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Restructuring Canada’s Energy Regulatory Board: Aims to restore public trust [free access]

July 7, 2017

Canada’s energy regulator – National Energy Board (NEB) – is proposed to be restructured and modernised to position the entity as a modern, efficient and effective energy regulator. The move is also aimed at restoring public trust in the country’s regulatory process.

 

The revamp of NEB is one of the priorities identified in the mandate letter issued to the Ministry of Natural Resources by the Canadian Prime Minister in 2015. Following this, in June 2016, the Canadian government initiated a comprehensive review of environmental and regulatory processes in Canada. The review, which is being closely coordinated across government departments, focuses on three key components — rebuilding trust in environmental assessment processes, modernising the NEB, and restoring lost protections and introducing modern safeguards to the Fisheries Act and the Navigation Protection Act. 

 

In May 2017, a five-member expert panel delivered its report, ‘Forward, Together: Enabling Canada’s Clean, Safe and Secure Energy Future’, recommending the steps that needed to be taken for the modernisation of NEB.

 

NEB responsibilities

When constituted in 1959, the main responsibilities of the NEB included the regulation of construction and operation of interprovincial and international oil and natural gas pipelines, international power lines and designated interprovincial power lines. The NEB also regulates the export of natural gas, oil, natural gas liquids and electricity, and the import of natural gas. In addition, NEB publishes information regarding trends, events and issues related to Canada’s energy markets.

 

With respect to infrastructure projects, NEB’s responsibilities include reviewing social, environmental and economic issues, and granting construction permits. In the 1980s, with advancements in engineering design, NEB’s role was expanded to include environmental assessment to ensure scrutiny of every safety detail.

 

Need to modernise NEB

Canada has announced high-level government policy and targets to reduce greenhouse gas emissions, as a measure to combat climate change. To achieve this, a radical change in the production and use of fossil fuels, and related energy infrastructure is needed. However, a large part of Canada’s economic prosperity is driven by continued fossil fuel exploitation, a process at least partly enabled by NEB-regulated infrastructure projects. Thus, when NEB considers a licensing decision for energy projects such as a pipeline project, the public expects the Board to reconcile these projects with the government’s overall policy framework. If the NEB denies such projects, it would be exceeding its mandate as a regulator. If the NEB sticks to its role of a ‘just’ regulator, it is perceived as an institution that is undermining the government’s policy goals around climate change. This places NEB in an unfair and untenable position.

 

Recommendations

To address the above conflict and position the Board as a trustworthy and fair regulator, the government is looking to alter the structure, role and mandate of NEB. Key recommendations of the panel include:

 

Creation of two new entities: The new entities will be the Canadian Energy Transmission Commission (CETC) and the Canadian Energy Information Agency (CEIA). The CEIA will be responsible for providing energy and economic information and reporting on Canada’s progress against energy policy goals. The CETC will take up NEB's role as an independent, quasi-judicial body with authority to approve or deny projects based on technical criteria and environmental assessments. Like the NEB, the CETC will be responsible for energy imports and exports, as well as compliance verification, enforcement action and emergency response oversight.

 

Changes to the project review process: The report identifies three different categories of projects, namely, major projects (projects of national consequence), significant projects and smaller-scale projects (lower-risk projects), for determining the appropriate review process. However, the basis of distinction between these projects is not discussed.  

A major project requires a ‘national interest’ determination from the Governor in Council (GIC), commonly known as the Federal Cabinet. It is proposed that a single office (such as the existing Major Projects Management Office) coordinate a strategic-level review of the proposed project by all relevant government departments as well as carry out consultations with potentially affected Indigenous groups. The review will not focus on evaluating detailed design or the environmental impact of the project, but rather on assessing its net economic benefits, acceptability of the proposed route, alignment with national policies, etc. The Minister of Natural Resources would then present its recommendations to the GIC, following which the GIC will decide if the project is of national interest. This entire process, from initial filing to GIC decision, is expected to take one year.

Once a project receives a positive national interest status, it will move on to the second stage, which involves a detailed regulatory review and environmental assessment, to be carried out by a five-member joint panel of hearing commissioners (two appointed by CETC, two appointed by CEA Agency, and one independent hearing commissioner). Following widespread engagement with communities and with inputs received from Indigenous consultations, the joint panel will issue or deny a licence to the project. In the second stage, the joint panel will address issues including detailed environmental risks and mitigation measures, emergency preparedness plans, Aboriginal and treaty rights and engineering details. The second stage is expected to take two years to complete.

Significant projects will only be subject to a single review. These projects will not need to go through the national interest determination stage and will only need to undergo the licensing process involving detailed regulatory review and environmental assessment carried out by a joint panel comprised of hearing commissioners.

Smaller-scale projects will be reviewed only by the CETC, and not a joint panel, as part of the licensing process.

Other recommendations: To improve relationships with Indigenous peoples, the panel recommends establishing and funding a new Indigenous Major Projects Office (IMPO) under the governance of Indigenous peoples. To improve public engagement, the panel recommends repealing existing criteria in the NEB Act (which governs the functions and responsibilities of NEB) and allowing every interested party an opportunity to participate in the review process. Currently, only the representation of someone directly affected by a project or who has relevant information or expertise can be considered by NEB during the review process. The panel also recommends creating a Public Intervenor Office to inform participants on the mechanics of the hearing process, directly represent their interests, and coordinate scientific and technical studies.

The comment period for the report ended on June 14, 2017. The government will now review the report over the next few months along with reports from other recently-completed environmental and regulatory reviews. Based on these, the government will propose the course of legislative reform of the NEB.