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.
