In the Eye of the Storm
Speech to the Economic Club of Canada
Canadian Energy Summit 2014
By Peter Watson, Chair of the National Energy Board
Friday, November 21, 2014
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- The topic I will be speaking about today is:
- “IN THE EYE OF THE STORM” - Pipelines and the National Energy Board”
- Over the past few years, the National Energy Board has found itself in unfamiliar territory...
- on the front page of newspapers across Canada.
- And the demands on us seem to hit all of the major energy issues in twenty-first century Canada;
- to lead the climate change debate,
- to increase market access for Canada’s energy,
- to allow more people to participate in our process,
- to cut red tape,
- to go faster,
- to go slower,
- to ensure that pipelines never fail,
- and to answer to all the voices in the debate and to remain neutral through it all.
- It is a unique place for the National Energy Board, because for decades, Canada’s national energy regulator had a very low profile.
- The NEB quietly processed applications. The public and media paid little attention.
- But in recent years, things changed.
- In 2008, the NEB had a total of 80 calls from the media.
- Last year, the NEB had over 600 media calls.
- In 2006, the NEB had 8 interveners at a TransMountain pipeline hearing for a project that went through a National Park.
- Today, there are 400 interveners at the NEB’s hearing into the Kinder Morgan TransMountain pipeline project.
- For some, the game changer was the 2010 BP Horizon blowout where millions of barrels of oil spilled into the Gulf of Mexico.
- For others, it was the Enbridge pipeline rupture in Kalamazoo, Michigan later that year.
- And when the Northern Gateway Joint Review Panel completed its work in 2013, it had reviewed feedback from 1,450 participants and received 9,500 letters of comment.
- And very soon when the Energy East pipeline hearing begins, we estimate that over 5,000 people will be participating in the process.
- This review could very well be the biggest hearing in the history of the National Energy Board.
- It will examine the longest proposed pipeline project the Board has ever reviewed.
- The energy debate in Canada is complicated; it provokes strong and often polarized opinions.
- And the NEB often finds itself as a central figure in the stories spun out into the public arena.
- So today, I want to examine three questions, and discuss how the NEB came to be in the ‘eye of the storm.’
- The first question is - what is the NEB? What is its mandate?
- Second, who is the NEB? Who are the faces behind the institution? And more importantly, what is their character?
- And third, why does the NEB find itself in the eye of the storm and what are we doing about this?
- I will then conclude by discussing pipeline safety.
- But first, I wanted to share with you, a little about me.
- I was born and raised in Alberta, and went to University in Alberta.
- Prior to joining the NEB, I spent thirty one years in the Alberta public service.
- That work included time as Deputy Minister of the Environment, Deputy Minister of Energy, and Deputy Minister of Executive Council and head of the Alberta Public Service.
- What I have found in my career to date is that the public rhetoric about energy vs. the environment is too often polarized - framed as right or wrong, with winners and losers.
- In my experience it is not that simple - it is not an EITHER/OR discussion, but rather a BOTH/AND discussion.
- And that is perhaps the most fascinating part of Canada’s National Energy Board - it is one of the few institutions in this country that can work towards balancing these disparate views on specific projects.
- As every project we examine is reviewed on a number of criteria - including the environmental, the economic and the social aspects of the proposal.
1. What is the NEB?
- So let me tell you about the National Energy Board.
- The NEB is a quasi-judicial, independent body created by Parliament in 1959 to regulate international and interprovincial aspects of the oil, gas and electricity industries.
- We regulate pipelines, energy development and trade in the Canadian public interest.
- We are accountable to Canadians through Parliament - and we function at arm’s-length from Government.
- Doesn’t sound like a place you’d expect to be in the ‘eye of the storm’...does it?
- Today, the NEB regulates about 73,000 km of international and interprovincial pipelines and about 1,400 km of international power lines.
- Those pipelines ship about 134 billion dollars’ worth of oil and natural gas every year and the power lines transmit about 2.7 billion dollars’ worth of electricity in and out of Canada annually.
2. Who is the NEB?
- So who is the NEB? Who are these people that work in the ‘eye of the storm’? What is their character?
- The National Energy Board has a huge technical resource of about 450 staff.
- It includes engineers, inspectors, engagement staff, and environmental specialists, among many others.
- The NEB has 13 permanent and temporary Board Members that are appointed by the federal government.
- From BC to Nova Scotia to the North West Territories - and many points in between, we have a highly accomplished Board.
- They range from biologists to farmers to engineers to life-long public servants to lawyers.
- So what is the overall character of the staff and Board of the NEB?
- First, they care. They feel personally responsible for helping to ensure the safety of energy infrastructure within communities, on First Nations lands, as well as on private lands.
- Their work in the community starts even before an application for a pipeline is made, and they oversee safety for the full lifecycle of a pipeline - from concept, to its construction and operation, and then to its eventual safe abandonment.
- They also have tremendous expertise. Many staff at the NEB would be among the most knowledgeable professionals in the pipeline and regulatory business.
- They have a passion for public service and a commitment to fairness, taking responsibility and doing the right thing.
- They also have the dedication and capacity to deliver.
- Last year, they carried out almost 300 compliance actions - ranging from inspections to audits to emergency exercises - and every day they work diligently to strengthen all aspects of our pipeline oversight.
- When pipeline companies do not do what they are supposed to - the NEB takes action.
- We have been given powerful tools designed to get a company back on track and discourage them from making the same mistakes again. This includes,
- issuing fines,
- lowering the amount of product they are allowed to move through their pipelines,
- or shutting them down completely.
- No matter what action we take, the goals are always the same - keep pipelines safe and protect the environment.
3. Why in the Eye of the Storm? What are we doing about it?
- So, why does the NEB find itself in the eye of the storm, and what are we doing about it?
- First, energy and environmental issues are more interconnected than ever before.
- Climate change and the debate around forms of energy that power our economy are global and systemic issues that people are passionate about.
- The big question being, why doesn’t the NEB take into account greenhouse gas emissions from the oil sands when it holds hearings for pipelines that propose to carry oil sands crude?
- Let me be clear - we at the NEB care about climate change.
- When we carry out pipeline reviews, we examine the greenhouse gas emissions that would emit directly from the construction and operation of that pipeline.
- But as you would expect, those emissions are small.
- Let me also be clear that the NEB does NOT have the authority to regulate the greenhouse gas emissions that occur when the crude oil is being extracted from the oil sands upstream of the pipeline,
- that authority rests with provincial regulators.
- And we do NOT have the authority to regulate the emissions that would occur when the oil in an NEB regulated pipeline is burned to power a manufacturing plant or a car,
- that authority also rests with other regulators.
- Nor can we allow our hearings to become bogged down in a discussion on climate change policies, carbon pricing strategies, or restrictions on the use of fossil fuels. These discussions are the purview of governments.
- At the NEB, we do our job. And Parliament has clearly mandated what our job is.
- Our job at the NEB is to assess the need for new cross-border energy infrastructure and make sure it can be constructed and operated safely.
- Our job is not to conduct a referendum on society’s use of fossil fuels every time a company proposes to build a pipeline.
NEB Independence - Can Canadians trust us?
- Second. People are also questioning the independence of the NEB and whether they can trust us.
- In fact, during my short time at the Board, I have been accused of being in the back pocket of both industry and the federal government.
- So let’s deal with industry first.
- The National Energy Board’s budget is cost-recovered by a levy imposed on industry, the levy being akin to a tax.
- However, the public perception of cost recovery can be that we are obligated to rubber stamp every pipeline project that gets proposed. That is not true.
- You should think of the levy like the concept of “polluter pays” - or in other words - those who create the burden, or the need for oversight, pay the freight.
- Our Board Members and staff are bound by strict codes of conduct and conflict of interest requirements, which were created to ensure that they do not have any bias on matters before the NEB.
- We do not feel indebted or obligated to industry in any way.
- I also want people to know that we have denied applications in the past, although admittedly not very frequently.
- In some cases, companies withdraw an application if NEB testing uncovers flaws that are not fixable.
- But more often, once an application has been tested by the NEB - and the company incorporates the changes committed to during the assessment process - it is likely that the project can be constructed and operated safely.
- Every project undergoes a rigorous, science-based testing that is among the highest - if not the highest - standard for assessment in the world.
- And then - not only is an application for a pipeline subject to rigorous testing by the NEB staff, members and participants, they are always subject to further conditions attached to the approval.
- Those conditions often cost the pipeline company millions of dollars to implement, and quite frankly, are another example of the independence of the NEB from industry.
- Most importantly, when a project is approved by the NEB, we are very confident that it can be built and operated safely.
- And if we see evidence that the people operating the pipeline aren’t operating it safely - or if the project’s conditions are not being met - we will put a stop to the pipeline.
- And we have done that.
Independent from Government
- The NEB is also independent from government in our regulatory decision-making role. We report to Parliament - the elected representatives of Canadians.
- The only way the Government can tell us what to do is to get changes to our Act passed through Parliament or to make orders to us through the ways set out in the NEB Act.
- Otherwise, if any government in Canada - provincial, federal or municipal - wants to tell us something about a project, they have to apply to participate in a hearing, just like everyone else, and provide us with the evidence and arguments that they feel are relevant.
Hearing Time Limits
- Now, some have suggested that recent legislative changes enacted by Parliament regarding timelines for our review process, have struck at the heart of our independence and put us under the thumb of the Minister.
- We are now subject to a 15 month legislated time period, during which we need to;
- run a fair process (whether written or oral, or both),
- analyze a highly technical application,
- undertake a comprehensive environmental assessment,
- prepare reasons,
- and then have them translated into both official languages.
- And in those 15 months, we need to hear from people who are directly affected by the specific proposed project, as well as from those who have relevant information and expertise related to that project.
- It sounds daunting, doesn’t it? But I’m here to tell you that we believe this is doable.
- Not only do we believe it is doable from a process perspective, it also aligns better with Canada’s economic cycles.
- The assessment of the feasibility of a pipeline cannot be held up for years - the market will not wait, and opportunities are lost when decisions cannot be made in a timely manner.
- This is not good for Canada or for Canadians.
- Now, having said that, you need to know that I will not hesitate to seek an extension to a hearing beyond the 15 months if we need to get additional information to make our decision - or if we believe we need more time for intervenors to be fairly and properly heard.
- That is our obligation and duty to Parliament and to Canadians.
- Each independent NEB hearing panel has the tough job of deciding what is relevant to the application before them.
- They also have the tough job of determining;
- how best to receive that information,
- how to test it's credibility,
- and how much weight it should receive in their deliberations.
- They do this all - while being mindful of the many participants’ interests and desires, and Parliament’s intent regarding timelines.
- Meeting the time limit is achievable, and has been achieved in the past. However, it requires rigour in our process and in our actions - we need to be efficient and fair.
- If a panel does not require oral cross examination to test the quality of evidence, then they make the call not to use precious time for something that is not needed.
- Like any tribunal, the NEB has lots of experience with witnesses and lawyers grandstanding, rambling, and wasting time in oral public hearings (that applies to both applicants and intervenors).
- That is not fair to anyone and it does not add to the quality of the analysis and recommendations.
- So, we have a difficult job to do...managing all the demands in our hearing processes...many of them relevant and focused - and some of them not.
- The legislation outlining the length of our reviews clearly shows the intent of Parliament - and we are comfortable with that.
- And with that intent in mind, we will move forward unfettered....and ensure our decisions are fair and reasonable.
- As I said, I will not hesitate to seek an extension...but only when the evidence supports it and it is required.
- we will not let our processes become a popularity contest.
- Another one of the issues we face is the concept of public consultation
- Jeffrey Simpson recently wrote a very good column asking ‘what does it mean to be consulted?’
- He then outlined the exhaustive multi-year process that the Joint Panel on the Northern Gateway pipeline went through: all of the communities they visited, all of the days of hearings they held, and all of the letters they received.
- And at the end of his column he wrote, “...we seem to have reached a point where even the most exhaustive examination by an apparently expert panel does not provide for enough consultation...if this kind of process does not cut it, has anyone got a better idea?”
- For us at the NEB - it is an important question.
- Because many of my 450 colleagues at the NEB literally lived and breathed the Northern Gateway hearing for years.
- In my short time at the Board, I have asked many people that were part of that hearing if they have a better idea on how we can consult Canadians.
- The conclusion I have come to does not necessarily involve the hearing process or the hearing room.
- Because the quasi-judicial nature of a hearing is probably part of the problem when it comes to the NEB building a better relationship with Canadians...as hearings are rule-bound, impersonal and just downright intimidating.
- Not to mention that many people who want to say something to us will not be considered directly affected and so won’t be able to participate in a hearing.
Listening to Canadians
- In order for the Board to effectively serve the Canadian public, people need to have confidence in the NEB and believe in the Board’s ability to enforce rules and regulations that are in place to protect Canadians and the environment.
- And with all the attention on the NEB because of its role in energy development, there has never been a better time to tell our story...and to listen to Canadians outside of the hearing process.
- And I - as the NEB’s Chairman - need to spend more time sitting across the table from Canadians and community leaders, listening to their concerns about the pipelines we regulate.
- And in particular, we must spend more time engaging Aboriginal communities.
- Hopefully the outcome of this will be better relationships, and improved trust and confidence in the NEB.
- So stay tuned - the NEB is looking at ways that we can better connect with Canadians - and we will let you know about our plans very soon.
Action on Safety
- The final issue that I want to discuss is pipeline safety.
- And rest assured that at the NEB, we will never take pipeline safety for granted.
- As I’ve mentioned, the NEB’s inspectors and operations staff carried out almost 300 compliance actions last year - ranging from inspections to audits to emergency exercises.
- And every day they work diligently to strengthen all aspects of our pipeline oversight through amendments to regulations requiring more from companies, rigourous testing of pipeline applications, and the imposition of strict conditions.
- And that oversight has led to some interesting results.
- Every day about 3 million barrels of oil are transported in NEB regulated pipelines in Canada. Of all that oil, only about 300 barrels leaked from NEB regulated pipelines in 2013 - and that was from 9 different incidents.
- Now, some might say that 300 barrels is an extremely low number...but at the NEB we still think it is too high - we never rest easy on safety and environmental protection.
- We all know that the industry has had some very catastrophic incidents in the past....and if we are complacent - then the conditions will surface again for another catastrophic incident to occur.
- Our objective must be to continually strive for zero incidents.
- In Canada today, the public must have confidence that pipelines will be safe.
- So our plan is to continue to raise our performance on safety oversight.
- We will do that through improving what I call ‘safety culture.’ Let me explain what that means.
- Safety culture means managing every aspect of business that could affect safety and the environment - from hiring and budgets - to what a company decides its business priorities should be.
- When a company has a strong safety culture, everyone - no matter what job they do - is empowered to make important decisions on safety. Those actions are not just supported - but are rewarded by leaders.
- I’ve heard the word culture defined as “the way things work around here” - so if you think of it that way - the NEB expects pipeline companies to ensure the ways things work around here is an obsessive focus on putting safety first in everything they do.
- And when we look in the mirror at the NEB, we will put an obsessive focus on improving our quality systems for regulatory oversight.
- So that we will never take the role we play in supporting safety - for granted.
- We will work with companies - and alongside communities - and share the same goal of making Canada’s pipelines the very safest they can be.
- In closing. I have to tell you that the view from the ‘eye of the storm’ is unique.
- While controversy and change swirl around us, the centre of the storm has to remain calm.
- For the NEB to remain relevant we need to be composed and absolutely committed to listening to Canadians and to helping ensure that the pipelines we regulate are safe and can be made even safer.
- You have my personal commitment that we will do both. Thank you.
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