Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources

Issue 29 - Evidence - May 26, 2015


OTTAWA, Tuesday, May 26, 2015

The Standing Senate Committee on Energy, the Environment and Natural Resources, to which was referred Bill C- 46, An Act to amend the National Energy Board Act and the Canada Oil and Gas Operations Act, met this day at 5:03 p.m. to give consideration to the bill.

Senator Richard Neufeld (Chair) in the chair.

[English]

The Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld. I represent the Province of British Columbia in the Senate, and I am chair of this committee.

I would like to welcome honourable senators, any members of the public with us in the room and viewers all across the country who are watching on television. As a reminder to those watching, these committee hearings are open to the public and also available via webcast on the sen.parl.gc.ca website. You may also find more information on the schedule of witnesses on the website under "Senate Committees."

I would now ask senators around the table to introduce themselves. I'll begin by introducing the deputy chair to my right, Senator Paul Massicotte from Quebec.

Senator MacDonald: Michael MacDonald, Nova Scotia.

Senator Black: Doug Black from Alberta.

Senator Patterson: Dennis Patterson, Nunavut.

Senator Boisvenu: Pierre-Hugues Boisvenu, Quebec.

Senator Seidman: Judith Seidman from Montreal, Quebec.

The Chair: I'd like to introduce our staff, beginning with the clerk, Lynn Gordon, on my left and our two Library of Parliament analysts, Sam Banks and Marc LeBlanc, on my right.

Bill C-46, An Act to amend the National Energy Board Act and the Canada Oil and Gas Operations Act, called by its short title the pipeline safety act, was amended in the House of Commons and passed third reading on May 6, 2015. This bill was read the first time in the Senate on May 6, 2015 and referred to our committee on May 14.

Today begins our examination of this legislation. I am pleased to welcome in the first portion of our meeting officials from Natural Resources Canada. Welcome to Jeff Labonté, Director General, Energy Safety and Security Branch, Energy Sector; Terence Hubbard, Director General, Petroleum Resources Branch, Energy Sector; Christine Siminowski, Director, Energy Safety and Security Branch, Energy Sector; and Joseph McHattie, Legal Counsel.

Thank you for taking time out of your busy schedules to come and run through the bill with us. I understand you have some opening remarks, after which we'll go to questions from the senators.

Jeff Labonté, Director General, Energy Safety and Security Branch, Energy Sector, Natural Resources Canada: Thank you, Mr. Chair and members of the committee, for the opportunity to address you on this particular piece of legislation — an important piece of legislation for our department and the government as whole.

Bill C-46 is known as the pipeline safety act, and through its recent introduction, the government is taking clear action to demonstrate its commitment to protecting both the safety of Canadians and the environment. This is part of an ongoing commitment to safety and environmental protection that is part of the government's Responsible Resource Development plan that has previously looked at other pieces of energy-related legislation here in Canada.

Let me start by providing a few brief comments about pipeline safety overall, maybe a little bit about the notion of world-class safety systems. Then there's a PowerPoint presentation that I would like to use to touch on some of the highlights for you, after which we will be happy to take the questions.

[Translation]

I am very pleased to give you an overview of this project, and I am happy to have this opportunity to talk to you and to answer your questions this afternoon.

[English]

In terms of pipeline safety in Canada, it's important to start with where they are, how they're regulated and what the record of them exists today. Canada has some 825,000 kilometres of pipelines. The federal government has responsibility for regulating 73,000 kilometres of those pipelines, predominantly those that cross international and provincial boundaries, as well as the larger pipelines that move larger volumes, although certainly there are large pipelines in some provinces that share jurisdiction for the remainder of those 825,000.

Our pipelines are essential to our everyday life and move energy from producing areas to markets to consumers to export destinations. Some 1.3 billion barrels of oil and petroleum products move through pipelines every year, and another 5 trillion cubic feet of gas is shipped through pipelines.

NEB regulation is established through the National Energy Board Act, which is the subject of the amendments proposed in the pipeline safety act. It has a record in which 99.999 per cent of oil and gas products moved through Canada's federally regulated pipelines were shipped and arrived safely between 2008 and 2014.

In terms of the notion of world class, I have a few comments about that and will certainly welcome any further questions.

While we have a fairly impressive record, and one in which there are very important arrivals, destinations and movements of energy products, we must strive for zero incidents and to be even better. Bill C-46 implements what Canada believes to be a world-class pipeline-safety system under the pillars of prevention, preparedness and response; liability and compensation; prevention to ensure incidents don't occur; preparedness and response so that companies are ready and able to respond if an incident does occur; and liability and compensation to ensure that Canadians are protected from costs and damages that may follow an incident.

We believe that Bill C-46 ensures we continue to have a world-class safety system and one in which energy transportation can be moved safely across the country and protect the environment.

Let me run through the PowerPoint presentation that I believe was circulated. Should it not be, we can certainly make copies available to senators.

The proposed pipeline safety act proposes amendments to the National Energy Board Act and the Canada Oil and Gas Operations Act. Both acts fall under the purview of the Minister of Natural Resources, predominantly, although the Minister of Aboriginal Affairs and Northern Development has some responsibility for activities that are north of 60 in the territorial areas in Canada.

The fourth slide highlights some of the changes. There are new provisions in the bill that focus on prevention and that strive to reduce the possibility of incidents occurring.

These include: the ability to provide specific standards for pipeline monitoring and emergency response; amendments to preserve damage prevention or the regulations that permit activities around, above and where pipelines are found across the country; clarifying audit and inspection powers of the National Energy Board; and sentencing provisions to provide guidance should there ever be something, but also to provide a deterrent.

In terms of some of the preparedness and response on slide 5 of the PowerPoint: companies operating will be required to hold sufficient financial resources to cover potential costs associated with an incident from major oil pipelines. This is set at $1 billion, and at lower levels for all other pipelines in the country. Companies will also be required to hold a minimum level of financial resources that are accessible and available. There is a provision of the NEB to take control of spill response in exceptional circumstances should a company not be able to do so or are unwilling to do so. There is an authority for the National Energy Board to reimburse individuals and governments for costs that may incur for response to a spill or an incident.

Slide 6 talks about liability and compensation. The bill makes explicit reference to the polluter pays principle that exists in common law, but will be written into the legislation. It introduces no fault or absolute liability that provides a prescribed amount for which companies are automatically responsible, whether at fault or negligent. It preserves that fault and negligence is unlimited should companies be at fault or negligent. It provides for a similar $1 billion in absolute liability for major oil pipelines. It provides authority for the NEB to recover any costs from industry in the event that the board needs to take control of an incident. It clarifies that companies are responsible for abandoned pipelines, until the pipelines are removed from the ground. It provides federal or provincial attorneys general the opportunity to pursue damages to the environment called non-use value damages.

There is a number of smaller implementation amendments included within the same bill. I won't cover those now. At this point, chair, I would pause to allow for questions and certainly to respond to any comments from senators about the legislation.

The Chair: Thank you very much, Mr. Labonté. So we'll begin with questions.

[Translation]

Senator Massicotte: Thank you very much for joining us. The bill has a lot of merit, but it also raises a number of questions.

The House of Commons proposed two amendments that were adopted. The first made provision for any damage suffered by the Aboriginal people. The other concerned the National Energy Board. The word "shall" in English, was replaced by the word "devrait" in French. In other words, they should be reimbursed for the costs incurred, but they might not be.

Do you agree with those two amendments? If so, why were they not originally planned for?

Mr. Labonté: Thank you for these good questions. I would like to point out a few aspects of these two amendments that have been proposed and that received the approval of the House of Commons and the Natural Resources Committee.

The first part had to do with the cost-recovery basis for Aboriginal communities.

[English]

In this particular instance, the earlier provisions in the bill define an Aboriginal governing body as a particular entity. In the provision in the legislation, it provides that the board may order a company to repay certain parties for costs that may be incurred. In this particular instance it did not include Aboriginal governing body, and that was proposed and amended at committee before the house.

The clause originally in the bill did not preclude that an Aboriginal governing body from being included, but for greater precision it was added at the request of the committee members and accepted by the government at committee.

The second one proposes that in the event of a pipeline incident in which the Governor-in-Council would designate a company were a company not able to respond to the incident. It orders the National Energy Board to take control and assume responsibility for the clean-up and activities. The bill had a provision to the effect that, after regulations were passed, the board may recover the costs from industry. An amendment was proposed that obligated that the board shall — in other words, must — collect those resources from industry at large.

Consistent with a number of provisions in the bill, it provided greater certainty that it would happen should the board ever be ordered to act on behalf of a company. The costs would be recovered in that there would be the requirement to do so.

[Translation]

Senator Massicotte: From an Aboriginal perspective, nothing in the bill was preventing you from planning for the reimbursement of the damage caused. This provision was not in the bill. In other words, it was not your intention systematically. You are giving me the impression that the government agrees with the changes. However, it is an important sector.

What changed in your position between the time when you drafted the bill and when it was passed? Is it a change of position or flexibility on your part?

[English]

Mr. Labonté: I don't think the amendment necessarily proposes a change in the position in the bill. I think it provides greater certainty or clarity, if you will. Several other parts in the bill specifically referenced Aboriginal bodies. This particular provision did not include a specific reference. The amendment was proposed to make it clearer and it was passed. It did not preclude that possibility in that it was actually covered in several other sections of the bill.

It was defined in the "Definition" section of the bill. It's actually on the first page. It's at clause 15: An . . .

"Aboriginal governing body" means a council, government or other entity authorized to act on behalf of

(a) a band as defined in subsection 2(1) of the Indian Act, or

(b) a First Nation, or an Aboriginal people or any. . . organization that is party to a land claim agreement. . .

The bill had defined, with precision, this particular point. The ordering process by which the authority granted the board to order reimbursement did not specifically include it. However there are other sections of the bill that did list Aboriginal governing bodies. The amendment was proposed to provide greater certainty on the point and it was accepted at the committee.

[Translation]

Senator Massicotte: Paragraph 48.12(i) defines the types of damages that apply for the purposes of the legislation. In the past, all too often, when it was a question of environmental damages, we referred to these terms in particular. However, that's not the case here. Is there a difference between the damage that was described and defined and the expression "environmental damages"?

[English]

Mr. Labonté: Let me answer perhaps from one perspective and then I could ask my counsel to contribute further, if there was a need for further precision.

Environmental damages is, I think, an area of law that's still being better described and defined at common law and sort of more broadly. Here is the introduction of item (c), the loss of non-use value, which is consistent with other federal legislation. Our inclusion of this component defining non-use value is in an effort to maintain a consistency and coherence across different pieces of federal legislation — both environmental and energy legislation. I think there is a broader definition of environmental damages that, if you will, spells out different components and describes them with a greater degree of precision.

In this instance, we wanted to provide clarity on this particular component, consistent with other federal law and across the federal framework.

I do know that representations were made in reference to the idea of environmental damages. We see this as similar without using the terminology. To maintain some consistency, the terminology remains the same in that it refers to non-use value, which is found in other federal law.

[Translation]

Senator Massicotte: Do you agree, sir?

Joseph McHattie, Legal Counsel, Natural Resources Canada: I would simply like to confirm what Mr. Labonté said. There is no definite definition of the expression "environmental damage" compared to other damage in usage. It is a choice of words. In this case, we had to establish consistency between this bill and the other pieces of legislation that have already been passed.

Senator Boisvenu: Welcome to our witnesses. I found your presentation very interesting.

I have a few technical questions. What is the situation in Canada in terms of the number of accidents that happen per kilometre of pipeline? I think that is how the performance of a network is calculated. For instance, how do we compare to the U.S.?

My second question is a bit more technical and has to do with the volume of gas and oil. Is the number of incidents by volume comparable to that of the U.S., where accidents seem to be more frequent than in Canada?

Mr. Labonté: Thank you for your question. You asked very important questions about the comparisons with other countries. My colleagues from the National Energy Board have carried out comparative studies between Europe, the U.S. and Canada. Overall, Canada has a more positive track record than that of other countries. My colleagues could give you a more accurate answer.

For our part, when we look at the facts, we are of the opinion that, over the next five years, there could be an average of six or seven crude oil incidents per year regarding the federal pipelines. The volume spilled into the environment is at approximately 1,700 barrels of crude oil and, approximately 96 per cent of the volume is recovered by cleaning activities. In general, the cost associated with these incidents is about $3.7 million.

So, as a general rule, Canada is very stable and has a very good track record, but to us, six or seven incidents is more than zero, which is our target. So it is positive, but there is still work to do.

Senator Boisvenu: You are talking about federal pipelines. That means that there are pipelines that fall under provincial jurisdiction and others that fall under federal jurisdiction.

Mr. Labonté: That's right.

Senator Boisvenu: What is the proportion of pipelines in Canada that fall under the provinces compared to those under the federal government?

Mr. Labonté: There are 73,000 kilometres of pipelines under federal jurisdiction. There are 825,000 kilometres of pipelines in general, but that includes large-diameter pipelines. So there are residential natural gas pipelines, and there are also pipelines for more significant transfers between the provinces or international borders. It is very different.

Generally, there are more in the West, where there is more energy production, but we find pipelines almost everywhere in the country.

Senator Boisvenu: Does the current bill seek to harmonize the regulation with that of the provinces or is the regulation completely separate?

Mr. Labonté: It is completely separate, but one aspect of our work is prevention. There are acceptable activities that vary from one government to another. Right now, we are holding discussions with the provinces to harmonize our standards for those activities.

For instance, in the bill, we explained the responsibility for the calls or the confirmation of pipeline-related activities by the owners of the lands where the pipelines are, since the activities in the ground are limited.

[English]

Damages or the movement of the earth above the pipeline.

[Translation]

In this case, the standards are different, and we would like to harmonize the activities with the provinces as much as possible and to streamline the process and increase health and safety by developing a common standard for the country.

Senator Boisvenu: From an environmental standpoint, Canada is often criticized when it passes regulations that are stricter than those of its American neighbours. We are told that Canada applies different rules in one country than in the other because of competition issues. You still consulted people for this bill. What was the response of the companies managing the pipelines to the regulations of other countries compared to ours, which I think are still stricter?

Mr. Labonté: That is a very good question. I hope my colleagues from the Department of Industry will be able to be more specific in their answer. We have held discussions with many pipeline companies in Canada.

[English]

Certainly, there were companies that felt that these were more severe and that these were serious changes. Others felt that these were necessary and important elements to improve the pipeline safety system. Various smaller companies probably have somewhat more concern than the larger companies.

We have had a lot of discussions internationally about our work. We've shared with the United States. We've shared with our colleagues in the United Kingdom and our provincial colleagues, particularly the ones out West, who have been very interested in our work in terms of looking at pipeline safety and establishing world-class benchmarks around prevention and preparedness response. Perhaps others will follow suit, but certainly there is a strong feeling that, for the pipelines that are federally regulated, the measures proposed here provide a greater degree of certainty for Canadians that the pipeline companies are working to do their very best to reduce those six or seven incidents per year to zero.

Senator Black: First of all, I want to thank you all for being here and to underline that the work you're doing is critical to Canadian prosperity. I do a lot of work in energy. Being a senator from Alberta, I suppose that wouldn't surprise any of you.

I've come to understand, vis-à-vis market access for energy on the West Coast, that the block among the Aboriginal peoples relates to the ability to clean up what will be inevitably a problem. There are always problems.

That is my point of view. That's where I'm coming from, so that's the context of my questions.

In terms of the legislation before us, I want to give you my quick summary. You tell me if I'm right or wrong.

Basically, the major companies that are federally regulated need to place a bond for $1 billion to ensure that, in the event of an incident, there is $1 billion on the table for cleanup; correct?

Mr. Labonté: That's more or less correct.

Senator Black: And that liability is absolute?

Mr. Labonté: Correct.

Senator Black: All of which is good, all of which is absolutely tremendous. Is this the legislation from which cleanups are regulated? For example, if there were an incident, is this the place where a lawyer would find all of the legislation necessary to regulate, oversee and then assign liability arising from an incident, or are there other pieces of legislation as well?

Mr. Labonté: I would suggest that this actually covers all of that, although I paused for a minute with regard to the legislation/regulation part. For example, the board has, under the existing statutes, the authority under the law to order companies to act. The board has the ability under the regulatory approval process to review plans and to look at what a company proposes to do in the event of an incident. Certainly, if a liability issue emerges in the event of an incident, then Bill C-46 lays out very clearly who is responsible, what the company's liability and responsibilities will be.

Senator Black: Great. I have a couple of specific questions and then maybe a comment that you could offer your point of view on.

I want to return to the conversation around consultation. Could you please tell us the level of consultation you would have had with Aboriginal groups on the West Coast of Canada?

Mr. Labonté: Indeed. Let me pause for a minute just to define the word "consultation." It is a very precise word. From our perspective, constitutionally we have duties to do so as the federal government. In doing so, in this particular instance, let me use the words "outreach," "discussions," "presentations," "workshops," "dialogue," as well as "consultation," just to cover the range.

In this particular instance, I'll probably turn to my colleague because he is leading the charge. Terence Hubbard would be able to speak to all of the things we have done on this.

Terence Hubbard, Director General, Petroleum Resources Branch, Energy Sector, Natural Resources Canada: There has certainly been some extensive engagement with First Nations communities, particularly in B.C., by the federal government over the last two to three years in the context of the energy market diversification agenda. Both deputy ministers and ministers have been visiting and hearing from communities their preoccupations and concerns with respect to resource development and with respect to the development of pipelines.

Douglas Eyford was appointed as special representative on behalf of the federal government to consult with First Nations communities to provide recommendations in terms of the development of energy infrastructure. Pipeline safety was one of the key themes from his report. More recently, the federal government has created within NRCan what we call our major projects management office west, which has a mandate specifically to engage First Nations communities in B.C. on issues related to energy infrastructure development.

Senator Black: Thank you very much. That's very comprehensive.

Should there be an incident not involving a pipeline, but an incident involving a tanker or an incident similar to what we saw in Vancouver Harbour two or three or so weeks ago, would this legislation cover that or not?

Mr. Labonté: It would not.

Senator Black: Which legislation would?

Mr. Labonté: In the instance of a tanker, I believe it's the Canada Shipping Act, but I would have to verify. It's the Minister of Transport who would have responsibility for that.

Senator Black: Would you know, and if you don't, you don't, if they have the same type of limitation, liabilities, absolute liabilities of $1 billion or more involving that type of event?

Mr. Hubbard: There is a similar regime in place in terms of marine spills. As Jeff mentioned, it is led by our colleagues over at Transport Canada. On the marine shipping side of things, there are international conventions, and Canada belongs to those.

There's a specific international regime, an insurance pool, if you will, which has currently about $1.4 billion of compensation available to Canada to respond in the event of a marine spill. Transport Canada has introduced legislative amendments as well to enable the government to top up that fund, if you will, in the event of a catastrophic spill and those funds prove insufficient.

Senator Black: Where did the number of $1 billion come from?

Mr. Labonté: A number of things kind of informed the amount. We did some benchmarking research, looking at countries around the world. The United States has placed a levy on every barrel of oil that is received, produced, transferred or exchanged in the United States, whether by ship, pipeline or what not. That compensation fund has a cap of $1 billion per incident to be made available in the event that the company didn't respond in the most appropriate way. The Northern Gateway panel reviewed the Northern Gateway pipeline project and had proposed a $950-million requirement for bond, insurance and financial resources. Then there's the establishment of a reasoned number that we put forward, and $1 billion was the number that we came to.

Senator Black: Tremendous. That was very helpful to me. Thank you.

Senator Seidman: Thank you very much, Mr. Labonté. I want to ask you about the prevention aspects of the safety amendments in this bill. On page 4 of your deck, you focus on the amendments to the damage prevention regime to improve safety alignment with the provinces. Could you explain what amendments are to be made to the damage prevention regime?

Mr. Labonté: The damage prevention regime amendments are found in the bill. I'm just going to reference the place and perhaps you can follow along.

They relate predominantly to ground disturbance. This is what is permitted in terms of what's around, near and above pipelines. Generally, pipelines are approved and have easements and rights of way that have a certain width, if you will. In many parts of the country, those easements affect private land owners and put restrictions and covenants on the portions of the land impacted by them.

Federally, we have established what depths of activities can happen in what's called the safety zone. Imagine you have three acres, and there is a 25 metre swath where a pipeline goes through your particular land. There's a requirement that if you're digging deeper than 30 centimetres you inform the pipeline company before you dig so they can identify where the pipeline is in that particular right of way and ensure that there is no potential risk associated with moving the earth and disturbing the ground.

The added clarity that is being introduced here protects both people and the property. In some instances, those are found in semi-urban or urban areas. A municipal works crew might want to determine when they're doing something from a municipal works point of view where a pipeline is, sort of the "call before you dig" type scenario that you often find in urban areas.

We analyzed and looked at the different provinces and what provinces spelled out as the depth at which you must make decisions and depth at which you could actually disturb the ground in an effort to harmonize. British Columbia, Alberta, Saskatchewan and Nova Scotia all have the same level of depth, if you will, at which there is a requirement, so we were moving towards having consistency. Some provinces spell it out with greater clarity. Others don't. The attempt here is to avoid a patchwork — in some cases it's 30 centimetres, in others it might be 10 and others 40 — and have clarity and consistency throughout the country.

Senator Seidman: The next bullet is clarification of audit and inspection powers of the NEB for pipeline and power lines under their jurisdiction. What kind of clarification are you referring to?

Mr. Labonté: Here we're dealing with the notion that the board has under its purview and responsibility the ability to do inspections and audits of pipelines. In doing so, the powers vested in the board's officers have been strengthened to give greater clarity to the requirement for companies to furnish access to documents, access to information and access to abilities.

The board does these activities, and we're proposing here some text to bring greater clarity to what those abilities are, and we're also including electricity transmission because the board regulates interprovincial transmission.

This follows on the government intention to provide additional resources to the National Energy Board to increase the number of audits and inspections, which was announced in the 2012 budget. It's a chance when you're dealing with a piece of legislation — in this case, the Energy Board Act was written in the late 1950s — to provide precision to the modern world that we live in and the authorities that actually exist and are exercised.

Senator Seidman: Indeed, new funding was provided in the Economic Action Plan 2012 that allowed the National Energy Board to increase their annual inspections of oil and gas pipelines by 50 per cent. What were they before this provision, and what would that 50 per cent increase be?

Mr. Labonté: I'll leave it to my colleagues to give you greater precision, senator, but I certainly can give you what I know. Perhaps they can provide more on that. About 100 inspections a year were occurring. After Budget 2012, it reached 150 in 2012, 169 in 2013, and 230 in 2014.

Senator Seidman: New funding in 2012 also doubled the number of audits. What would the numbers be?

Mr. Labonté: The audits have gone from three per year to six per year.

Senator Seidman: That's three audits, three different companies, or pipelines?

Mr. Labonté: It could be three different systems. For example, Enbridge will have a system that is run out of a command centre in Calgary, I think. They did an audit of the entire system that runs thousands of kilometres of pipelines across the country.

Inspections are different than audits, and they would be able to give you a greater degree of certainty on this particular point. It's not an audit of an individual pipeline but of a company, its operations and what its plans or protocols would be.

For the reference point, there are 99 corporate entities that are regulated by the National Energy Board.

Senator Seidman: The third bullet under "prevention" is "authority for the Governor-in-Council to implement consistent standards for pipeline monitoring and emergency response." How do you define "standards"? Whose standards? Consistent standards, but what standards?

Mr. Labonté: Standards are produced by a range of different parties in Canada that apply to pipeline operations. There are the Canadian general standards, international standards that deal with the materials like certain metals and there are standards related to the protocols for emergency response. The provision in the bill allows for the ability to set regulations, should we wish to do so as a government, to establish perhaps minimum standards or specific protocols.

At this point, they are generally done on an international basis. Those standards exist, but we can actually improve, upgrade or enforce a more specific standard in Canada, should we wish, and we would have the regulation-making authority to do so.

I think there's a fairly active discussion going on across the country with provinces and other players about what types of standards are required for things like responses to different types of energy products and different things. This might allow us to also, if necessary, provide harmonization and consistency.

Again, it's an area that jurisdictionally is different across the country, and the degree to which we want to exercise that authority is resident in the bill.

The Chair: I will go to a second round, but first I want to carry on from Senator Seidman's questions a bit.

I think you said inspections went up last year to 260?

Mr. Labonté: 230.

The Chair: Could you tell me what an inspection entails? In the province I come from, we have thousands of kilometres of pipeline. Is it an inspection of a compressor station, a pigging station or of the whole pipeline? It's great to see 230, but it would be nice to get some idea of that 230 really entails.

Across Canada are a lot of pipelines and facilities that need to be inspected. Maybe you could help me a little bit there.

Mr. Hubbard: Our colleagues at the National Energy Board will be able to provide more precision, but it would be a range of inspections from inspecting a compressor station, requiring an integrity dig or inspecting construction of some sort of enhancement to the system.

It would be a range of inspection activities — some announced, some unannounced.

The Chair: One of those 230 could be someone just inspecting a compressor station. Could you tell me how they decide? I'll ask NEB, too, but I think it's useful to know from you folks how the determination is made as to what an inspection is. You can go through some small compressor stations relatively quickly.

Mr. Labonté: Right. Before I get to that question, perhaps I could add one more bit. Certainly, inspections are one aspect of monitoring and establishing the operational structure and integrity around pipeline systems and how they're operated by companies. There are also conditions that come with pipeline approvals that often include things that would like inspections. So, certain conditions have to be met.

You would know this from your background, senator, but to build a pipeline, it has to be of a certain variety. Then for the pipeline to get leave to open, it has to be demonstrated to the regulator. They generally fall into the category of approval as opposed to inspection; whereas an inspection tends to look at things that exist already, as I understand it.

"The criteria are risk based," is the answer to the question in its simplest form. It is based on the company record, type of pipeline, activity, previous history, and factors such as the age and the characteristics of the pipeline. These are all factors that affect the determination, as I understand it

My colleagues would probably be able to give a more eloquent answer.

The Chair: One more question that doesn't have to do with inspections. In developing this act, you obviously consulted with industry and all those kinds of people who would be involved. Could you tell me who you consulted with as far as landowners go? I'm not specifically thinking about someone with a home; I'm thinking about farmers who have a lot of pipeline crossing their land. Who would you generally consult with to get some idea of what they're thinking, needing or would like to have?

Mr. Labonté: I appreciate the question. I can give you a couple of cases and examples, and my colleague might be able to add to it.

The first would be that the National Energy Board has a Land Matters Working Group that is a working group of landowners and landowner associations, which include farmers, people in the agricultural business and people who might be in the rural parts of the country. They regularly and consistently dialogue over land issues. I'm sure you can imagine that there's a fair degree of spirited discussion about these factors, because it affects people's land, and it's very dear and near to their businesses and hearts.

So one source is a land management group we track, monitor, listen to the conversations and take stock of what the challenging issues are.

There are specific land associations that exist across the country, some of which are provincial-based and some are national in scope. We consult with them about the given project. They have frequently provided advice and recommendations to government about these things through letters, exchanges and policy briefs.

We took into account all of those elements when putting forward the proposals in the legislation. I think we covered quite a bit of what their interests were. Abandonment, for example, was a significant issue; damage prevention was another, as was harmonization. But there are certainly other areas that are of continued interest to those groups.

Mr. Hubbard: The only thing I would add is that we also have access to a wealth of information from project- specific consultations and have heard significantly from landowners over the years in terms of areas of concern around pipeline safety, abandonment and arbitration through those mechanisms, as well.

The Chair: Just to sum that up: You wouldn't have had direct contact, then, when developing this legislation; you would have actually done it through the NEB and their experience dealing with landowners. Correct me if I am wrong.

Mr. Labonté: It's been both. We've used sources like hearings and the NEB groups, but we've also had direct conversations with . . . .

Mr. Hubbard: The Canadian Association of Energy and Pipeline Landowner Associations.

Mr. Labonté: A number of those groups have written and spoken to us about the bill. We have had telephone conferences with them.

The Chair: Thank you. I have a couple senators on the second round.

Senator Black: Mr. Chairman, I think my question is better directed to the next panel, thank you.

Senator Massicotte: I'm going to go back to the question that was asked earlier. I want to get my numbers right you referred to six audits per year. How does that compare to inspections? An inspection is a one-off per item, right, within a system? An audit is more comprehensive, I presume?

Mr. Labonté: Correct.

Senator Massicotte: How comprehensive? Give me some examples.

Mr. Labonté: I defer to my colleagues with the National Energy Board to give specifics, but the operating system and operations centre for Enbridge pipelines went through an audit that went or for weeks and weeks. An audit report was published with recommendations and requirements for the company to respond.

Senator Massicotte: This legislation now gives them more authority and cash to do more audits; am I correct in saying that?

Mr. Labonté: It gives them more authority and clarifies their authority.

The budget is a separate element that's appropriated through Parliament annually.

Senator Massicotte: I think you also said you have 989 companies; is that correct?

Mr. Labonté: There are 99, some of which are parents and subsidiaries. So it's actually a smaller number than 99. It's closer to about 70 different entities.

Senator Massicotte: So they could do one every 17 years?

Mr. Labonté: You could look at it that way. You could look at it from the perspective of some companies are one company, one pipeline, very small distance —regularly inspected, would cover a lot more extensively the requirement. Some companies have thousands of kilometres, a much more sophisticated system. So again it's a risk-based and kind of consistent-based assessment.

The Chair: Unless there are other questions, we thank all of you for your time, for your presentation and for answering questions.

During the second portion of our meeting, I am pleased to welcome, by video conference from Calgary, officials from the National Energy Board: Robert Steedman, Chief Environment Officer; and Jonathan Timlin, Director, Regulatory Approaches.

Gentlemen, thank you for being with us today. You have some opening remarks to make. After that we will go to questions and answers.

Jonathan Timlin, Director, Regulatory Approaches, National Energy Board of Canada: Good afternoon, honourable senators, and thank you, Mr. Chair. My name is Jonathan Timlin. I'm the director of the National Energy Board's Regulatory Approaches Team. With me is Dr. Rob Steedman, the NEB's Chief Environment Officer. It is a great honour for us to appear today before this committee on the proposed pipeline safety act, Bill C-46.

The National Energy Board is a quasi-judicial independent agency, created by Parliament in 1959 to regulate pipelines and energy development in the Canadian public interest.

Our mandate is set out in several federal statutes, including the National Energy Board Act, the Canada Oil and Gas Operations Act, the Canada Petroleum Resources Act, and the Canadian Environmental Assessment Act, 2012. We cannot regulate outside of the scope of these acts.

While the National Energy Board 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 legislation.

[Translation]

In 2012, Parliament passed the Jobs, Growth and Long-term Prosperity Act, which included some of the most significant changes to the National Energy Board 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," which enable us to impose financial penalties on companies or individuals for non-compliances related to safety and the environment.

[English]

The NEB last appeared before the committee in January during the legislative review of the Energy Safety and Security Act, Bill C-22, to which Royal Assent was given in February. This legislation amended the Canada Oil and Gas Operations Act and the Canada Petroleum Resources Act and provides the board with new tools for regulating northern activities.

Now we have Bill C-46, the pipeline safety act.

The NEB welcomes measures that will strengthen its legislation and expand its 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 resource requirements that are designed to make sure companies have the ability to pay for spills; greater clarity regarding audits and enhanced enforcement powers to issue stop-work orders in the North; power to assume control of an incident where the company is not able to pay or is not complying with board orders and the Governor-in-Council designates that company; clarification of the board's jurisdiction over abandoned pipelines; and board power to assume control of an abandoned pipeline if the company is not complying with board orders.

The NEB will work effectively and efficiently to implement any changes that are passed by Parliament, and we will do so in a timely manner.

[Translation]

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. 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.

[English]

The National Energy Board Act stipulates that the board must consider representations from those who are directly affected by the granting or refusing of a project application, and it may consider the representations of any person who has relevant information or expertise.

The public's appetite to participate in energy hearings is greater than ever. Until the summer of 2010, the NEB maintained a fairly low public profile. Most Canadians had little or no idea what the NEB was. In 2006, when the NEB 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, with relatively little public attention. There were only 29 interveners in that process. Contrast that with today, where we have 400 interveners and over 1,300 commenters in the Trans Mountain Pipeline Expansion Project. To date, we have received close to 2,300 applications to participate in the Energy East hearing.

An important part of the National Energy Board's job is to review and assess project applications and, after assessing the evidence that is placed before it during a hearing, to determine whether a project is in the public interest. However, that is only one part and merely the beginning of our role. Our regulatory oversight spans the entire life of the project from design through to abandonment.

There is no doubt that Canadians are concerned about the safety of energy infrastructure and the protection of the environment.

[Translation]

Once a pipeline is operational, 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.

[English]

The NEB is committed to taking all available actions to protect Canadians and the environment. Conducting unauthorized activities 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 companies it regulates to strive for zero incidents, we recognize that damage prevention is a shared responsibility among all those who operate or work near pipelines.

We require companies to ensure that people know how to safely conduct activities like excavation and construction near pipelines.

In December 2014, this committee produced a report called DIGGING SAFELY: One-call Notification Systems and the Prevention of Damage to Canada's Buried Infrastructure, which recommended the use of one-call systems across Canada.

We also support the use of one-call systems that promote effective and timely communication between someone planning an activity near a pipeline and the pipeline company, as you heard when NEB appeared before you in the context of that very important study.

[Translation]

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 board 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.

[English]

In 2014, the board took the following enforcement actions: 302 notices of non-compliance and assurances of voluntary compliance; three inspection officer orders whereby designated officers had the authority to direct and, in some situations, order parties to correct a non-compliance; five safety orders, which are orders of the board that restrict operations; and six administrative monetary penalties, which, as I referred to earlier, is a new tool provided to the board in the Jobs, Growth and Long-term Prosperity Act.

Public engagement is also a very important component of the NEB's activities. The NEB is committed to engaging Canadians beyond the formal hearing process. In fact, in January, NEB's 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, next week, the NEB will be hosting a pipeline safety forum in Calgary where we will be addressing specific issues to improve safety of regulated facilities. The goal 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 and the environment. The information collected from the engagement initiative and the safety forum will be incorporated in a report to be released in 2015.

Senators, thank you once again for inviting us to speak to you today about the important work of the NEB and how this proposed legislation will impact that work, particularly in the context of the board's strategic priorities, and those are taking action on safety, leading regulatory excellence and engaging Canadians.

[Translation]

We welcome any measures that will strengthen our legislation, and expand our toolkit 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 are now ready to answer your questions.

[English]

Dr. Steedman and I would be happy to answer any questions you may have.

[Translation]

Senator Massicotte: Thank you for making time to study the bill with us. I would like to talk about the broader aspects. Despite your efforts, people are a little cynical about the oversight of pipeline companies. People are afraid that the matter is more politicized rather than based on science and facts. I think your media program is very much needed. There have been a few experiences recently in Quebec and Western Canada. The public at large is very hesitant.

We heard from the government officials, and we know that, on average, you conduct six audits per year for over 60 companies under the pipeline legislation. Six of a total of 99 does not seem like a lot. You need an average of 17 years to get to all the companies. When I see the cynicism and lack of confidence of Canadians, I wonder why the number of audits is not higher.

[English]

Mr. Timlin: Thank you very much, senator, for the question. I think the question is a very important one, as it speaks to the work that the board does to ensure compliance with its regulations and its responsibilities.

I'm going to put the question into a broader context and speak about the full suite of compliance activities that the board undertakes in any given year. I'll speak to 2014, as I have the statistics directly in front of me.

I would point out that the board completed over 350 compliance actions in 2014. That included 230 inspections, as Mr. Labonté had mentioned in the previous discussion; 13 emergency exercises; 19 emergency procedures manual reviews; 64 compliance meetings; six operational audits, as you mentioned, senator; and 21 report reviews. Again the focus of these activities is to ensure that our regulatory requirements are being met and that the environment is being protected and the safety of the Canadian public is being ensured.

[Translation]

Senator Massicotte: Thank you for your answer, but the challenge is huge. In Quebec, we had the east pipeline project, which has recently been changed. The public is very cynical about how prepared and competent these companies are.

But let's change the subject. The bill sets fixed timelines for the approval of licences to export petroleum products. I think the maximum is six months. Why is that needed? Why have the timelines been set? Is it because it used to take six months to receive approval? What is the problem? What is the purpose of this amendment?

[English]

Mr. Timlin: The question that you raised is a question that pertains to policy. The board, of course, as an expert regulator, is not in a position to comment on why the government chose to advance certain policy measures within the legislation.

By a broader context, perhaps I could point to a number of time limits that are already established within the legislation. For instance, the board has 15 months to review applications under section 52 and 58 of the National Energy Board Act.

While I certainly wouldn't want to speak to the rationale for the government introducing this change, I would say that the notion of time limits is consistent with other elements of the National Energy Board Act review process.

[Translation]

Senator Massicotte: As you know, the proposed legislation imposes a $1-billion liability limit and all sorts of other related procedures.

Clearly, Canadian taxpayers want to make sure that, in the event of a spill that causes damage, the polluters, the oil companies, pay for the damage caused. Can you give me an example from the past 10 years where the public was stuck and had no choice but to bear the costs of the damage caused by the pipelines?

[English]

Mr. Timlin: Senator, I'm not aware of any such circumstances. I'd like to speak a little bit about the $1 billion. I heard the discussion that has taken place at this point, and I thought it would be helpful to provide additional clarity regarding that component of the bill.

The $1-billion absolute liability limit would apply to companies that have the capacity to transport more than 250,000 barrels of oil per day. That $1-billion absolute liability limit is established in the bill before you. Certainly there will be absolute liability limits, as I mentioned in my opening statement, that would apply to the other pipeline companies that the NEB regulates, or companies that have the capacity to transport less than that amount, as well as companies that transport other commodities.

I would also point out that the bill requires that the companies maintain financial resources at a minimum to meet their obligation, to meet their absolute liability obligation. Those financial resources can be met in a number of different ways, and there could either be regulations that establish what those different resources would look like, or board orders.

Senator Black: Thank you both for being with us, and thank you for what you do.

If there is a spill from an oil tanker, who regulates that?

Mr. Timlin: It's a good question, and let me be clear on this one. Maybe I'll speak more to what the NEB's regulatory responsibilities include. That is, if there is a spill from a pipeline that we regulate, that is something that we would play a strong role, of course, in addressing. If there is a spill from an oil tanker, that is not something that the NEB would regulate. That is something, I understand, in which the Coast Guard would play the strongest role.

Senator Black: If the product was being transferred from a pipeline to a tanker, who regulates that?

Mr. Timlin: You would be at a terminal, for instance?

Senator Black: Yes, at a terminal or at a loading dock.

Mr. Timlin: That's right. I'm going to provide a few comments, and I'll certainly invite Dr. Steedman to mention anything in addition.

The board's jurisdiction ends at the end of the pipe. Where the commodity is goes from the terminal to the tanker would be the extent of the board's jurisdiction. But certainly if there were to be an incident, what is primarily and paramount of importance is that the different agencies involved work together to make sure that there is a coordinated response. That is why we work closely with the Coast Guard and we exercise activities to ensure that there would be no gap in responsibility or oversight in a situation that you describe.

Senator Black: I understand we all exercise our best efforts, but that's not what I'm trying to get at here. I'm trying to get at what liability would be imposed, and who would assume the obligation for liability in the event of either a spill from a tanker or a spill during transfer, both of which are more likely to happen than a spill or a leak from a pipeline, as your data reveals. That's all I want to know. If there is someone else I should ask, that's fine too.

Mr. Timlin: I think in that case I would certainly say that where the National Energy Board Act applies, the liability limits in the act would apply and the requirements in the act would apply. So it's a matter of where the National Energy Board Act is applicable.

Senator Black: Thanks very much for that. I would need to do a bit more investigating to understand this liability, which I'm happy about, the $1-billion liability. As a lawyer, I can see nothing but opportunities to suggest that the spill or the incident happened in a different forum. Would you agree with that?

Mr. Timlin: I'm sure the senator as a lawyer would appreciate it that I'm not going to speak directly to hypotheticals.

Senator Black: That's fine and dandy.

I have one question for Dr. Steedman. I don't necessarily understand, but I'm told that, simply put, there does not exist in the world today technology to clean up oil on water. We only have technology to disperse it. Are you able to comment on that?

Robert Steedman, Chief Environment Officer, National Energy Board of Canada: Thank you for that observation. I'll comment to the extent of my familiarity with the systems.

Any oil spill on water is a unique circumstance. It will involve unique combinations of location, the nature of the product that has been spilled, weather conditions, wave energy, temperature, et cetera. All these things are important.

There are a variety of techniques to recover oil from the surface of the water. These include, for example, devices called skimmers, which typically work best in relatively calm water on relatively concentrated parts of an oil spill where the oil is literally lifted off the surface onto rotating drums and stored on board. It is eventually pumped into tanks or auxiliary vessels, for example.

Other methods include absorbent booms, which are frequently used. It would be a key element in the example you mentioned earlier of a spill at a terminal, which typically is relatively easy to contain. It's visible. It is in an attended situation and booms are placed around the ship in that condition. So people and the operators are ready for that kind of circumstance.

So the booms contain the slick, which has a tendency to spread out on the surface of the water like any oil. There are types of booms that absorb the oil from the water and they are recovered and replaced.

In remote circumstances, and this has been tested particularly in the Arctic where oil may be confined by ice, the oil can readily be burned, once it is ignited. We saw some of this in the Gulf of Mexico as well. There are a variety of techniques.

The recovery is never complete and that is a pretty reliable generalization. The recovery, when initiated promptly, can be a significant part of the overall response. Of course, once oil is on the water then its characteristics begin to change. It thickens, evaporates and it depends on the nature of the product. There are very important techniques to collect oil from the water. Dispersants are used only when a net environmental benefit analysis, which is cued up in terms of preparedness in advance, suggests it will be in a net benefit. The main difference with a dispersant is that it breaks up the oil, depending on how successful it is. Typically it suspends it in smaller droplets in the water column. It may reduce the amount of oil that reaches the shoreline or reaches surface dwelling animals like waterfowl. It greatly increases the surface area of oil. Crude oil is a biodegradable substance and we have abundant scientific evidence that microbial processes quite rapidly degrade oil once it is dispersed in the water column.

There are downsides to that as well in that the dispersed oil can become temporarily more available in the water.

Senator Black: I've heard that. I'm just trying to explore, to test what I have been told, but I've been told that both in BP's Deepwater Horizon incident and the Exxon Valdez issue of Alaska, that something less than 20 per cent of the oil was recovered or burnt. The rest was dispersed, which is to this day continuing to affect life, marine life, and continuing to wash up on beaches even in Alaska. That's what I'm told. Are you able to comment on that?

Mr. Steedman: My knowledge on this is based primarily on evidence that has been placed before NEB hearings such as the Northern Gateway proceeding. The approximate amount of recovery — I think, I would agree with that generalization.

For the oil in the Deepwater Horizon case, dispersant was injected right at the oil head on the sea bottom, so a great deal of oil was dispersed through the water column. There was also a great deal of oil on the surface.

It is no longer apparent in the Gulf of Mexico. Although there, and also in the case of the Exxon Valdez, there is oil on certain types of rocky beaches where it penetrated and was trapped, buried and no longer exposed to air, microbes and water. On certain kinds of beaches oil can be found. To my knowledge, it is generally due to the material that I mentioned that is no longer moving around in the environment in either case. There is a recent paper in a science journal referring to the Gulf of Mexico.

Oil biodegrades quickly. It evaporates. It disperses. It sinks. It doesn't mean it's all gone, but it tends to be out of the environment largely in a matter of months to years.

Senator Seidman: Mr. Timlin, in your presentation, you talked about the 2014 Enforcement Actions that were taken, and you listed many. So my question is: Do you check back to confirm compliance? Do you have some way of ensuring that the voluntary compliance by the party or parties is indeed as you requested?

Mr. Timlin: Oh, yes, absolutely. We check up on every enforcement action to make sure that the appropriate corrective action has been implemented.

Senator Seidman: In the House of Commons committee meetings concerns were raised about the NEB's ability to both regulate the pipelines and manage the responsibilities attributed to them. Do you have the resources available to address the additional responsibilities outlined in Bill C-46? Will there be tracking mechanisms that you can use to ensure that the items brought forward as a result of the new responsibilities will be adequately achieved?

Mr. Timlin: I believe Mr. Labonté in his presentation also mentioned the Economic Action Plan 2015 provided the National Energy Board with $80 million, over five years, starting in 2015-16. These resources were really allocated to focus on safety, environmental protection and enhanced engagement with Canadians, and, of course, the funding would be cost-recovered from industry.

Certainly the board is pleased that it was allocated these additional funds, and we will work hard to ensure that these funds are going to be applied efficiently, effectively and focus on the areas they have been dedicated to.

I would also point out that the board is transparent in how it spends its money. Of course, like any government department, we publish how we do spend our money, and because we're cost-recovered as well, we are required to have really detailed financial statements that are publicly available.

Senator Seidman: In our earlier meeting with the department people, we talked about audits and inspections and the increased numbers that you were performing with these new resources that you received in 2012. We talked about six audits. In your opinion, is that adequate? What does an audit cover?

Mr. Timlin: I'm going to start off by answering this question at the high level and then turn it over to Dr. Steedman, who can speak more specifically about what an audit covers. I would point out that an audit is one of the many tools we use to ensure that our regulatory requirements and what we need companies to do are being met. As I mentioned, the six audits fit nicely within the overall package of 350 compliance actions that we conducted in 2014.

With respect to how an audit is conducted and what is covered in an audit, I'm going to ask my colleague to speak to that.

Mr. Steedman: Thank you very much for that question. I'll note initially that, of the roughly 100 companies that are presently regulated by the National Energy Board, a relatively small subset of that number of companies accounts for the vast majority of the pipeline kilometres. These are the big companies that operate transmission pipelines across the country. The smaller ones tend to be small interprovincial types of pipelines, et cetera. That is relevant, in a way, to the question of how many audits are enough.

We refer to our audits as management system audits. Canada and the National Energy Board use a very effective regulatory regime that is unique in the world. It is a goal-oriented, performance-based management system. Rather than, for example, what occurs in the United States — I'm simplifying here a bit — ordering companies to inspect pipelines at a fixed interval, the Canadian pipeline safety management regime requires companies to understand, assess and document the risks that all aspects of their operations may face. They're required to design management systems that anticipate, manage and mitigate those risks if they cannot be eliminated through design improvements.

That is a very comprehensive and system-oriented way to make sure pipelines are operated safely. It puts a lot of onus on the company to understand their system and to tell the National Energy Board how they're going to anticipate and manage those risks. We audit their management system against the commitments they've made to us, and we audit all the documentation, training and performance aspects within the company. This is why an audit is a huge undertaking, often involving teams of 10 to 20 people over the better part of a year. They involve extensive field visits to the company. It's really the basis of assessing the quality and breadth and extent to which the company is following through on the commitments it has made to the NEB in its regulatory approval certificates or orders, for example.

We use inspections to see how those management systems play out in the field. The inspections and audits check different parts of the system, and they're quite complementary. An audit finding, for example, may suggest exactly where and how an inspection might be optimized to detect non-compliance and to lead a company to better performance. Inspections may show that management system principles and details, documents and training may not be fully implemented at the field level so that, for example, operators operating heavy machinery where so much of environmental protection is achieved during construction, or not. These two systems are quite complementary.

As to your comments earlier with Natural Resources Canada, they target different parts of the company's operations, and they are different forms of compliance verification from our perspective.

Senator Seidman: Of course, the whole point both in Mr. Labonté's presentation and our discussion has to do with prevention, because ultimately that's what we're concerned with. We should hope that we would be preventing spills as opposed to having the miseries of cleaning them up. The audits and inspections go a long way to helping to ensure that the safety regulations are enforced. That's my understanding. Is that correct?

Mr. Steedman: Yes, that is correct.

Senator Mitchell: Thanks, gentlemen. You referred to the idea of the NEB taking over abandoned pipelines. Who pays once you take one over? Has a fund been created by the company that once owned it that's left in trust, or is there some kind of a pooled fund in the industry, or do taxpayers pick up the tab for any work that needs to be done on those abandoned pipelines?

Mr. Timlin: Currently where a company wants to abandon its pipeline, it needs to seek authorization from the board under section 74 of the National Energy Board Act. It would have to satisfy conditions before the board would issue an abandonment order under section 74. This legislative change would enable the board to set conditions subsequent to an abandonment order being issued. So if there is a problem with the abandoned pipeline, the problem would be rectified by the company. The problem would not be left to the landowner, for example, to deal with.

Your question also referenced ensuring that the taxpayers or the farmer who owns the land would not be left on the hook for a problem related to an abandoned pipeline. Since approximately 2010, the board has been undergoing a process through our land owner consultation initiative to identify potential costs or the cost of abandonment and to ensure that companies are setting aside appropriate amounts of money, per company, to ensure that their pipelines can be abandoned safely and can be maintained if they're abandoned in the ground.

The underlying point I wanted to emphasize there is the board's action with respect to ensuring that companies do have this money set aside, as well as the legislative changes that would provide the board the power to make orders subsequent to an abandonment order being issued are complementary measures to ensure that the taxpayer, the landowner, the person who lives near an abandoned pipeline would not be left holding responsibility if there is a requirement that needs to be adjusted.

Senator Mitchell: Some years ago, when we did a major study of pipeline transportation amongst other forms of transportation of petroleum products, we received witness testimony from a farmer who represents a group concerned with these matters who said that there is a chance that an abandoned pipeline can erode and collapse when they're driving their tractor over it, at risk to the vehicle and the person in it. Is that, in your experience, a notable, significant risk, and is it necessary to fill these abandoned pipelines that could be driven over by a tractor or a heavy combine with something so they don't collapse?

Mr. Timlin: It's a very important question, and I would point out that before the board would issue an abandonment order, it would ensure that it is doing the utmost possible to make sure that that pipeline can be abandoned safely and the situation that you described would not occur.

That said, I would also add that this legislation provides an additional tool to the board in the situation that you described, to order the company responsible for undertaking the necessary work to bring that abandoned pipeline back to a safe condition.

Senator Mitchell: Thank you. You very appropriately and nicely referred to our report on Call Before You Dig, which I want to thank you for, and which is quickly becoming "click before you dig." The report, of course, is yet again evidence of the great work the Senate does.

I know that the NEB is very interested in that whole process and that you participate and that you encourage, but do you have any means by which you could actually encourage provinces to begin to legislate?

Right now, Ontario has really strong legislation, and it's something that's needed across the country.

Mr. Timlin: As you mentioned, senator, the notion of Click Before You Dig or Call Before You Dig is critically important to the safety of pipelines. When we do see incidents on pipelines, often they are as a result of work being done around pipelines and that work not being done safely.

The report of the Senate committee and the work that we've been doing is really focused on the safety of pipelines. You'll note that the legislation makes some fundamental changes to our damage-prevention regime, and that was discussed a little bit in your interactions with the officials from Natural Resources Canada.

The track that we continue to work on, and that will continue under this legislation, is to require companies to participate in a one-call system or one-call centre, where one is placed within that province. We would also require people to contact a one-call centre if they're going to do work around a pipeline.

Our ultimate objective is to ensure that the contact is made; that the one-call centre is contacted and that the work is done with full knowledge of where the pipeline is.

With respect to how the various provincial regimes decide to undertake their own regulatory requirements and regime, our focus really is to ensure that pipelines are held as safe as possible, and we encourage any measure that would meet with that objective.

Senator Mitchell: I was impressed by the figures you mentioned about how quickly and dramatically the involvement and the requests in the review processes by the public have increased. I want to applaud your efforts in going out to the public and beginning to engage them.

I have a theory that one of the reasons you get so many people at these public hearings is because they have nowhere else to talk about their environment concerns and about environmental policy. Have you given thought to other mechanisms or ways of creating public debate around that issue, beyond your outreach and beyond simply the review process hearings that really aren't structured for that at all, but they're the only place people really have to go?

Mr. Timlin: Personally, I had an interesting opportunity to participate in the Vancouver Island component of the chairman's recent engagement initiative. What I saw was fascinating. In many cases, people are very aware of the work we do with respect to pipeline reviews, but they're not necessarily aware of the life-cycle mandate we have. From my perspective, it is really important that people understand that our role doesn't stop when the Governor-in-Council approves a project. Where a project is being constructed, we're there inspecting. Where a project is being operated, we inspect, do audits and undertake other compliance activities all the way through to abandonment and potentially beyond, if this legislation receives Royal Assent.

To your point, senator, it is really important that we get that message out and that we engage with Canadians so that they understand how we regulate and work on their behalf to keep the pipeline systems safe and the environment protected.

The Chair: You touched on abandoned pipelines briefly with Senator Mitchell's question. Prior to this bill, abandoned pipelines, at least during our briefing, were left up to the provinces and the landowners. It was a mishmash. Under this legislation, when it's in place, the National Energy Board will continue to be responsible for all abandoned pipelines for as long as they're in the ground. Hopefully the company that owns them will be responsible, and there are orphan funds being set up to fund those kinds of things in case some company goes broke. It was actually very good to hear that.

Senator MacDonald: Gentlemen, thank you for being with us today.

Toward the end of your remarks, Mr. Timlin, you mentioned that you welcome any measures that will strengthen our legislation and expand your tool kit to protect Canadians and the environment. Of course, you don't write the laws or the regulations; you enforce them and apply them. If you were writing the laws or the regulations, is there something that's obvious and is becoming increasingly obvious to the board that should be addressed that perhaps is not being addressed at the federal level?

Mr. Timlin: I had the pleasure to appear before a House of Commons committee where I was asked a very similar question. At the risk of repeating myself, I'm going to use the same answer I gave then.

As you pointed out, our responsibility is to ensure that the laws and policies set by Parliament are implemented efficiently and effectively. We do so in a manner that focuses on safety and environmental protection. It is not the place of the regulator to provide advice or comments on how those laws should be amended from time to time.

Senator MacDonald: I appreciate your answer. You're a pretty good politician for a guy on the National Energy Board. Maybe if I could speak to you privately sometime, you would have a different answer for me, but I appreciate that.

I have a few more questions. I couldn't help but notice the large increase from 2010 when 29 interveners appeared on the XL pipeline to a total of 1,700 on the TransCanada, and you're looking at 2,300 applications in regard to the Energy East hearings.

Why do you think there is such an increase to this level? Could you define for us the difference between an intervener and a commenter? What criteria do you use to decide who you will listen to and who you don't? I would think, if you have 2,300 applications and a fixed time frame in which you have to hear everybody, you have to use some objective criteria to decide who gets heard and who doesn't. Could you clarify that process a bit and perhaps expand on it?

Mr. Timlin: I'm absolutely happy to. I'll take your first question first. With respect to the number of interveners, which, as I mentioned with the first anchor loop of the Trans Mountain that went through Jasper National Park, there were eight interveners. We are seeing 400 in the current Trans Mountain expansion.

There could be several factors to illustrate why that has happened. Some would say it was the situation in Michigan with the spill that fell into the Kalamazoo River. Others might say it's the Macondo blowout in the Gulf of Mexico that we talked about previously. There are a number of different issues that have raised public interest and scrutiny with respect to pipeline activities. I would perhaps point to those as being examples where the public has become more seized of energy transport and the safety of energy systems.

With respect to the hearing process, the board is required to hear from those directly affected by a project. For each hearing process, we invite people to apply to participate. In doing so, people identify to the panel of the board that would be hearing a particular project application. They apply and identify why it is they feel that they are directly affected, what they would be interested in speaking about and how it relates to the listed issues that the panel would be reviewing.

Then the panel reviews each individual application to participate and takes a determination based on the merits of what's said in that particular application.

As I mentioned before, it is in that context of section 55(2) of our act that requires the board to hear from all of those who are directly affected by a project.

An intervener has full status when it comes to the review of the project. That is they can ask information requests of the proponent and other interveners who are submitting evidence. That is all placed on the public record. A commentator tends to be more of a one opportunity to provide your thoughts and perspectives on the application, provide specific evidence that goes on the record as well.

The real difference between an intervener and a commentator is that the intervener has multiple opportunities to test the evidence through information requests, oral final argument, as well as written summation, whereas a commentator provides a letter to the board that is entered into evidence. I don't know if Dr. Steedman would like to add anything.

Mr. Steedman: No.

The Chair: On oil pipelines, is the NEB responsible for inspections of pumping stations?

Mr. Timlin: The definition of "pipeline" in our act is the pipe itself and any associated facilities on that pipe; that would include pumping stations.

The Chair: That would include compressor stations and gas plants, I would assume. I want to double-check that with you. Would that be correct?

Mr. Steedman: Yes, we do regulate in British Columbia the Pine River Gas Plant, for example. It tends to be a unique situation in the B.C. gathering and processing system, but yes, we do regulate that plant. As to the dehydration and sweetening of natural gas, there are separate regulations, the pipeline processing regulations, dealing with that, which are distinct from the Onshore Pipeline Regulations.

The Chair: Would you be responsible for inspections of the plants in Fort Nelson and Fort St. John? You said Pine River already.

Mr. Steedman: I am not going to confirm that because I'm not familiar with that description, but it's the systems on the Spectra gathering system on the West Coast.

The Chair: You have, as I understand, 73,000 kilometres of pipeline that you're responsible for. How many pump stations, compressor stations and gas plants would you be responsible for?

Mr. Timlin: Those would be undertakings that we would be most happy to provide to the committee through the clerk.

The Chair: I suggest those are in the hundreds. I asked this of the department heads, and they said you would be better able to answer this: In 2014 you did 230 inspections. How did you decide how and what to inspect? If I think about 73,000 kilometres of pipeline, I think of hundreds of pipe stations and compressor stations, all of those things you talked about that you're responsible for inspecting. How do you decide what, when and where to do it?

Mr. Steedman: Thank you for the question, Senator Neufeld. As a rough rule of thumb on your previous question, compressor stations on gas pipes and pump stations on liquid pipelines, are roughly 50 to 100 kilometres, apart, depending on terrain and other things; that's very approximate and varies.

The National Energy Board uses a risk-informed decision tool to decide which inspections are done when, and the feeds to that are based on staff intelligence, knowledge and observations on the performance of a company, observations from audits, observations from inspections, and a semi-quantitative modelling system based on the location of the pipe, the size of the pipe and the product and operating specifications of the pipeline.

Those things are factored into the annual compliance verification plan, whether it's for environmental matters or pipeline integrity, safety, emergency response, security, et cetera. There are different teams assigned to each of those major categories. Another aspect to the plan involves companies that we have not had a verification activity with or some kind of encounter with the staff or the facility, typically these can be very small companies, and we make a point of rolling some of those into each annual compliance verification plan.

The Chair: Where I'm going is the 230 inspections. If they're going into a compressor station and looking at what's going on, how do you determine if it's enough? I don't know how you would do that. I'm not going to suggest that I can come up with an idea how it is enough. To be perfectly honest, that number doesn't sound like much to me for that many kilometres of pipeline and all the ancillary equipment that keeps that pipeline full, the pump stations and all of those things going.

Is there a group of people that will go out, fly a pipeline and look at it that way? Do you determine that through smart pigs? Help me so I can feel comfortable.

Mr. Steedman: Certainly, Senator Neufeld. We require companies, as I mentioned earlier, to understand the risks and hazards associated with all of their facilities and operations. For example, it is very common practice for companies to fly an oil pipeline or gas pipeline right-of-way, looking for encroaching land use, people putting up fences or constructing or, in very rare occasions, evidence of leakage along the pipeline. They may walk with sniffer dogs, and there are a whole variety of techniques that involve on-the-ground regular patrols of the pipeline right-of-way. We require them to do that. They have their own inspectors.

I mentioned that we audit their management systems. We look to see whether they have and are implementing comprehensive systems and activities that cover the risks that they've identified and that we also may feel are identified.

Our knowledge of their operating and management systems and their field operations and the success of all these, put together through evidence of incidents or near misses, or near hits, as we refer to them, are some of the aspects. If at any time the board becomes concerned that a company is not totally on its game in terms of protecting the environment and the people who live around a pipeline, we take immediate action. It can vary from an inspector order to stop construction until measures are implemented that are consistent with their approval. If there's any concern about the integrity of a pipe, the board may order a pressure restriction. Pressure restrictions provide a very significant margin of safety and the time to find out the detailed reasons for concern over integrity or performance. If necessary, the board will shut down the pipeline.

These things altogether, with ongoing oversight, our knowledge of the company's culture, their operating systems and their performance in the field, allow the board to use its resources optimally in a given year and to maintain an ongoing oversight of the systems with a focus on the areas and systems that are most likely to present hazards.

The Chair: Thank you very much, gentlemen, for being with us today and providing that information.

(The committee adjourned.)


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