Expert panel recommends a new Canadian Energy Transmission Commission

An expert panel with a mandate to make recommendations on modernizing and restoring the public’s trust in Canada’s National Energy Board (NEB) has issued 42 recommendations to the federal minister of natural resources. Some of the key recommendations are:

• Replacing the NEB with a new independent Canadian Energy Transmission Commission (CETC);
• Having the federal cabinet decide if future major pipeline projects are in the national interest as the first step of the regulatory process rather than the last step as is currently the case;
• Creating an independent Canadian Energy Information Agency (CEIA), which is separate from regulatory decision and policy makers to collect and provide energy data and analysis;
• Having a joint CETC and Canadian Environmental Assessment Agency (theAgency) public hearing process before five independent CETA commissioners for hearings into major pipeline projects; and
• Repealing the current standing test whereby only people directly affected by a pipeline project can participate in an NEB hearing and instead allow everyone to participate regardless of if or how the pipeline project affects them.

A new CETC

The panel has recommended amendments to the National Energy Board Act whereby the NEB will be replaced by an independent, quasi-judicial CETC with the mandate and authority for licensing trans-boundary pipeline and transmission line projects. The CETC will approve or deny projects based on technical criteria, the results of detailed environmental assessments and project-specific conditions.

It is proposed that the CETC will have an independent board of governors located in Ottawa whose sole responsibility is strategy and oversight of the CETC’s activities, while public hearing panels and other regulatory decisions will be made by hearing commissioners.

Politicians decide first

The expert panel recommends a process whereby a proponent of a major pipeline files a preliminary proposal with the federal minister of natural resources, who then makes a public recommendation to cabinet on whether the proposal is in the national interest after consulting with indigenous people and undertaking a strategic-level assessment and engagement with stakeholders. The minister will have one year to make such a recommendation from a proponent filing the preliminary project description. Cabinet will then have the final decision if a proposed project is in the national interest and will have three months to make its decision.

If approved, the proponent may then proceed further with designing its project, undertaking an environmental assessment and applying to the CETC for regulatory approvals.

These recommendations, if followed, would be a significant variation from the NEB’s current regulatory process whereby after further design work, an environmental assessment and an NEB decision (possibly after an NEB public hearing), the project is referred to cabinet to determine if it is in the public interest.

The panel’s recommendations respect that politicians should be deciding the policy issues and not the technical decisions about safety and risk, and technical specialists should not be deciding the policy issues of whether the project is in the national interest. There is a risk, however, there will be duplication between the proceedings, and with it potentially inconsistent conclusions on the same issues.

For pipeline projects that are not of national consequence, it is proposed that a joint review panel hearing will be required but cabinet approval will not be required. Smaller activities will require CETC review and approval, but not a joint panel review. The criteria distinguishing the levels of review will relate to a project’s risk and impact and not to an arbitrary pipeline length criterion (currently 50 km).

Separation of data collection and analysis from the regulator

While recognizing that current reports are “highly regarded and inform analysis and decisions by industry, financial institutions, governments, and academia,” the expert panel believes the new CETC’s credibility will be improved if it separates the energy data collection and analysis currently undertaken by the NEB into the new CEIA reporting to the minister of national resources. It also believes a broader range of sources of data should be considered, and that this function must be moved from Calgary. The panel also noted “many” presentations expressed concern that the NEB was staffed by “experts from the fossil fuel industry.”

The panel believes having an independent energy information body that is not involved in developing energy policy, or regulating energy infrastructure, or proximate to the fossil fuel industry, will help to assure information is seen as neutral and credible, allowing it to, in the panel’s words, “tell it like it is.” The panel envisions the CEIA engaging in “greater outreach to inform the public on the major issues.”

Longer timelines

The expert panel has recommended that public hearings about major pipeline projects be held by a joint CETC-Agency panel of five hearing commissioners, with the CETC and the Agency each contributing two commissioners and the fifth being an independent person. At least one hearing commissioner should be an indigenous person.

It is proposed that joint panels will have two years to hold a public hearing and to issue their decision.

Given the 15 months for cabinet to receive the minister’s recommendation and decide if a project is in the national interest and the two years for a joint review panel to hear and decide on a project, the timelines of getting a major pipeline project approved will increase from the current 15 months to 39 months. Additional time will be required to actually undertake the detailed design and environmental assessment if a proponent wants to wait for cabinet’s decision prior to spending significant amounts on the project.

The panel has also recommended that unlike the NEB, the CETC not be given any authority to issue approvals under the Fisheries Act or Navigation Protection Act. Taking away this single-window approval may also increase regulatory timelines.

Everyone can participate in a hearing

Despite noting that well-organized interveners in pipeline projects can jam hearing halls with thousands of people opposed to a pipeline project and disrupt the process, the expert panel has recommended that every interested person should have a reasonable opportunity to participate in a CETC pipeline hearing. Currently, persons and groups who want to participate in an NEB pipeline hearing have to pass a “standing” test, which determines if they are “directly affected” by a proposed pipeline or possess relevant expertise that would be of sufficient assistance to the regulator to merit their inclusion in the hearing.

The panel also believes that every interested person should have a real say in every major aspect of the CETC’s business, including major project hearings, licensing reviews, ongoing operations and management of the CETC itself.

Fixing a broken NEB?

The expert panel’s report carefully notes that in recent pipeline hearings major challenges were faced in reconciling Canada’s energy, economic and climate change goals.

On the one hand the federal government has entered into international agreements to reduce greenhouse gas emissions. On the other, the government recognizes, and at times promotes, secure access to energy for Canadians and the economic prosperity driven by our oil and gas industry. The expert panel recognized that reconciling these opposing policies is difficult. People have used NEB pipeline project hearings as the venue for trying to resolve the policy questions about climate change and energy because of an absence of any better alternative. The NEB, according to the expert panel, cannot possibly succeed when pushed to serve as a forum for debate about national policies on how energy development should occur, if at all, in light of climate change.

The expert panel has called on the federal government, led by the minister of natural resources, to formally develop a Canadian energy strategy that reconciles economic, social and environmental (particularly climate change) goals in a way that can meaningfully inform decision-making by cabinet.

However, it is not clear this will actually happen. Developing a national energy strategy will be difficult in that the provinces and territories will all need to support the strategy. The different resources and opportunities that each province has often lead to different energy objectives.

Further, it is unlikely that having a national energy strategy will fix what many interveners at NEB hearings think is wrong, namely that some pipeline projects get approved and are therefore contrary to Canada’s climate change commitments. Having cabinet announce a national energy strategy is unlikely to deter environmental activists who are against all fossil fuel development from strongly opposing future pipeline projects.

Likewise, there is a risk that some of the major changes designed to enhance credibility may have the opposite effect. Recommendations to dilute internal energy industry experience and physically move leadership from the heart of Canada’s energy industry, to manage the perception of “regulatory capture,” could lead to decisions and decision-making that in turn harm the new entity’s credibility. It is difficult to imagine, for example, comparable recommendations being made about the Canadian Nuclear Safety Commission.

The minister of natural resources is accepting comments on the expert panel’s report until June 14, 2017.