Bill C-46 (Historical)

Pipeline Safety Act

An Act to amend the National Energy Board Act and the Canada Oil and Gas Operations Act

This enactment amends the National Energy Board Act and the Canada Oil and Gas Operations Act in order to strengthen the safety and security of pipelines regulated by those Acts.
More specifically, the enactment, among other things,
(a) reinforces the “polluter pays” principle;
(b) confirms that the liability of companies that operate pipelines is unlimited if an unintended or uncontrolled release of oil, gas or any other commodity from a pipeline that they operate is the result of their fault or negligence;
(c) establishes the limit of liability without proof of fault or negligence at no less than one billion dollars for companies that operate pipelines that have the capacity to transport at least 250,000 barrels of oil per day and at an amount prescribed by regulation for companies that operate any other pipelines;
(d) requires that companies that operate pipelines maintain the financial resources necessary to pay the amount of the limit of liability that applies to them;
(e) authorizes the National Energy Board to order any company that operates a pipeline from which an unintended or uncontrolled release of oil, gas or any other commodity occurs to reimburse any government institution the costs it incurred in taking any action or measure in relation to that release;
(f) requires that companies that operate pipelines remain responsible for their abandoned pipelines;
(g) authorizes the National Energy Board to order companies that operate pipelines to maintain funds to pay for the abandonment of their pipelines or for their abandoned pipelines;
(h) allows the Governor in Council to authorize the National Energy Board to take, in certain circumstances, any action or measure that the National Energy Board considers necessary in relation to an unintended or uncontrolled release of oil, gas or any other commodity from a pipeline;
(i) allows the Governor in Council to establish, in certain circumstances, a pipeline claims tribunal whose purpose is to examine and adjudicate the claims for compensation for compensable damage caused by an unintended or uncontrolled release of oil, gas or any other commodity from a pipeline;
(j) authorizes, in certain circumstances, that funds may be paid out of the Consolidated Revenue Fund to pay the costs of taking the actions or measures that the National Energy Board considers necessary in relation to an unintended or uncontrolled release of oil, gas or any other commodity from a pipeline, to pay the costs related to establishing a pipeline claims tribunal and to pay any amount of compensation that such a tribunal awards; and
(k) authorizes the National Energy Board to recover those funds from the company that operates the pipeline from which the release occurred and from companies that operate pipelines that transport a commodity of the same class as the one that was released.

[Josée Touchette]

Currently, our budget allocation is not decreasing, and in estimating what the needs are going to be once Bill C-46 is passed—assuming that it passes, because we are not there yet—we will make sure we use the resources that are appropriated to us by Parliament in the best way possible for the safety of Canadians and the protection of the environment.

[Josée Touchette]

Thank you for your question.

I believe what you are referring to is the fact that we have sunsetting money. There's our basic budget, but then we have some sunsetting funding that refers to safety, and that is set to sunset in two years from now. Our budgeted allocation for fiscal year 2014-15 was in fact $89 million.

In terms of how we could deliver on our enhanced responsibilities that would come from Bill C-46, I would suggest that at this point it's too early to definitely say how the various measures are going to be implemented if they're passed by Parliament.

[Geoff Regan, Liberal, Halifax West, NS]

According to the 2015-16 main estimates, funding for the regulation of pipelines, power lines, energy development, and so forth has decreased from $81.7 million—let's say $82 million— in 2013-14 to $77 million in 2015-16, which is a reduction of some $5 million, or about 6%.

Given that Bill C-46 gives the NEB a lot more responsibility and authority, I think, shouldn't your budget be increasing? It seems to me that Canadians want to see the NEB doing more of these kinds of things, not less of them, not saying, “Okay, we're mandated to do this number and that's what we're going to do, and it's not going to increase.” I think one of the big problems the industry has right now is a lack of confidence in the process.

In view of this, I think the real question is, how can Canadians have confidence you'll be able to effectively carry out these new regulatory functions if the budget for energy regulation is shrinking?

[Jonathan Timlin]

The number of audits or inspections has not been mandated to increase as a result of Bill C-46.

[Josée Touchette, Chief Operating Officer, National Energy Board]

Thank you, Mr. Chair.

We weren't aware that we could be asked questions beyond the scope of the bill, but that being said, we are here to answer your questions and we'll be happy to do so.

Good afternoon, ladies and gentlemen. Allow me to introduce myself. My name is Josée Touchette, and I am the chief operating officer for the National Energy Board, or NEB. It's a great honour for me to appear today before the Standing Committee on Natural Resources about the proposed Pipeline Safety Act, Bill C-46.

I bring to the board over 25 years of experience in the public service, over half of which was in senior executive positions, including at Aboriginal Affairs and Northern Development Canada, the Department of National Defence and the Department of Justice.

Allow me now to introduce my colleagues.

I am joined today by Dr. Robert Steedman, our chief environment officer. Dr. Steedman has been with the board for over 10 years. He holds degrees in environmental sciences from the University of Toronto, Oregon State University, and the University of Calgary.

I am also joined by Mr. Jonathan Timlin, our director of regulatory approaches. Before he moved to Calgary three years ago to work for the NEB, Mr. Timlin worked in Ottawa as a senior policy adviser with both Transport Canada and the Major Projects Management Office. He also previously worked in the electricity industry.

I'd like to begin by telling you about the board's role to provide a bit of context for our discussions later.

The NEB is a quasi-judicial independent agency created by Parliament in 1959 to regulate pipelines and energy development in the public interest. While the NEB functions at arm's length from government, it is accountable to Parliament through the Minister of Natural Resources. Our role is to implement—not set—policies affirmed by federal legislation. The safety of Canadians is a top priority for the NEB.

However, many Canadians don't understand this aspect of our business or how we concern ourselves with it at all.

Today I will provide some insight into how the NEB operates, including an overview, our legislated mandate, changes to the legislative framework, the new public environment, life-cycle regulation, and current safety measures. I will also give you some context on the challenges we face and the three strategic priorities that we are focusing on in response to those challenges.

The National Energy Board is an expert tribunal, currently comprised of six permanent and seven temporary board members, and supported by a staff of highly skilled engineers, environmental specialists, auditors, inspectors, lawyers and engagement specialists, among others. We are very proud of the work that we do at the NEB—whether it's managing complex public hearings, assessing environmental impacts and pipeline integrity, carrying out pipeline inspections and audits, or the myriad of other tasks that we perform daily to ensure that Canada's energy infrastructure is safe and reliable.

Let me turn to our legislative framework.

Our mandate is set out in several pieces of legislation, including the National Energy Board Act, the Canada Oil and Gas Operations Act, the Canada Petroleum Resources Act, and the Canadian Environmental Assessment Act of 2012. I will discuss each of these in turn.

The National Energy Board Act sets out the NEB's regulatory responsibilities regarding, first, the construction, operation, and abandonment of pipelines that cross international borders or provincial boundaries, as well as the associated pipeline tolls and tariffs; second, the construction and operation of international power lines and designated interprovincial power lines; and third, the import of natural gas and exports of crude oil, natural gas liquids, natural gas, refined petroleum products, and electricity. The board also monitors aspects of energy supply, demand, production, development, and trade that fall within the jurisdiction of the federal government under the NEB Act.

The Canada Oil and Gas Operations Act and certain provisions of the Canada Petroleum Resources Act set out the NEB's regulatory responsibilities for oil and gas exploration and activities on frontier lands not otherwise regulated under joint federal-provincial accords, such as, for example, Nunavut, the Arctic offshore, Hudson Bay, the west coast offshore, the Gulf of St. Lawrence, a portion of the Bay of Fundy, and onshore Sable Island.

Finally, both the NEB Act and the Canadian Environmental Assessment Act, 2012, provide the NEB with a mandate to consider potential environmental effects and conduct environmental assessments when making regulatory decisions and recommendations.

Environmental aspects have been considered in board decisions under the NEB Act since the early 1970s.

We cannot regulate outside the scope of the acts that govern us. There is a broad network of regulatory jurisdictions across Canada that share responsibility for regulating oil and gas production, energy infrastructure and the environment.

For example, the NEB Act does not provide authority to regulate the production of oil or gas. That responsibility falls to the provinces or their agencies.

I wish to underscore that this legislative mandate is given to us by Parliament. Our role is to implement—not set—policies affirmed by federal legislation.

Let me turn to some of the legislative changes that we've had recently.

In 2012, Parliament passed the Jobs, Growth and Long-term Prosperity Act, also referred to as Bill C-38, which included some of the most significant changes to the NEB Act since its implementation in 1959. Under this legislation, the NEB was given a 15-month maximum time limit for regulatory reviews. This provides the public with enhanced certainty around regulatory proceedings and NEB project reviews. The board was also given new compliance enforcement tools in the form of administrative monetary penalties, or AMPs. AMPs enable us to impose financial penalties on companies or individuals for non-compliances related to safety and the environment.

The Energy Safety and Security Act received royal assent in February. That new legislation amends the Canada Oil and Gas Operations Act and provides the board with new tools for regulating northern oil and gas activities.

The key components of that act include the following elements: $1 billion absolute liability limit in the offshore and new obligations related to financial responsibility and financial resources; improved transparency through new board authority to hold public hearings, make information public, and provide participant funding in relation to projects under the Canada Oil and Gas Operations Act; 18-month time limit for NEB review of Canada Oil and Gas Operations Act applications; authority to establish an administrative monetary penalty regime under the Canada Oil and Gas Operations Act consistent with AMPs under the National Energy Board Act; and authority for cost recovery under the Canada Oil and Gas Operations Act, which would move the board toward 100% recovery of all expenditures.

You now have before you Bill C-46, the pipeline safety act. We at the board welcome any measures that will strengthen our legislation and expand our tool kit to protect Canadians and the environment.

Should Bill C-46 receive royal assent, some of these measures include: an absolute liability regime that will cover all NEB-regulated pipelines and new financial resources requirements that will make sure companies have the ability to pay for spills; greater clarity regarding audits; enhanced enforcement powers to issue stop-work orders in the north; clarification of the board's jurisdiction over abandoned pipelines; board power to assume control of an abandoned pipeline if the company is not complying with board orders; and board powers to assume control of an incident where the governor in council determines that the company will not be able to pay or is not complying with board orders.

The NEB will work effectively and efficiently to implement any changes passed by Parliament in a timely manner.

These legislative changes come at a time when the Canadian energy industry is in the midst of a perfect storm. The conversation around energy development in Canada is working to reconcile safety and environmental protection, economic development, the rights of aboriginal people, and diverse local interests and needs. The resulting debate is complicated and provokes strong opinions.

And the board is in the eye of the storm. We are surrounded on all sides by opposing interests and are also increasingly subject to public scrutiny.

Until the summer of 2010, the board had maintained a fairly low public profile. Most Canadians had little or no idea who the NEB was. In 2006, when the board reviewed an application for the Trans Mountain Anchor Loop Project through Jasper National Park, there were eight interveners

In March 2010, the board released its Keystone XL decision to relatively little fanfare and only 29 interveners in the process.

Contrast that with today, when we have 400 interveners and over 1,300 commenters in the Trans Mountain pipeline expansion project. And we currently have close to 2,300 applications to participate in the Energy East hearing.

The National Energy Board Act stipulates that we must hear from those who are directly affected by the granting or refusing of a project application. And the public appetite to participate in energy hearings is greater than ever. So we adjust and adapt.

We have to remain flexible, so that increasing numbers of interveners can participate in our hearings in a meaningful way. But this focus on mega-projects and public participation leaves the false impression that all the board does is review applications. Nothing could be further from the truth.

As we navigate this storm, we also have a critically important responsibility to provide regulatory oversight to about 73,000 kilometres of pipeline. That is nearly enough pipe to wrap around the earth two times.

The vast majority of those pipelines are buried below ground. Canadians safely live, work, and travel over them every day, and many never even realize that those pipelines are there, but this infrastructure is aging. The majority of these pipelines were put in the ground more than 30 years ago. That is why we put so much focus on safety: on damage prevention, compliance, and enforcement activities.

In 2014, the board conducted 353 compliance activities related to public safety, security and environmental protection. That is almost one compliance activity for every day of the calendar year. These compliance activities included 230 inspections of pipelines and 6 comprehensive audits.

In 2014, the board received nearly 600 applications for pipeline and power line-related facilities, tolls and tariffs, as well as import/export authorizations.

An important part of the board's job is to review and assess project applications, and, using the evidence that is placed before it during a hearing, to determine whether a proposed project is in the Canadian public interest. However, this is only one part of our role. Our regulatory oversight spans the entire life of the project—from design to abandonment. Oil and gas pipelines under NEB jurisdiction require the board's approval before being built.

In that context, companies must file detailed project applications. When an application arrives, we assess it for factors such as safety, environmental impacts, engineering integrity, security, emergency response capability, the rights of people affected, and if applicable, the reasonableness of the proposed tolls and tariffs. Public hearings are then held in many cases.

As I already said, the public appetite to participate in energy hearings is greater than ever. We also want to hear from individuals and groups that are directly affected by a project. If a project is approved, the board sends inspectors to the construction site to ensure that the company is building the project according to the board's conditions and commitments that the company made during the application process.

After construction is complete, the board uses tools such as audits, inspections, compliance meetings, and field exercises to hold companies accountable for safe operation that protects the public, workers and the environment.

Once a pipeline is no longer needed, the NEB requires a company to submit an application for abandonment. This starts an assessment process to determine the conditions that must be met in order for the project to be safely taken out of service.

Bill C-46 would enhance the board's authority in the area of abandonment, and we welcome that. In other words, the board regulates from start to finish and holds pipeline companies responsible for the full cycle of the pipelines they operate.

There is no doubt that all Canadians are concerned about the safety of energy infrastructure and the protection of the environment. The NEB is committed to taking all available actions to protect Canadians and the environment. Conducting unauthorized activity near pipelines or otherwise failing to comply with damage prevention requirements puts the safety of people and the environment at risk.

While the NEB requires the companies it regulates to strive for zero incidents, we recognize that damage prevention is a shared responsibility among all those who operate and work near pipelines. We require pipeline companies to ensure that people know how to safely conduct activities like excavation and construction near their pipelines. We also support and promote the use of one-call systems that promote effective and timely communication between someone planning an activity near a pipeline and the pipeline company.

In addition to our damage prevention program, we have a comprehensive compliance and enforcement program to make sure companies are doing what is required. Each year the NEB conducts targeted compliance verification activities, including six comprehensive audits and at least 150 inspections of regulated companies. This is in addition to the 100-plus technical meetings and exercises conducted on an annual basis.

These tools have been effective in allowing the board to proactively detect and correct instances of non-compliance before they become issues. When companies follow our rules, which are designed to identify hazards and manage risks, pipelines are a safe and reliable way to move oil and gas.

The NEB has strict requirements companies must follow in order to operate their pipelines. These requirements touch on everything from the type of materials used to build a pipeline, to the steps that should be taken to protect people and the environment. Make no mistake—should companies fail to live up to their commitments around safety and environmental protection, the NEB does not hesitate to take strong enforcement action.

We will take every measure to protect people and the environment. We have powerful tools to keep companies on track and prevent incidents which we will use without hesitation. This could include issuing cash fines called administrative monetary penalties, lowering the amount of product a company is allowed to move through their pipeline, and shutting down a pipeline completely if necessary.

In 2012 the board took the following enforcement actions: 302 notices of non-compliance and assurances of voluntary compliance, 3 inspection officer orders, 5 safety orders, and 6 administrative monetary penalties.

While our focus is on preventing accidents from happening in the first place, should an incident occur, the NEB has an emergency management program in place and is ready to respond to an emergency situation at all times. We have working agreements with other government departments and agencies in order to coordinate responses and communicate effectively in times of crisis.

In addition, companies are required to consult with municipalities, first responders and other agencies in the development of their emergency management program. These programs must be put in place prior to operation of a pipeline and must continue throughout its life cycle.

In addition, companies are required to provide emergency management information to persons associated with emergency response, and to develop continuing education and liaison programs for relevant agencies and the public adjacent to the pipeline.

As you can see, there is a significant amount of work that is being done by our staff every day to strengthen all aspects of our pipeline oversight, whether it is through the rigorous review and testing of pipeline applications, compliance and enforcement, or developing and implementing regulatory improvements.

But as technology and the public interest evolve, so to have the NEB's regulations and the expectations of our regulated companies. Management systems in particular are critical to continual improvement in pipeline safety. At their very essence, management systems document how people are to carry out the responsibilities of their position.

In 2013, we amended the National Energy Board Onshore Pipeline Regulations to clarify management systems requirements for the purpose of protecting the public, workers and the environment. The NEB expects companies to have management systems in place for the key program areas for which companies are responsible, those being: safety, pipeline integrity, security, emergency management and environmental protection.

Amendments included a requirement for companies to have a process for internal reporting of hazards, near misses and incidents. They also included new provisions holding a company's senior leadership accountable for its management system, safety culture and the achievement of outcomes related to safety and environmental protection. One thing that has remained constant is our commitment to safety. Safety continues to be our number one priority.

This brings me to the three strategic priorities we have identified to help guide our actions moving forward. First, we are going to take action on safety. We will focus our efforts and resources on developing, refining, and communicating our actions on safety and environmental protection. Using data and trend analysis, we will continue to focus, not just on preventing incidents, but on preventing industry cultures that make incidents more likely to occur. In doing this, we will demonstrate to Canadians how we hold the companies accountable, and exactly what we are holding them accountable for.

We are leaders in regulatory excellence. We are continually improving as a regulator, by reviewing and evaluating our processes. We are committed to act and to be seen as a ''best-in-class'' regulator—and we will demonstrate this through benchmarking and performance measurement. This will also help demonstrate to Canadians that our programs are focused on the right things and achieving the right results.

Finally, we are going to engage Canadians. Our engagement with Canadians must move beyond our application processes. This means broad engagement across the whole of Canada, including a responsive focus on regional issues. It also means more information, readily accessible by any stakeholder who wants it. We feel that by being open and transparent about the work we do, we will earn Canadians' trust that we are, in fact, doing the right things on their behalf.

Another example of how we are starting to act on our strategic priorities is by directly engaging Canadians from coast to coast to coast on safety and environmental issues, including on energy infrastructure of interest to local communities. In January, our chair, Peter Watson, began an engagement initiative, setting out to listen to Canadians’ views of pipeline safety and, if necessary, adjust the NEB's practices and programs.

At the beginning of June, we will also host a pipeline safety forum in Calgary to address specific issues to improve the safety of regulated facilities. The goals of the forum will be to have an open exchange of information on technical pipeline issues, increased understanding of stakeholder concerns, and opportunities for both industry and regulators to improve safety outcomes to better protect people, property, and the environment.

The information collected from the engagement initiative and from the forum will be rolled up in a report to be released later in 2015.

Thank you once again for giving me the opportunity to speak to you today about the important work of the NEB. I provided an overview of the NEB and our legislated mandate. I highlighted recent changes to our legislation, as well as changes that are proposed.

Our long-term commitment requires that we continually review and improve the ways in which we do business. We welcome any measures that will strengthen our legislation and expand our tool kit to protect Canadians and the environment.

Should the bill receive royal assent, we will work hard to implement any changes in a timely manner.

We're happy to address any questions you may have. Merci.

[The Vice-Chair, NDP, Guy Caron]

Welcome to the committee's 52nd meeting.

We are beginning our study of Bill C-46, An Act to amend the National Energy Board Act and the Canada Oil and Gas Operations Act.

As you can see, I'm not Mr. Benoit, who, unfortunately, can't be here today, so I will be replacing him as chair.

We are pleased to have with us, today, three representatives from the National Energy Board to discuss Bill C-46. In light of the agreement that was made, members' questions may go beyond the scope of Bill C-46, but I think you were made aware of that possibility.

Now, without further ado, I'd like to welcome Jonathan Timlin, Josée Touchette and Robert Steedman.

I understand from discussions you've had with the chair and the clerk that you were given about 20 to 25 minutes for your presentation. I would invite you to start right away, before we start the rounds of questions.

[Jeff Labonté]

Sure.

The bill provides first-hand a provision that the National Energy Board could take control of an incident response and compensation of damages to any harmed parties. That provision doesn't exist in the National Energy Board Act today, and it would propose that it would be implemented based on the ability of the Governor in Council to designate a company. A designation would follow a sequence of steps, where a company might suffer an incident, and the company might not respond to the board's orders to clean up the incident or to behave in a certain way, and the board might then make a recommendation to the Minister of Natural Resources to designate the company as unresponsive. The Governor in Council would then consider designating a company as unresponsive, and then the board would be provided the authority to act.

Bill C-46 provides that the Minister of Finance may provide funds from the consolidated revenue fund to the board to pay for the cleanup and the response. In the event that damages are suffered beyond the cleanup and response, a tribunal may be established to provide adjudication and review and assessment of damages and provide compensation for parties that may be harmed. I use the word “may” in a number of choices because there are the possibilities that an incident occurs and there aren't many parties who suffer damage, in which case setting up a tribunal would be fairly extraordinary and heavy-handed and not necessary. It may be that an incident, should it occur, could affect more than one person or several parties, in which case adjudication through a tribunal would be a reasoned response.

The consolidated revenue fund reference is to the government's account, if you will, managed by the Minister of Finance, and would be exercised in that way only when a company would be designated as unresponsive or unwilling.

[Jeff Labonté]

In this particular circumstance it falls into a mix of things. My colleague from Justice might contribute to my answer more fully from a legal perspective.

From a practical perspective, it depends on the nature of what issue might come about. If a company were bankrupt and no longer existed, and its pipeline had been abandoned, it would become a situation of provincial jurisdiction, perhaps as a disturbance of an environmental nature, for example, if something had caused damage. There might be a disturbance of a different nature.

The National Energy Board at this point in time has been pursuing a fund to look at how to manage the abandonment that might occur, which may provide some protection against what you are explaining could potentially happen.

Bill C-46 provides clarity that, under the National Energy Board Act, pipeline companies will be responsible for their pipelines even after they're abandoned, up to the point at which they're removed from the ground. Should a pipeline be abandoned and left in place, the company will be responsible for it in perpetuity until the pipeline is removed, and it must give provisions to the board to ensure there's adequate and appropriate funding to accommodate that should the pipeline company cease to exist in the longer term.

It makes explicit and clear that abandoned pipelines remain under federal jurisdiction, and that companies remain responsible and liable for those pipelines.

[Jeff Labonté, Director General, Energy Safety and Security Branch, Energy Sector, Department of Natural Resources]

Thank you very much, Chair.

Thank you, committee members, for the opportunity to come to speak to you about this particular piece of legislation which is in the House and which I think has received a fair degree of good debate and discussion. We welcome the chance to hopefully address any questions and comments you might have, and if we're not able to do so today in person, we'll do so in writing if we have to afterwards.

I have a brief set of remarks that will probably take about two minutes to run through, and then there's a PowerPoint presentation. I think it's in all of the binders, and we've had extra copies distributed. I'll probably just focus on a few highlights to leave as much time as possible for comments and questions. I recognize that some of you participated in the briefing that we had earlier in the year in anticipation of today.

First of all, I'd like to welcome my colleagues and acknowledge their participation and expertise.

Through the recent introduction of the pipeline safety act, the government is taking some action to demonstrate its commitment to both the safety of Canadians and the environment. This ongoing commitment is part of the government's plan for responsible resource development, and this particular piece of legislation builds on other pieces of legislation that have been tabled in the House and several that have passed.

I will perhaps do a quick survol of where we situate ourselves with federal pipelines.

Pipelines are an area that is managed by both the provincial governments and the federal government. Canada has about 825,000 kilometres of pipelines throughout the country. The federal government has responsibility for some 72,000 to 73,000 kilometres that cross both international boundaries and provincial boundaries, which therefore make them federal jurisdiction. The regulator for the federal government is the National Energy Board.

Through those pipelines, on an annual basis some 1.3 billion barrels of oil and petroleum products are shipped between producers and warehousers, refineries and consumers. At the same time, about five trillion cubic feet of gas are piped across the country to different hubs, different distribution points, and then ultimately to consumers, both in industry and to Canadians as individuals.

The NEB pipelines have a fairly strong safety record. The government will regularly point out that 99.999% of crude oil and products arrive safely to their destination, and that's on a regular running basis over the last five-year period. While the safety record is strong, we must, of course, continue to strive to have as few and possibly zero incidents as possible to ensure that Canadians are protected and the environment is protected as well.

Bill C-46 implements a number of measures focused on world-class pipeline safety under the pillars of prevention, preparedness and response, liability and compensation. Prevention focuses on trying to ensure that incidents don't occur. Preparedness and response means ensuring that companies are ready and that Canadians are confident and assured that companies and the regulator are prepared to respond should incidents occur. Liability and compensation means ensuring that Canadians are protected from the costs and damages that might flow from an incident, should one occur.

Bill C-46 focuses on and strives to ensure that our pipeline safety system remains world-class and is consistent with Canadians' expectation for energy transportation and protection of the environment.

I'd like to take a few moments just quickly looking at the deck to illustrate a number of specific elements, and then, of course, we'll turn it over to the chair and welcome questions from committee members.

There are two aspects to our presentation. First, we would like to see amendments to the bill concerning the

National Energy Board Act as well as consequential amendments to the Canada Oil and Gas Operations Act.

To give some background, the Minister of Natural Resources is responsible for the National Energy Board Act and shares responsibility for the Canada Oil and Gas Operations Act with the Minister of Aboriginal Affairs and Northern Development, as there's a separation between north of 60 degrees and south of 60 degrees vis-à-vis energy development activities.

I will move on to slide 4, emphasizing a number of key prevention elements included in this particular bill. New sentencing provisions are in place for damages to the environment. There's an authority for the Governor in Council to implement consistent standards for pipeline monitoring and emergency response. There are amendments to damage prevention regimes to seek to have alignment and harmony with the provinces' damage prevention regimes. At the same time, there is clarification of audit and inspection powers for the National Energy Board. Those are for pipelines, and at the same time, since the board's act also provides for power lines, they extend to include power lines under their jurisdiction.

In terms of preparedness and response, slide 5, companies operating pipelines will be required under the new legislation to hold sufficient financial resources to cover any potential costs associated with an incident. Set in the act is that it would be $1 billion for major oil pipelines and regulations, at lower levels for other classes of pipelines to be developed under regulation. Companies will also be required to hold a minimum level of accessible financial resources to ensure an immediate response. This is sometimes referred to as cash on hand or cash available for a response, should it be necessary.

At the same time, the act will provide authority for the board to take control of spill response in exceptional circumstances where a company may be unwilling or unable to do so.

Finally, the act provides the NEB the authority to compel reimbursement of costs for spills incurred by governments, individuals, or communities.

In terms of liability and compensation, slide 6 in our deck, there is explicit reference in the act to the polluter pays principle. There is an inclusion of a new measure to provide no fault or absolute liability to a prescribed amount in addition to the existing unlimited liability when companies are at fault or negligent in the event of an incident. Again, the absolute liability amount is set at $1 billion commensurate with the financial responsibility requirements for major oil pipelines and will be set at a lower level for classes of pipelines to be established in regulations.

There is authority to establish a tribunal should the government ever need to authorize the NEB to take control. The tribunal will be provided as a quasi-judicial body to assess and award damages in exceptional circumstances for those who may be impacted by an event, and of course, in the end, the NEB would be provided the authority to recover said costs from the industry as a whole in an exceptional circumstance to ensure that taxpayers are not responsible for the costs.

On slide 7, I would draw attention to some additional amendments that are being made to the act for purposes of administrative efficiency, as well as transparency, including things such as: legislated timelines for Governor in Council decisions on export licences; elimination of Governor in Council approval for the name changes in pipeline certificates and transfers; and a number of things such as eliminating the mandatory retirement age for NEB members to be consistent with the Canadian charter.

We're certainly delighted to be here today and look forward to addressing your questions and comments, and certainly listening to the discussion, and would welcome that at this point, Chair.

Thank you very much, everyone, for your attention.

[The Chair, Conservative, Leon Benoit]

Good afternoon, everyone. It's good to be here today.

We're here today to start our study on the pipeline safety act, which is Bill C-46, officially called an act to amend the National Energy Board Act and the Canada Oil and Gas Operations Act.

We had agreed to have three meetings plus the clause-by-clause consideration on this piece of legislation. Our first meeting today is with officials. Our second meeting will be with members of the National Energy Board. Our third meeting, an extended meeting, will be with witnesses from the industry as presented by our members. After that we will go to clause-by-clause.

Before I get to that, there are a couple of things that I really should deal with. The first is the budget for this study. You've all received a copy of it. The amount requested in $6,700. Of course, we only spend that if it's required.

I'd just ask the committee for their agreement to approve that budget. Is it agreed?

[The Chair, Conservative, Leon Benoit]

I will. Thank you.

Let's move ahead. We'll deal with the technical details as we go along, but let's start with the presentations of those who are here, in the order that they're listed on the orders of the day.

Before we get started, I apologize. I have one more thing I want to mention. Thursday's meeting has been cancelled. That was a meeting on the pipeline safety act. We were to have witnesses from the NEB, and they quite rightly pointed out that it would probably be more proper if they appeared after departmental officials. We have the departmental officials appearing the first meeting after the next out-week, and then we'll have the NEB on the Thursday of that same week. That was my mistake. I should have thought of that. When they brought it up, it made sense, so Thursday's meeting has been cancelled.

Let's go ahead with today's meeting, starting with Mr. Hanlon.

Go ahead, please, with a presentation of up to seven minutes.

Pipeline Safety Act

[Kelly Block, Conservative, Parliamentary Secretary to the Minister of Natural Resources]

Mr. Speaker, the opposition appears to have changed its tune. It would seem that an epiphany has occurred. It now believes what we have been saying all along, that Canada is a country blessed with natural resources and that we can grow the economy, while protecting the environment.

Bill C-46 builds on previous actions taken by our government to prevent incidents. These actions include increasing the number of annual pipeline inspections and audits conducted by the National Energy Board, as well as strengthening the board's enforcement capabilities by giving it the authority to fine pipeline operators for smaller incidents, all of which the NDP voted against.

Could the member explain why the New Democrats voted against those very important measures?

[Jinny Sims, NDP, Newton—North Delta, BC]

Mr. Speaker, it is always a pleasure to rise in the House and speak on behalf of the constituents in Newton—North Delta. After spending a week in our ridings, we hear so much from our constituents. From my constituents I hear a great deal of concern with what is happening with our resource development.

Before I get into that, I want to acknowledge the work done by Kultarjit S. Thiara, the president of the Surrey-Newton Rotary Club. I was so impressed when the community raised $50,000 to build a school in the Philippines over this weekend. When we are in our ridings, it gives us so much pleasure when we go to events and people, despite all the economic challenges and being worried about their jobs, donate so generously and when local leaders are willing to play a part in making a difference around the world. I went to about 20 other events, but I will keep those for another time.

I am going to be supporting the bill at second reading so that we can send it to committee.

The bill is not perfect by any means. As a teacher, I like to give some credit when good work is done, and I believe this bill is a baby step in the right direction. I believe the regulations we have right now are just not adequate, but Bill C-46 does take a long-overdue first step toward a true polluter pay regime for pipelines in Canada. I say it is only a baby step because we know it does not go all the way. It is like going to the ocean to dip one's toes in it and then just waiting there. There is a lot more work to be done on the bill, and I can assure everyone that we will be doing the hard lifting at committee stage.

We are also very proud that our NDP leader has been a champion of polluter pay and has very practical plans to grow the economy while protecting the environment. There are those who will tell us we have to choose between the two, that it is either the environment or jobs. When I speak to the smart young people in my riding, I find that they know that is not a choice. In order to have jobs and development, we need to also make sure that we are protecting our planet and developing our resources in a sustainable way.

Over and over again, we have seen the government putting the interests of big oil companies ahead of the interests of hard-working Canadians who are struggling to make ends meet. Our middle class is feeling squeezed, and we are hearing through different studies that the quality of jobs and therefore the quality of life are being impacted.

Something else I hear in my riding is that hard-working middle-class people trust the NDP to be able to fix some of these challenges, because they know that over the decades of mismanagement and rubber-stamping by the Liberal Party and now the Conservatives' love-in with big oil companies, they have been squeezed out. Their children's future has been left out. There has not been due consideration.

We are one of the wealthiest countries in the world. We are truly blessed with not only amazing geography from coast to coast to coast but also with the richness of our resources. Once again, we absolutely have to get out of this mentality of rip-and-ship. I watch that in my province, where we see logs leaving the country on trucks, which is environmentally not that great, and then coming back as two-by-fours, which we then buy. In resource development, no matter which area we are looking at, we really need to take a look at those value-added jobs.

Once again, we need to start developing decent paying jobs for our kids and our middle class right here in Canada. I can tell members that the leader of the NDP has a very practical plan to add value to our natural resources, get away from the rip-and-ship mentality, and support family-sustaining jobs right here at home.

Let us look at what is in the bill. Often what we hear about when my colleagues across the way explain the bill is not what is actually buried in it.

There is an element of polluter pay, but what disturbs me about the bill is that it would vest all kinds of powers to the National Energy Board and the cabinet to make some of these decisions. I think that is the kind of policy-making that leads to confusion. We need to have very clear guidelines, and it should not be left up to the cabinet or cabinet ministers to decide which way it would go, and which parts would be implemented and which would not. It is very disturbing for us in the NDP.

I live in one of the most beautiful provinces. I am sure that every MP says that, and they would be absolutely right. However, we all know of British Columbia's pristine lakes and coastline. Its coastline not only provides an incredible amount of great seafood for local consumption, it is sold overseas, and it is also a great tourist attraction. We bring in billions of dollars through tourism, and we are very worried about the impact of an oil spill, be it from a pipeline or a tankard on our pristine coastline.

I have to give credit to one of the hardest-working members of Parliament in the House, the member of Parliament for Skeena—Bulkley Valley. He is our finance critic right now, but his passion and campaign to save our coast is truly inspirational. I have watched the audience, whether they are 90-year-olds or 14-year-olds, be absolutely inspired when he speaks from his heart about the importance of protecting our waterways, our beautiful coastline, and the kind of lifestyle we have out in B.C.

There is a linkage to this because as members know the northern gateway pipeline is a project that is going to be crossing over many of our key rivers. It will be going through some of our most pristine lakes, through vast territory, and will end up in the ocean through some very dangerous territory. Therefore, we are very worried. However, the linkage here is that the northern gateway is an Enbridge pipeline.

I will pause here for a moment to share with members what happened at the Kalamazoo River, in Michigan. On July 26, 2010, there was an oil spill, and 843,444 U.S. gallons of crude oil came out of a 30-inch pipeline into a prime wetland. That pipeline was owned by Enbridge. The cleanup for that spill alone, not taking account other damages or loss of non-use which has to be considered, came to $1.2 billion. However, here we would be setting a target of up to $1 billion. We can see that is inadequate, but it is without taking into consideration the non-use and all of that.

Therefore, we are very worried about any kind of leakage, whether from a pipeline or tankard into our ocean. We are absolutely committed to polluter pay, and we have to start making realistic legislation that considers the real cost of the cleanup and not leave it up to cabinet ministers or other bodies to do this at their discretion.

[Sylvain Chicoine, NDP, Châteauguay—Saint-Constant, QC]

Mr. Speaker, I am pleased to rise in the House today to discuss Bill C-46 on behalf of my fellow constituents in Châteauguay—Saint-Constant. This is a bill that deals with issues as important as energy resources and the protection of our environment.

Bill C-46 amends the rules governing oil companies’ liability. That consists of establishing a principle under which the party responsible for an oil spill will pay up to $1 billion for the damage caused. This bill is part of a broader government review of the liability rules that apply to various aspects of oil and gas development.

Canadians are aware of the potential risks of extracting and transporting oil, and they need to know that their government is going to oversee the industry properly and also protect our environment. Canadians do not have to make a choice between economic development and environmental protection. We need to take both aspects into consideration jointly.

When it comes to projects like northern gateway, Keystone XL or energy east, it is important to make judicious decisions that promote economic development and employment in Canada, while at the same time minimizing the risks to our environment. We need a new vision when it comes to the future of our energy resources, a vision that is guided by three very simple principles.

The first is sustainability, to ensure that polluters pay the bill for cleanups associated with a spill and the pollution caused, rather than passing the bill on to the next generations.

The second is partnership, to ensure that the First Nations, the provinces and local communities genuinely benefit from resource development and to create reliable and value-added jobs here in Canada.

The third is the long-term prosperity that comes from investing the proceeds of our natural resources in modern, ecological technologies, to keep Canada on the cutting edge of energy innovation and keep energy prices affordable for all Canadians.

We are disappointed that in spite of all our calls for urgent action, the Conservatives have taken so long to introduce this bill. In 2011, the Commissioner of the Environment pointed out that the National Energy Board had been unable to solve a number of known problems and ensure adequate maintenance of pipelines. The government has still not implemented an adequate monitoring and inspection system.

Last year, Bill C-22 was also introduced. It dealt with liability relating to offshore drilling and the possibility of spills in the Arctic and Atlantic Oceans. Because of this narrow vision, the government did not conduct consultations on the liability regime applicable to rail transportation. The Conservatives did not take that issue seriously until they had to limit the political fallout or consequences from the Lac-Mégantic tragedy.

The bill we are currently considering includes absolute liability for all pipelines regulated by the National Energy Board. In other words, the companies will be liable for the costs and damage caused by a pipeline spill, regardless of fault, up to a maximum of $1 billion for high-capacity pipelines. However, in the case of fault or negligence, liability will be unlimited.

I welcome this measure. It is a good start, but that figure could be reached quickly, since the cleanup of some tragedies that have occurred in recent years has significantly exceeded the $1 billion ceiling provided by this bill.

Bill C-46 also limits the time Canadians will have to claim compensation for long-term damage to their health or the environment caused by an accident. The claim must be made within three years of when the damage occurs or six years, at most, after an oil spill. This is debatable, since it is highly probable that some damage will be discovered well after the six years provided by this bill.

The bill gives the National Energy Board the authority to order reimbursement of any cleanup costs incurred by governments, communities or individuals. It also grants the National Energy Board the authority and resources to assume control of a response to any incident, in exceptional circumstances, if a company is unable or unwilling to do so. The NEB would also have new tools for recouping cleanup costs, which could go so far as charging the entire industry.

Unfortunately, the government left some leeway here with decisions that would be left in the hands of cabinet and the National Energy Board, an agency that, on occasion, has demonstrated a lack of credibility. Instead of establishing a responsible regime, with a strict framework, the government is leaving too much leeway for politically motivated decisions, cabinet decisions and backroom agreements that would obviously not be made public between operators and the NEB. Of course, we will question the government about these discretionary measures. It is important to hold the government accountable to Canadians. We are disappointed in the scope of the bill. I hope the Conservatives will be open to the amendments that will be proposed in committee.

Given the limited scope of the bill, we are concerned that polluters will not have to bear the full cost of the damage and that Canadians will end up footing the bill. If so, that casts doubt on the true scope of this bill. What happens if there is a problem establishing fault or negligence? Will Canadians have to pay in such cases? We are talking about possibly billions of dollars. That is a lot of money, and it is not up to Canadians to pay the bills for companies that may have been negligent in their operations. It is all well and good to introduce a bill that focuses on figuring out who is liable, but we also have to be proactive and do as much as possible to prevent oil spills. This bill does not do that.

We need better regulations and increased monitoring of pipelines. In addition, we need to rebuild the robust environmental assessment process that has been dismantled by the current government over the past few years. With the huge expansion in the production and transportation of crude oil, we need enhanced safety protection, regardless of the method of transportation. To that end, we need to increase mandatory inspections, implement adequate regulations, and enforce these standards. Public safety and environmental protection must be among our top priorities.

My colleagues and I firmly believe that Canada must take steps to ensure that we are developing and transporting our resources in a safe and secure way that serves the interests of all Canadians. To that end, all pipelines need to adhere to the highest possible safety and environmental standards consistent with the principles of sustainable development. To ensure that oil companies and pipeline operators adhere to the regulations, we need to put in place robust laws and establish credible environmental assessment mechanisms.

Furthermore, given that transportation affects the provinces, municipalities and communities, we must ensure that the government consults them and establishes partnerships with them. If everyone works together, Canadians can be assured that all of these projects will be implemented and will respect the principle of sustainable development and that the approval process will be as fair as possible, in order to strengthen the accountability of everyone involved. The provinces will continue to develop their natural resources. The issue is knowing how to develop those resources sustainably, while protecting the environment and creating value-added jobs in Canada.

In closing, we will support this bill at second reading, and we ask the government to remain open to the amendments we plan to propose in committee.

[Alexandrine Latendresse, NDP, Louis-Saint-Laurent, QC]

Mr. Speaker, I am very pleased to be able to debate Bill C-46 today.

I am delighted because for once, this is a bill that has some good elements. Also, we cannot deny that oil transportation is a major issue and among those that most concern the public. People are worried and they have reason to be.

The figures given here speak for themselves and reiterate what I have heard before in many conversations. The public’s confidence in the methods of oil transportation is very low: 71% of people believe that rail transport is dangerous. After what happened again in Gogoma on the weekend, that opinion may become more entrenched.

In addition, 63% of Canadians believe that shipping oil by sea is too risky. Quebeckers are terrified at the idea that a tanker might capsize in the St. Lawrence. An incident like that would cause widespread and irreparable harm to Quebec, since the river is such a unique and fragile environment, and of such crucial importance to us all. Pipelines are seen by the public as the least dangerous method, with 47% support.

Overall, nobody is really happy. People fear the worst. They are right to be worried, if we consider that the consequences of an accident are catastrophic and irreversible. The number of barrels of oil per day that travel by pipeline is enormous. When we talk about huge figures like billions of barrels a day, it is to be expected that the idea of a spill would immediately take on incomprehensible and terrifying dimensions.

Canada is first and foremost a country with natural resources that can be exploited. This has always been the source of our well-being and our affluence. The diversity of our common resources positions Canada and its provinces on a number of economic fronts at the same time. It is also the source of our tremendous technical knowledge, built over decades in response to the needs associated with resource development, for which we are internationally renowned.

In short, we are blessed with incredible good fortune, and that fortune belongs to all Canadians. This is our real national treasure. However, while it is certainly a blessing, that treasure sometimes looks like a curse. Tragic events have happened in the past. The risks of inadequate regulation of the oil shipment methods are clear. The Lac Mégantic disaster is so serious and so clearly connected with the federal government’s complacency that I am surprised at how lax the legislative initiatives are.

In fact, the public has little faith in the government when it comes to its ability or desire to regulate the energy sector. If not the government, who should do it? The industry itself? Of course not. What we are seeing is a very serious legitimacy deficit. Canadians do not believe that the Government of Canada is going to protect them, or wants to protect them. That hurts.

I believe the people of Canada are entitled to expect that members of Parliament will make not just good decisions about pipelines, but the best possible decisions. All of us here have a duty to think about public safety, the sustainability of resource development and the resilience of the environment. Development of our natural resources that is responsible and scientific, the Conservatives’ favourite adjective, is what will guarantee our survival as an affluent society. Of course, we have to assume that everyone here wants our society to survive and does not imagine that the world is going to end next week with the second coming of the Saviour. That remains to be seen, however.

I am well aware that we must not expect too much. The government has now taken a step toward a polluter pays scheme, which is encouraging. Holding the industry accountable is essential. It comes a quarter-century late and it was not very difficult to put forward, but we will take what we can get.

Bill C-46 introduces absolute liability for all pipelines overseen by the National Energy Board. This is a good initiative and it is the reason behind our support. Absolute liability in the case of fault or negligence means that the operator will have unlimited liability.

In the case of any other incident, the operator is liable up to a maximum of $1 billion. By taking that approach, the government is clearly thinking only of physical damage and the repair costs that may be incurred. This initiative seems to be valid, but there are two points in Bill C-46 that are still vague. It is important that the public know that they might easily have to make a financial contribution in the event of a disaster.

First, if the case could not be made for negligence or fault, the government might have to absorb the costs. In addition, if the costs incurred exceed $1 billion, we will have to pay anything above that amount. In some cases, the bill adds up very quickly and can easily exceed that limit. As several of my colleagues have done already, I would also like to refer to the accident caused by Enbridge in Kalamazoo, Michigan, which has cost nearly $1.2 billion.

Second, as we suspected, environmental damage is not really part of the calculation.

In the end, the potential irreparable damage to the very fabric of our country, which is priceless, will not be worth it.

What the government is counting on can be easily explained: considering Canada's size, the government hopes that accidents will happen in the middle of nowhere, where environmental oversight has already been eliminated by budget cuts, and that the public will quickly forget contamination of the hinterland. Out of sight, out of mind.

Although this may be an ideological government, it certainly is not a sentimental one. Bill C-46 strengthens some of the powers of the National Energy Board to ensure that the transport of oil by pipeline meets certain standards and that the public is protected. However, the operator will still have a say and the bill leaves room for backroom arrangements. Ultimately, cabinet will decide whether there should be sanctions.

If the operator does not comply with the NEB orders, the board will not have the powers needed to take action, unless it is dealing with an abandoned pipeline. We will all agree that an empty pipeline is rather safe.

I would like to reassure those who thought that the Conservatives had suddenly discovered the merits of environmentalism. Bill C-46 is all about the economy. Accidents are expensive and it is unfair for the public to pay for the negligence of corporations. Naturally, we agree.

Because the “teeth” that Bill C-46 gives the National Energy Board are merely molars, if the government does not see fit to crack down on an operator, the only thing the board can do is chew on its reprimands.

The government began reviewing its liability regimes for oil and natural gas development last year. Bill C-46 is a first step that we find acceptable even though we would like the regulation to go much further. We want to protect the environment because we believe that the ecosystem is non-negotiable. Other countries do this and are more prosperous than we are.

The government refused to consider it and brought forward legislation that might not even serve the purpose if evidence of fault is lacking or if the government decides to act in favour of the operator.

Is it any surprise that public confidence is so low under the circumstances?

In addition, as we might have expected, this bill did not involve in-depth consultation with the members of Confederation or first nations. This is yet another example of the omniscience we see so regularly in the Langevin Block.

I am fascinated by the Prime Minister's telescopic vision, his effortless ability to see and understand everything across the country. That sense of direction is amazing—superhuman, even. The only thing the Prime Minister needs to complete his image is a central Asian republic.

At the end of the day, what people want is strict, guaranteed regulations. People want pipelines to be extra safe—no loopholes, no risky measures—as well as responsible, environmentally sound and sustainable management.

What Canadians want is for us to act like adults, not teenagers.

I can therefore guarantee that the best environment minister Quebec has ever had will not accept any “ifs” and “maybes” when he considers approving pipelines once he becomes prime minister of Canada.