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.
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
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
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
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.
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
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
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
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
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
The Chair: Thank you very much, Mr. Labonté. So we'll begin with
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
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
The first part had to do with the cost-recovery basis for Aboriginal
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
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.
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?
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
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.
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
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
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
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.
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
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.
Damages or the movement of the earth above the pipeline.
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.
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
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
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
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
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
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
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
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
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
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
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
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
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
The budget is a separate element that's appropriated through Parliament
Senator Massicotte: I think you also said you have 989 companies; is
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
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
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
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
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.
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 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.
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.
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
There is no doubt that Canadians are concerned about the safety of energy
infrastructure and the protection of the environment.
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
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.
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.
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
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.
Dr. Steedman and I would be happy to answer any questions you may have.
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
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.
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.
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
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
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
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
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.
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?
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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.)