Regulating Energy Infrastructure in the 21st Century

Canadian Academy of Engineering

Peter Watson, Chair and CEO

24 June 2017

1. Regulating Energy Infrastructure in the 21st Century

Slide 1 speaking notes (click to view)

Good morning. I’m pleased to be here today to present the National Energy Board’s perspectives on regulating energy infrastructure in the 21st  century.

Over the past few years, you have undoubtedly heard about the NEB and the work we do.

You may have read about us online or in a newspaper, seen us on the news, or heard about us in Parliament during Question Period.

As Canada’s national energy regulator, the NEB is mandated to regulate interprovincial and international pipelines, which if laid end-to-end would wrap around the earth nearly 2 times.

We also regulate international and designated power lines, imports of natural gas and exports of crude oil and natural gas liquids. We are also charged with providing information and advice on energy matters. 

The NEB is a lifecycle regulator. We oversee the safety and environmental protection of a pipeline project from the application assessment phase, through to construction, operation, and eventual abandonment.

Our work places us squarely in the midst of the most important public policy debates in Canada. 

From pipeline safety, to controversial pipeline projects, to the modernization of the NEB, to the relationship Canada has with Indigenous Peoples...

The NEB is in the middle of it all.

And we do this work, so that Canadians can count on us and have confidence in how we deliver on our mandate – so that the public is safe and the environment is protected.


2. Regulating in the 21st century is increasingly challenging

  • Low public confidence
  • New players mean many narratives are intersecting where energy infrastructure decisions are made
  • Dearth of dependable energy information (whether real or perceived)

... as a result, energy regulatory processes are called into question.

An Interconnected System: Policy Gaps Cascade on Regulation

Source: Cleland, Michael and Gattinger, Monica. “System Under Stress: Energy Decision-Making in Canada and the Need for Reform”. March 2017.

Slide 2 speaking notes (click to view)

Regulating energy infrastructure in the 21st  century is increasingly challenging.

And today, I believe that the context of energy regulation is more polarized than it has ever been.

In their insightful 2017 report on the issues facing Canada’s energy system, Michael Cleland and Monica Gattinger point out that the key challenge facing regulators today is low public confidence.

They attribute this challenge to:

  • social, value and technological change; and to
  • policy gaps in climate change,
  • reconciliation with Indigenous Peoples,
  • and cumulative effects of energy development.

In the middle of these issues, they say, is the energy regulatory process, which has been called upon to adjudicate on tough policy issues that actually require processes with explicit political accountability.

Against a context in which society often distrusts authority and expertise, they continue, it is not surprising that many energy adjudication processes have become increasingly protracted and uncertain – and have failed the test of public expectations.

As a result, outcomes may be contrary to the interests of Canada as a society, without necessarily satisfying communities, businesses or advocacy groups. In short, they believe that we are all losing.

At the heart of the Board’s mandate is the public interest, which involves balancing society’s environmental, economic, and social interests.

While having the flexibility to determine the public interest is important, we also recognize improvements to the legal framework surrounding our adjudication processes and other issues of material importance, will help to deliver better outcomes for all Canadians.

To that end, we fully support the Government of Canada’s review to modernize the NEB’s role, structure, and mandate, and we are committed to helping the Government achieve its objectives.

The challenges Cleland and Gattinger identify are system challenges that a regulator cannot resolve on its on. The reviews that Government has underway must provide clarity on these key system – wide issues. That clarity coupled with changes to the NEB Act and the transformation we are already pursuing, will position us properly for the future.


3. An evolving context

The sphere in which energy regulators operate in the 21st century is in constant flux and unpredictable

The NEB is not unique; energy regulation in Canada occurs in a continually evolving environment

The Cynefin Framework

Source: Boone, Mary E. and Snowden, David J. “A Leader’s Framework for Decision Making”. Harvard Business Review. November 2007.

Slide 3 speaking notes (click to view)

Earning and maintaining the public trust is challenging in a constantly evolving operating environment.

The NEB, like many other energy regulators, has found itself working within a fluctuating context, much like those characterized in the Cynefin Framework. They range from the simple to the chaotic, and they continually test our leadership and processes.

At our core, we know that Canadians need a credible and effective energy regulator. To inject greater resiliency into our activities and build trust in the face of a challenging operating context, the NEB went back to first principles. That is, we undertook an ambitious transformation agenda to drive the outcomes of regulatory and management excellence with our eyes on rebuilding the public trust.

Our transformation included an improved internal governance structure and the institution of robust operating practices to better align our resources and activities. This change has allowed us to more effectively deliver on our core responsibilities:

  • safety and environmental oversight,
  • energy project adjudication,
  • engagement,
  • and energy information.


4. Creating alignment in a complex system

Creating alignment in a complex system: Transparency, Accountability, Performance.
  • While the policy debate continues, energy regulators must carry on with their work to ensure infrastructure remains safe and the environment is protected.
  • Demonstrating regulatory excellence, fostering trust and legitimacy.
Slide 4 speaking notes (click to view)

Our focus on transparency, accountability, and performance will help us to become a more trusted regulator. And ongoing policy discussions will lead to shifts that will ultimately create a stronger regulatory system.

Canadians need to know that while the Government continues its modernization and environmental assessment review processes, the NEB is doing more than ever to drive regulatory excellence.

Indeed, perhaps there is no better time for the NEB to focus on internal transformation.


5. Five ways the NEB is meeting these challenges

Five ways the NEB is meeting these challenges
Slide 5 speaking notes (click to view)

Departmental Results Framework:

To be a modern regulator, we must report on our performance transparently – good or bad.

This year, the Board became an early adopter of the Government of Canada’s updated Policy on Results, known as the Departmental Results Framework (or as my staff affectionately call it, the “DERF”).

The DRF outlines our four core responsibilities (Energy Adjudication, Safety and Environment Oversight, Energy Information, and Engagement).

The DRF sets a clear direction for the NEB and illustrates exactly what we do, what we aim to achieve, and how we will report our outcomes to Canadians.

This framework is our blueprint for the way forward and we are pioneering its use. And our implementation of the DRF is supported by a strong management system.

Management Systems:

We require our regulated companies to have strong management systems in place and we have applied that thinking to our own internal workings.

Our Management System provides the necessary business planning, risk and data management and governance to enable the organization to deliver the outcomes described in our DRF, and correct our course as needed.

Relentless focus on organizational improvement is imbedded throughout our Management System by continually enforcing the “Plan, Do, Check and Adjust” cycle in everything we do.

Another way we’re building public trust is through our focus on providing Canadians with unbiased factual energy and pipeline information.

Management Systems:

We require our regulated companies to have strong management systems in place and we have applied that thinking to our own internal workings.

Our Management System provides the necessary business planning, risk and data management and governance to enable the organization to deliver the outcomes described in our DRF, and correct our course as needed.

Relentless focus on organizational improvement is imbedded throughout our Management System by continually enforcing the “Plan, Do, Check and Adjust” cycle in everything we do.

Another way we’re building public trust is through our focus on providing Canadians with unbiased factual energy and pipeline information.

Energy Information Visualizations:

As part of our efforts to support energy conversations, we have introduced a number of innovative information products. I’m also pleased to say we’ve gone beyond focusing on fossil fuels and have recently published two new reports on renewable energies.

Specific examples of these products include our:

  • interactive pipeline safety map and pipeline performance dashboard,
  • energy market snapshots,
  • and interactive energy futures data visualizations.

The interactive map provides Canadians with a detailed view of where NEB-regulated infrastructure is located, right down to individual neighborhoods. Our performance dashboard presents an interactive view of all pipeline incidents reported on NEB-regulated infrastructure.

Given the complexity of energy markets and the variety of commodity types, our weekly market snapshots provide analysis on developments in energy markets and allow Canadians to stay up to date with accessible information on major developments in the sector.

And, using data from the NEB’s Energy Futures report, we have developed an interactive tool allowing Canadians to explore energy production and consumption trends, and forecast them into the future.

Cross-border Regulatory Cooperation:

As we move into the 21st  century, regulators in North America and around the world are facing many of the same issues. We must therefore work with our international counterparts to advance cooperation and knowledge across multiple fronts:

  • improved safety and environmental protection outcomes,
  • enhanced engagement,
  • better energy and pipeline information,
  • and greater transparency.

The public and industry must know that we are all committed to achieving these outcomes and rebuilding their trust in us.

I reflect on the fact that our energy markets and infrastructure are highly integrated. In 2016, $130 billion (US) dollars of energy commodities were traded between Canada, the US, and Mexico.

Our relationships and cooperative efforts therefore need to reflect this degree of integration. Whether it is through agreements with our American and Mexican regulatory counterparts to support cooperation on pipeline safety, or one of the many other cooperative agreements we have in place, we must work together to address the challenges of regulating energy infrastructure in the 21st  century.

Safety Culture:

Fostering and supporting a culture of safety within the industry we regulate is an emerging area for us and another means by which the NEB is rebuilding public trust.

The focus on safety culture has a long history in some industries, the airline industry is a good example. But our industry has been relatively slow to focus on and address safety culture.

At its core, safety culture is the attitudes, norms, values, and beliefs which a particular group of people share with respect to risk and safety. A strong safety culture scrutinizes – as a normal business function – every decision it makes to ensure that risks are managed appropriately.

To this end, we are developing a regulator safety oversight culture assessment tool to begin to measure and improve as a regulator. This leading-edge research is in addition to our work with other North American regulators to identify specific indicators that can be used to gather data on companies’ safety cultures.


6. Preventing Harm

Preventing Harm
Slide 6 speaking notes (click to view)
  • In terms of being proactive and preventing harm – a positive Safety Culture is the ultimate defence.
  • It holds the promise of moving a company well beyond compliance with standards, and facilitating systemic influence on Safety performance.
  • As we seek to positively influence industry’s safety culture, we must also consider how our own organizational values affect our decision-making and behaviors. For this reason, we have begun efforts to understand and evaluate our own internal culture.


7. Focusing on results: Adapting to an evolving context

  • Policy decisions outside of our regulatory processes are required.
  • Energy regulators can contribute to build public confidence by:
    • Leading the way in regulatory and management excellence
    • Demonstrating our performance to Canadians
    • Building and influencing a strong safety culture both internally and across our regulated companies
    • Cooperating with our regulatory counterparts
Focusing on results: Adapting to an evolving context
Slide 7 speaking notes (click to view)

So here’s what I’ve said today. Regulating energy infrastructure in the 21st  century presents considerable challenges.

Not wanting to waste a good crisis, as the expression goes, the NEB has embraced innovative approaches to demonstrate performance and excellence in all that we do. This is supported by our:

  • Support of the Government of Canada’s modernization review and interim measures,
  • internal transformation efforts,
  • early adoption of a new performance framework,
  • management systems implementation,
  • push of energy and pipeline information,
  • focus on safety culture, and
  • regulatory cooperation

These initiatives will support strong safety and environmental outcomes in the coming years.

Indeed, we believe this is the best way forward to continue our leadership in regulating Canada’s energy infrastructure and building the public’s trust. Thank you.




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