Justin Trudeau’s ill-advised effort to ‘modernize’ the National Energy Board has all the makings of another pain-for-no gain exercise. The mountain of feedback received from Canadians reflects the anger and divisions of the pipeline debates and there is no consensus on how to reform it.
Indeed, some proposals to the panel charged with making recommendations would result in such an Ottawa power grab – for example moving the regulator’s headquarters to Ottawa from Calgary, or transferring many of the responsibilities of the now-independent regulator to the federal government – they are already stoking alarm and could mean more capital flight from Canadian energy if implemented.
“It is Imperial’s view that the NEB and its staff should be geographically located where it makes the most sense based on workload and the practicalities of hearings and the day-to-day logistics of regulatory oversight,” Imperial Oil Ltd. said in its written submission.
“We disagree that having the NEB located in Calgary taints the NEB’s objectivity. Rather, having the board’s head office in Calgary, away from Ottawa from where it was moved in 1992, physically puts the board and its staff at arm’s length from policy-makers and close to the operators they oversee.”
Imperial notes that the NEB’s move to Calgary came at great cost borne by industry through the NEB cost recovery levy. “It would be unfair, and a waste of money, to make industry bear this discretionary cost again,” the oilsands giant said.
The headoffice move idea came up in response to concerns by NEB critics that the regulator is too influenced by the oil and gas industry. Marc Eliesen, a former CEO of BC Hydro, led the charge when he urged the panel in February to fire its board of directors and relocate its headquarters from Calgary to Ottawa to restore public trust.
The Canadian Energy Pipeline Association, which represents Canada’s 11 major pipeline companies, argues the NEB needs to be based in Calgary because it’s the centre of Canada’s pipeline obusiness.
“The NEB is located in Calgary because there are literally thousands of transactions and obligations at every stage of the life-cycle of a pipeline that require daily interaction between experts at the NEB and technical experts at pipeline companies,” CEPA says. “There is no evidence to suggest that the NEB shows bias in favour of the industry that it regulates, nor in the decisions that it makes.”
CEPA says its member companies plan to invest up to $50 billion in pipeline infrastructure projects in Canada over the next five years, but NEB needs reform that “promotes certainty and efficiency … There is serious risk that companies will invest their capital in other jurisdictions if they see the Canadian regulatory system imposing unacceptable process uncertainty, risks, costs and delay.”
In its submission, the Canada West Foundation said the charge that the NEB has been “captured” by the energy sector is serious and needs to be proven. It should be fixed by picking board members with more diverse backgrounds rather than by moving its headquarters, the Calgary-based think tank says.
There are better ways to enhance the NEB’s legitimacy, it says, such as adopting a two-part review process, with the first part involving a political decision up front about whether a major project should go ahead, and before proponents make major investments. The second would be led by the NEB and deal with the more technical aspects, the think-tank says.
Calls for NEB reform emerged after it got caught in the crossfire of “ferocious energy debates” stemming from unresolved political questions, such as climate and indigenous policy, that don’t belong before a regulator, it argues.
But NEB critics are pushing to end the NEB’s role as an independent, quasi-judicial regulator.
Pipeline opponent Ecojustice proposes that the environmental assessment functions performed by the NEB should move to the Canadian Environmental Assessment Agency, which reports to federal environment and climate change minister Catherine McKenna.
“The NEB’s mandate with respect to major energy project reviews should diminish, not expand,” Ecojustice writes in its submission. “Given that much of the NEB’s jurisdiction concerns oil and gas, and in particular interprovincial and international pipelines, we expect that the NEB’s role will necessarily decrease as we stop building new oil and gas infrastructure and transition to a decarbonized energy system.”
Similarly, the Pembina Institute, another green group, recommends that an expanded federal environmental assessment process lead reviews of major projects, with the NEB relegated to providing technical input. It also recommends an amendment of the NEB Act so there is a direct link between Canada’s climate objectives and its energy decisions.
Some 850 individuals, industry groups, NGOs, academics; and an additional 130 from indigenous communities and organizations, provided feedback to the five-member expert panel, which will make recommendations to Natural Resources Minister Jim Carr by May 15, a spokeswoman for the department said in an email. They will help inform the potential development of new legislative and policy measures, she said.
“The NEB’s mandate with respect to major energy project reviews should diminish, not expand”
Having promised to restore confidence in the NEB during his election campaign, Trudeau will find himself in a no-win situation.
If he makes major changes to the regulator — which is actually widely admired internationally — he’ll contribute to the regulatory uncertainty that is promoting the exodus of international companies from the oilpatch, at a time the Trump administration in the U.S. is lightening the regulatory load, and as concern about a national carbon price and federal intrusion in the energy business feed Western alienation. If he doesn’t, he would have made another promise he won’t be able to keep.