 – Oil and Gas Pipeline Systems, in which most of the technical requirements are set out in prescriptive terms. Specific programs, manuals and plans must be in place but the content of these documents is guided by goals. The National Energy Board evaluates the company's compliance with regulations using audits and inspections.

Append

 

the facility, the operating history of the facility, and the future uses proposed for the land. The company's abandonment plan would typically address key issues that relate to public safety, environmental protection, and future land use. These include:

  • land use management;
  • ground settling;
  • soil and groundwater contamination;
  • pipe cleanliness;
  • water crossings;
  • soil erosion;
  • utility and pipeline crossings;
  • creation of water conduits, where water travels through the pipeline; and
  • related pipeline equipment (e.g. risers, valves, piping, etc.).

When the National Energy Board is satisfied with what the company has done, the abandonment order takes effect. At this point the facility is considered abandoned and is no longer under the jurisdiction of the National Energy Board.

To guide the development of abandonment plans, the National Energy Board has several proposed principles for the end state of land, as shown in Table 10-1.

In January 2008 as part of its Land Matters Consultative Initiative, the National Energy Board convened a public hearing, RH-2-2008,

to consider the financial issues related to pipeline abandonment. As a result, all pipeline companies regulated under the National Energy Board Act will be required to file, for approval, a proposed process and mechanism to set aside funds for abandonment. Pipeline companies are expected to demonstrate to the National Energy Board how the mechanism they have chosen meets the goal of ensuring that adequate funds will be set aside to cover all pipeline abandonment activities. Since the Mackenzie Valley Pipeline was applied for pursuant to the National Energy Board Act, these requirements would automatically apply to it.

The Mackenzie Gathering System was applied for pursuant to the Canada Oil and Gas Operations Act rather than under the National Energy Board Act. Our Condition 4 in the Miscellaneous Order for Mackenzie Gathering System Tolls (Appendix N) requires that, at least 18 months prior to the Mackenzie Gathering System being placed in service, the Proponents must prepare and file for approval, an estimate of abandonment costs, a proposal for the collection of funds and a proposed process and mechanism to set aside the funds. The requirements are therefore the same for both the Mackenzie Gathering System and the Mackenzie Valley Pipeline.

Table 10-1 Principles for the end state of land post-retirement

Table 10-1 Principles for the end state of land post-retirement

Concern

Principle

Responsibility

Facility owners and operators are responsible for the retirement of facilities and reclamation of the right of way as well as any liabilities arising from those facilities post-retirement.

Retirement and reclamation planning

Persons and groups potentially affected by the retirement of facilities are invited to be involved in the development of retirement and reclamation plans specific to those facilities.

 

A retirement and reclamation plan deals with the retired facility in such a manner that the risk to public safety, property and the environment is at a level that is acceptable in the public interest, with the agreement of affected parties where possible, but ultimately as determined by the Board.

 

Consideration is given to reuse and recycling of facilities in identifying retirement options.

End state of land

Retirement and reclamation returns the right of way to a state comparable with the surrounding environment. Facility owners and operators should accommodate the desired land use of those who are affected when it is reasonable to do so.

 

In natural environment areas, or where rare or sensitive native plant species and communities are present, reclamation promotes the eventual re-establishment of habitat quality on lands affected by right-of-way development to as native a state as is consistent with the current and surrounding land use.

Performance measurement

Measuring the performance of retirement and reclamation plans is required to facilitate continual improvement and to assess effectiveness.

10.2-Economic regulation

Once a pipeline is approved, the National Energy Board regulates the tolls and rules for transportation on the pipeline. Some of the costs that can be included in tolls include operating expenses, depreciation, return on capital, and income and other taxes. Tolls can be set for a year or for multi-year periods. The National Energy Board adjudicates and sets tolls when there is a disagreement between shippers and the pipeline company, or it can accept a negotiated settlement. However, the existence of a negotiated settlement does not limit the authority of the National Energy Board. The National Energy Board will determine that the tolls are just and reasonable before it will accept them. At any time, applications and complaints about tolls, tariffs and access to the pipeline may be filed with the National Energy Board.

The National Energy Board's Gas Pipeline Uniform Accounting Regulations and Oil Pipeline Uniform Accounting Regulations establish a uniform system of accounts for Group 1 companies. Group 1 companies are required to file a surveillance report four times a year, on the basis of the Toll Information Regulations. These reports provide details of financial performance and explain any significant variations from approved amounts. The National Energy Board will audit a pipeline company's records to verify the accuracy of filed documents and compliance with the National Energy Board's decisions, regulations and other directives.

10.3-Regulation, monitoring and enforcement under the Canada Oil and Gas Operations Act

The Mackenzie Gathering System, including gathering pipelines upstream of the Inuvik Area Facility, the Inuvik Area Facility and the natural gas liquids pipeline, has been applied for under paragraph 5(1)(b) of the Canada Oil and Gas Operations Act. By use of conditions these facilities would be regulated in a manner that is similar to regulation of the Mackenzie Valley Pipeline under the National Energy Board Act. The National Energy Board would regulate the tolls and rules on the Mackenzie Gathering System under the Canada Oil and Gas Operations Act with toll and tariff legislation that is very similar to the National Energy Board Act.

The Development Plans for the Niglintgak, Taglu and Parsons Lake fields have also been applied for under the Canada Oil and Gas Operations Act. Upon National Energy Board approval of a Development Plan and consent of the Governor in Council in relation to Part I of the Development Plan pursuant to paragraph 5.1(4) of the Canada Oil and Gas Operations Act, any work or activity relating to that field can only commence after the operator submits an application under paragraph 5(1)(b) of the Canada Oil and Gas Operations Act for that work or activity and obtains authorization from the National Energy Board.

An authorization under paragraph 5(1)(b) of the Canada Oil and Gas Operations Act is required for work and activities in relation to a Development Plan which may include drilling, well completions, facilities construction, production operations, and decommissioning. In accordance with section 6 of the Canada Oil and Gas Drilling and Production Regulations, an application for an authorization under paragraph 5(1)(b) of the Canada Oil and Gas Operations Act should contain the following:

  • a description of the scope of activities;
  • an environmental protection plan;
  • a safety plan; and
  • a contingency plan.

In accordance with section 5 of the Canada Oil and Gas Drilling and Production Regulations, an applicant for an authorization under paragraph 5(1)(b) is required to develop an effective management system that includes processes for setting goals for the improvement of safety, environmental protection and waste prevention.

The National Energy Board would assess each application for work or activity submitted under paragraph 5(1)(b) including assessment of the accompanying environmental protection plan, safety plan and contingency plan to verify that the work or activity:

  • is within the scope of and consistent with the approved Development Plan;
  • complies with terms and conditions outlined in the National Energy Board’s approval of the Development Plan;
  • complies with the Canada Oil and Gas Operations Act and its regulations, which promote, for the exploration for and exploitation of oil and gas:
    • safety, particularly by encouraging persons exploring for and exploiting oil and gas to maintain a prudent regime for achieving safety;
    • protection of the environment;
    • conservation of oil and gas resources;
    • joint production arrangements; and
    • economically efficient infrastructures.

Depending on the work or activity, the environmental review of the proposed paragraph 5(1)(b) work or activity may be coordinated with other appropriate regulatory bodies. A National Energy Board authorization under paragraph 5(1)(b) of the Canada Oil and Gas Operations Act would include any appropriate terms and conditions.

In order to drill, re-enter, work over, complete or recomplete a well or suspend or abandon a well or part of a well a company requires a well approval from the National Energy Board in accordance with section 10 of the Canada Oil and Gas Drilling and Production Regulations. The National Energy Board would assess each application for a well approval to verify the following:

  • compliance with the terms and conditions of the authorization under paragraph 5(1)(b) of the Canada Oil and Gas Operations Act;

 

  • it is within the scope of and consistent with the Environmental Protection Plan, safety plan and contingency plan;
  • it is within the scope of and consistent with the approved Development Plan;
  • compliance with terms and conditions outlined in the National Energy Board’s approval of the Development Plan;
  • compliance with the Canada Oil and Gas Operations Act, the Canada Oil and Gas Drilling and Production Regulations and other Canada Oil and Gas Operations Act regulations.

Any well approval granted under section 10 of the Canada Oil and Gas Drilling and Production Regulations by the National Energy Board would contain appropriate terms and conditions.

After the National Energy Board issues an authorization for a work or activity under paragraph 5(1)(b) of Canada Oil and Gas Operations Act including a well approval under section 10 of the Canada Oil and Gas Drilling and Production Regulations, the National Energy Board will periodically conduct inspections and audits of field operations to verify compliance with the applicable Canada Oil and Gas Operations Act regulations, terms and conditions of the Development Plan approval, the 5(1)(b) authorization and/or well approval, and other matters relating to environmental protection, safety, and conservation of oil and gas resources.

Enforcement of the Canada Oil and Gas Operations Act and its regulations for safety are carried out by the Chief Safety Officer and Safety Officers. Verifying compliance for environmental protection and oil and gas conservation matters is within the mandate of the Chief Conservation Officer and Conservation Officers. Conservation Officers and Safety Officers work in collaboration with other regulators to ensure that there are no regulatory gaps and to minimize regulatory overlap.

Throughout the lifespan of a project, the National Energy Board will monitor drilling, completions, facilities construction, production operations, and decommissioning with inspections and management system audits. Information on condition tracking, inspection reports and other compliance information is used by the National Energy Board to improve its internal processes, track condition compliance and non-compliances, and to establish the need and frequency of future inspections and audits.

The frequency and type of inspections depend on several factors, including the:

  • complexity of the project;
  • safety and environmental issues identified during the application and prior activity phases; and
  • observed compliance history of the company.

Inspections and monitoring activities by the National Energy Board include:

  • verifying compliance with, and assessing the effectiveness of, mitigation measures, conditions, and Environmental Protection Plans and safety plans;
  • verifying compliance with the appropriate standards and regulations; and
  • monitoring drilling, facilities construction, production operations, and decommissioning.

If cooperative approaches to compliance are not successful, Safety Officers may issue orders about safety and the Chief Conservation Officer may order operations to be shut down, if necessary, to prevent damage to persons or property, to protect the environment or to prevent waste.