Sunday, Post Church Service Commentary:
Dr. Charles Stanley (www.intouch.org, NGP Photo) gently reminds us that our actions have consequences and that we reap, "what we sow, more than we sow and later than we sow." We include this reference not to suggest that decision makers are bad or good people, but to emphasize the principle that actions have consequences.
Today's posting is for the benefit of Alaskan and Canadian decision makers who have said, "This is where the oil is; a tax or regulatory increase won't stop those oil companies. They have to do business with us. Where else are they going to go?"
The answer is that investors have a number of alternatives for using their money productively. They are prudent. They are decisive. To them, government support or opposition counts.
Below, is a relatively small but -- to the greater Norman Wells area -- highly significant way in which an Aboriginally controlled government decision process has adversely affected economic strength, jobs and opportunities in their region.
Contrast this with the gas sale agreement decision announced in Inuvik a few days ago.
CBC News. Husky Energy has withdrawn its application to horizontally drill and frack up to four wells in the Sahtu region of the N.W.T.
In a short note to the Sahtu Land and Water Board, the company said it has decided to postpone drilling for two years. It had intended to start drilling this coming winter.
Gregor Harold McGregor, mayor of Norman Wells, N.W.T., says Husky's decision to withdraw its fracking application isn't good news for the region's economy. (CBC)
The decision is a disappointment for businesses in the region that were hoping to capitalize on the project.
"I'm in a state of shock at the moment," said Gregor McGregor, mayor of Norman Wells.
"I wasn't expecting it. It sure isn't good news for the area, for the region. The economy here is very fragile, I've said that many times. I guess we're about to find out just how fragile it is."
Husky's decision comes a week after the Sahtu Land and Water Board delayed making a decision on the project. The board wanted more information about the project.
Earlier this year, ConocoPhillips — the other big energy player in the region — announced it will not be drilling in the region next winter.
|CBC North. The Town of Inuvik (NGP Photo, Inuvik Russian Orthodox Dome Church, Circa. 2003, and author) has announced it will renew its agreement with Inuvik Gas to distribute fuel to the town, but residents shouldn't expect lower gas bills, says the senior administrative officer.|
The Pebble Partnership (PLP) filed suit against the Environmental Protection Agency (EPA) on Wednesday in the U.S. District Court for Alaska.
PLP asked the District Court to stop the EPA's move to pre-emptively veto the Pebble Project under Section 404(c) of the Clean Water Act.
As we have written, if the EPA succeeds in this overreach, virtually all construction projects will come to be at risk of preemptive project vetos, putting a final nail in the coffin of Constitutionally guaranteed, "due process".
Real "Energy Policy" Begins And Ends In The States. Forbes, EID’s David Blackmon (NGP Photo). The states are where the issue surrounding well-by-well disclosure of hydraulic fracturing fluid content has been addressed over the last 3 years.
Commentary: Huge Russian - Chinese Natural Gas Sale Agreement Could Impact World Markets and Alaska Project Feasibility
We urge readers to absorb yesterday's Bloomberg report on the Russia-China, $400 billion gas purchase arrangement, By Robert Tuttle, Anna Shiryaevskaya and Isis Almeida.
Our readers are well aware that Asian market demand will be almost exponentially increasing over the next 20 years. This owes to a growing Japanese appetite for natural gas in wake of the 2011 Fukushima Daiichi disaster, to growing industrial demand throughout the region, and to a trend of conversion from coal to gas fired electrical generation.
Energy Guardian's James Felker said today that the President's latest FERC appointment, Norman Bay, may be in trouble.
• Cheryl LaFleur, Acting Chair, Federal Energy Regulatory Commission
Augmenting demand in Europe, will be the aftermath of a cold curtain of mistrust now trying to separate western European nations from Russian gas production.
The authors of the Bloomberg story point to the nearly half-trillion deal as a game changer for many reasons. Read about those reasons in their report.
But from our crow's nest looking down at Alaska's potential Alaska North Slope (ANS) LNG export project we see the Russian-Chinese deal as increasing the need for the most competitive, cheapest supplies of imported gas.
The competition could grow as more gas is discovered and developed in the Arctic. ExxonMobil's Imperial Oil, "...is assembling one of the most comprehensive oil and natural gas exploration programs in Canadian history," for Beaufort sea drilling, according to Gary Park's story in today's Petroleum News.
Could Canadian arctic natural gas supplies eventually find their way into an Alaska gas export project, or will they compete with it, we wonder? Since ExxonMobil owns about a third of Alaska's gas reserves, we would bet effort will be made to work together...as has been the history with the Arctic Gas project of the 1970s and later transportation schemes.
Those who are most competitive should end up with long term contracts first.
Those who are less competitive are more likely to be late signers with marginal pricing, with some even continuing to be long term owners of their own gas -- or be reduced to selling it in spot markets.
Some could end up with stranded facilities, a risk to companies. In Alaska's case, since it could be an equity owner of the project, it will be risking public funds and political reputations on the vagaries of the international gas market.
At least, this could have the advantage of teaching governmental decision makers and citizens about the costs as well as the benefits of engaging in private market activity.
With the list of American and Canadian LNG project applications continuing to grow, one could envision the window of opportunity for sales of Alaska LNG to be diminishing, not improving, over the immediate term.
However, we defer to the investors who would certainly not let such an enormous project migrate from this early, pre engineering stage to a later open season without sufficient confidence that markets for Arctic gas do indeed exist.
On the other hand, if the current competitive gas export market continues to discriminate more and more against the most expensive player -- Alaska -- it may lead ANS gas marketers to once again reassess the feasibility and changing metrics of value added petrochemical projects within the 49th state.
After all, windows of opportunity do close and open, close again and open again.
Our faithful readers will remember the tributes offered them last week on behalf of retiring National Energy Board Chairman and CEO, Gaétan Caron. Today, we provide our Canadian readers with the link to apply for a significant, temporary appointment as an NEB Board Member.
Today, the House Natural Resources Subcommittee on Fisheries, Wildlife, Oceans and Insular Affairs held an oversight hearing entitled “Oil and Gas Activities within Our Nation’s National Wildlife Refuge System.”
Today, the House Natural Resources Subcommittee on Energy and Mineral Resources held an oversight hearing on “American Energy Jobs: Opportunities for American Manufacturing.” This hearing examined the growing job opportunities in the manufacturing sector made possible by America’s energy renaissance...."
Alaska's government is using its savings accounts, cash flow, borrowing capacity and bonding capability to invest in all sorts of energy projects. These include an in-state/international gas pipeline/LNG project, an intrastate gas pipeline project, a North Slope LNG trucking project for Fairbanks, a major hydroelectric project and various wind generating and other alternative energy projects.
A number of these could compete against each other, against other energy developments or against energy entrepreneurs and the private market. To be fair, some argue that big projects judged to be in the public interest would not happen without public financing.
Be assured that every project a public official desires for a constituent will require him or her to trade votes and public monies to another public official wishing to also bless his/her own constituents with beneficent gifts financed by others--including the next generation.
In the next few years, the marketplace will have its way with all of these concepts, perhaps pronouncing some to be winners along with some losers.
TODAY, U.S. Sen. Lisa Murkowski (NGP Photo) raised concerns with Federal Energy Regulatory Commission (FERC) nominee Norman Bay about the lack of transparency and due process at the enforcement office under his leadership.
Alaska's history of government owned projects is mixed with what many call a successful Bradley Lake hydro project, Alaska Housing Finance Corporation (AHFC) and various ports, roads and bridges -- balanced by unsuccessful dairy, beer, grain silo and seafood processing experiences.
Of course, we don't remember when the state administration or legislature followed state grants and equity ownership with robust, annual forensic audits of state supported projects. These evaluations would try to assure that those projects are free from favoritism, sole source corruption, wasteful spending, an unproductive workforce, etc.
It is hard for elected leaders to assure the same efficiency that private investors require.
For example, if you plant a garden in your yard, you will likely water, weed and fertilize it. If a dandelion pops up, you'll pull it out by the roots before it spreads its noxious, invasive seeds.
If you are an elected official, you'll vote to build a landscaped road or highway. And, since you have the 'best intentions', you'll require landscaping that looks pretty, at least for the ribbon cutting.
In the case of Northern Lights Blvd. in Anchorage (and other roads and highways throughout Alaska), builders planted millions of beautiful, long flowering Shasta daises by sprayed seeding on the right of way shoulders. The first few years, they were beautiful...along with the few interspersed Arctic poppies.
The ingenious landscape designer probably convinced government project engineers that this would create the efficiency of both crowding out the weeds and eliminating a lot of grass mowing while creating a beautiful, colorful right of way.
But a few years after construction, 'well intended' street maintenance managers ordered regular mowing at just the wrong times.
In early May, the yellow-headed dandelions emerge, smiling for all the world to see, preparing to evolve into cottony seed and propagate -- trillions and quadrillions of them.
Then, in early June, the beautiful daises emerge from their winter sleep.
Street maintenance managers are not landscape designers, so they do what seems natural.
They wait until the dandelions are ready to go to seed, then mow the rights of way just as the beleaguered daises are laboring to bloom. This causes killing of the good flowers, homicidia boni flore, along with their premature seeds -- derailing the efficient design purchased with taxpayer dollars.
Yes, all government spending is cloaked in best intentions. It is up to voters to assure that elected leaders limit spending to sustainable, prudent uses because the voters and their children will inherit the debt as well as any benefit.
While we're at it, let's ask the State highway departments and municipal street maintenance managers to please mow down the yellow heads before they go to seed and before planted daisies grow high enough to be cut off by the big landscaping mowers.
Otherwise, let's don't waste money in the future trying to beautify rights of way with specialty plants and landscaping unless there is a plan to maintain them.
Why should our kids be paying off highway and road bonds ten or twenty years from now for landscaping that no one cultivates or protects after the ribbon cutting?
And, for those who say this year it is too late to cut down the yellow heads in time, be on notice that a bumper crop of dandelions is waiting to explode forth with fall seeds later this summer! (Public facilities everywhere pay similar homage to the dandelion, which Alaska officials -- ironically -- refer to as an invasive plant. This is a photo taken near Northern Lights Blvd. at East High School in Anchorage.)
In the past, we've seen street maintenance cut down the daisies in mid summer then not cut the bumper dandelion crop until after they are ready to release seeds to the summer winds.
So, there's still time to change and take this lesson of the dandelions and daisies to the town hall meetings where candidates invite questions.
After all, don't we owe it to our kids if not ourselves?
Indeed, since political leaders create government supported projects is it really in the interest of those political leaders to find fault with their "investment" of public monies? Isn't it just more natural to not "rock the boat" if there are no bad headlines...and keep fingers crossed that the project will "be my legacy and not my downfall".
You can bet that, even if a few elected leaders were to take these words seriously and want to require an evaluation of the use of public money in private sector projects, the majority would not want to budget money to enforce best practices. Nor would the majority of elected leaders want to create a process that could expose "a government investment gone terribly wrong".
So where does this lead us?
We are in an interim stage between legislative sessions. It is a stage wherein the Administration is beginning to fashion its budget priorities for the next year. It is also campaign time, when dozens of citizens are preparing for a primary election in August and a general election in November.
The solution to the dilemma of how to spend public funds well is to question and talk with candidates. Ask, "do you support such and such a public investment in such and such energy project? Can the private sector do it without using state money? If state money is used, how can you be sure it will not be misused? If public funds are misused, what are the penalties? Are you putting public funds into projects that compete with each other or with private sector exploration, production or projects; if so, what is the compelling rationale? In order to build this project with public funds, what will be the true cost after you have agreed to support other state spending in return for the support of colleagues for your project? Will your decisions provide a legacy of opportunity for our children, or a burden of debt?
In questioning candidates, one could also refer to the University of Alaska's Institute of Social and Economic Research finding that a sustainable 2014 state budget is in the range of $5.5 billion. Then compare that with economist Scott Goldsmith's (NGP Photo) review of the Administration's Revenue Forecast of last fall suggesting a 2014 revenue forecast of 5.116 billion. The updated forecast produced this month projects actual revenue to be somewhat more optimistic, in the range of $5.3 billion (but creeping down to $4.5 billion in FY 2015). Revenue would not even be that good over the long term, we believe, had not the Legislature enacted production tax reform a year ago. Now, a voters referendum threatens that tax reform and the future of natural resource investments in Alaska.
In sort, good energy and economic questions for candidates come quickly to mind--with just a little thought.
In this way, we might help to assure our children inherit their full and reasonable birthright that includes:
- A state enjoying federal and state policies that truly enable citizens to make a living from natural resources as defined in Alaska's constitution (Article VIII, Section 2); and
- A state that has no unfunded liabilities for public employees or other decisions that would indebt our children for our excesses; and
- A state that spends within its means; and
- A state and citizenry that actually celebrate the natural resource industries which its constitutional dependence on natural resources logically requires;
- Among other things.
For further reading on this subject, we recommend:
- 5-17-12, Alaska Business Monthly, "We Detest Intergenerational Inequity"
- In Google search box, upper right, type Commentary.
- 10-25-13, Master Resource, Alaska Taxes and Repsol
- 2013, ADN Extra Columns
- 4-25-12. Alaska Business Monthly,Wichita Falls Times Record News. .pdf. Alaska and Texas Can Lead the Way in America's Recovery
- 4-10-12. Alaska Business Monthly. ARE ALASKANS MISINTERPRETING ALASKA'S CONSTITUTION?
- 8-17-11. Alaska Dispatch and NGP:The Me Generation.
- 8-10-11. Alaska Dispatch and NGP: Obama-Salazar-environmental oligarchy damages Alaska's economy.
- 2-23-11. Fairbanks News Miner: Pipeline is Alaska's Lifeline
- 12-31-10. Master Resource. Robust Oil and Gas Resource for Consumers....
- 11-21-10. Petroleum News Alaska. "A Brave New World for Explorers and Producers."
- 8-25-10. Alaska Journal of Commerce: "Protecting Alaska's Freedom Against Government"
- 4-5-10. Washington Times: For Show or For Real?
- Various dates, Rule of Law
Dandelion - Daisy Photos (See Story Above):
Dandelions, East High School, Anchorage, Ak. (Left)
Anchorage School District Headquarters (Below)
Northern Lights at Anchorage School District Headquarters, Antique Auto Mushers of Alaska (Adopt A Road Project)
Chester Creek Greenbelt at Northern Lights Blvd.
Russian Jack Park
Park Strip, Downtown Anchorage. Mower spreads invasive dandelions after flowers have evolved into mature seeds.
Baxter Road Bible Church Daisies.
Calgary Herald by Dan Healing. It’s a classic case of too much of a good thing. Burgeoning liquids-rich gas production in west central Alberta has overwhelmed the ability of gas plants to process the growing stream, Calgary producers warn, leading to lower production forecasts.
Brief Commentary, "Public - Private Gas Pipelines": We contrast three public-private gas pipeline projects, two of which are linked below, from weekend news reports/commentary. As time goes on, we'll hear much more about these and other projects. They cannot be precisely compared, in part because they serve different markets with different sources of gas designed for different purposes, using different rights of way. Ownership, however, can be compared as readers will glean from the stories below. Time will tell whether both ownership models and projects will work, neither will work, or one will work. Your archive on the history, politics, policy, plans and people associated with Northern Gas Pipelines and activities impacted by them continues to grow -- for your future reference -- right here. -dh
1. ADN by Tim Bradner re: Alaska North Slope Gas. Last week, Gov. Sean Parnell approved the bill authorizing state financial participation in the proposed large North Slope gas pipeline and liquefied natural gas project. The first contracts with our soon-to-be partners, the North Slope gas producers and TransCanada, a pipeline company, will be signed in June. This is a really big deal. As much as we want a gas pipeline, and we're told state participation is critical, I must admit to trepidations. We'll have to foot our share of the bill on a project that could cost more than $60 billion, and there are many risks.
2. ADN by Dermot Cole. Construction on the natural gas pipeline is expected to start in 2016, with the goal of delivering fuel by the middle of 2019. No, not that gas pipeline. Developers of the Donlin Gold project have applied for a right of way in Southcentral Alaska for a 315-mile pipeline to transmit Cook Inlet natural gas to their proposed gold mine near Crooked Creek, about 280 miles west of Anchorage.
Today's Energy In Depth Headlines:
Longmont, Broomfield, Lafayette spend $100K defending HF bans. Daily Camera. Randy Hildreth of Energy in Depth said “the local ban-fracking campaigns were actually run by Food and Water Watch and other national activist groups with millions of dollars at their disposal. They used these cities and towns to score some quick political points, but they've already moved on to their real goal — banning oil and gas development across the state of Colorado." NOTE: This article was included in the Times Call, Fort Morgan Times, Colorado Hometown Weekly, and Insurance News.
The weekly oil and gas follies. Forbes, EID’s David Blackmon. U.S. crude production climbed to a 28-year high last week as the shale boom moved the world’s biggest oil-consuming country closer to energy independence. Output rose 78,000 barrels a day to 8.428 million, the most since October 1986, according to Energy Information Administration data. (Many More Follow; click below)
|Mike Smith, Executive Director of the Interstate Oil and Gas Compact Commission, also weighed in today with his best wishes to Caron for "Life after the NEB".|
Early today, Chuck Gray, Executive Director of the National Association of Regulatory Utility Commissioners commented on National Energy Board Chairman Gaétan Caron's impending departure from his 35-year assignment. Here is Gray's testimonial.
Yesterday, we acknowledged the outstanding service National Energy Board Chairman Gaétan Caron (NGP Photo) has provided to Canada over a long and distinguished career.
Last evening, former Chairman of the Alaska Oil and Gas Conservation Commission, John Norman, sent us this personal reflection highlighting Gaton's warm relationships in Alaska as well as throughout North America.
Today, we received further testimonials to Chairman Caron's service, including this note from Regulatory Commission of Alaska (RCA) Commissioner and former Chairman, Bob Pickett (NGP Photo). Pickett writes:
I would like to take this opportunity to acknowledge the long and extremely distinguished regulatory career of Chairman Gaétan Caron of Canada’s National Energy Board (NEB). Canada has been fortunate to have such an outstanding individual at the NEB over the past 35 years. I have had the pleasure of working with Gaétan through the National Association of Regulatory Utility Commissioners (NARUC) Gas Committee. Chairman Caron’s insights and good, balanced judgment has always contributed greatly to NARUC’s Gas Committee deliberations.
Alaska and Canada have many common interests and concerns in the development of energy resources in arctic and sub-arctic environments. With strong and proud First Nations populations, huge infrastructure challenges, and the rapidly changing world of energy, regulators in Canada and Alaska have much to learn from each other. Chairman Caron’s thoughtful approach, integrity and his diplomacy has done much to promote the dialogue and exchange of information between regulators in Canada and Alaska.
Canada is America’s largest and most reliable trading partner. The relationship between our two countries will increase In importance in the years ahead. We should all be thankful that one of Canada’s best has been at its National Energy Board over the past three and one-half decades. Gaétan's work has helped to build a foundation for future successes.
AOGCC Commissioner (Ret.) John Norman's (NGP Photo) Testimonial
Your tribute to Gaétan Caron and his own reflections on 35 years with the NEB of Canada caused me to recall a delightful time some years ago here in Anchorage.
Chairman Caron was in town speaking on oil and gas issues of interest to Alaska and Canada. You suggested that following his talk he be invited to join a group of Alaska regulatory officials to continue the exchange of information.
He graciously accepted the invitation and we proceeded to spend a beautiful Winter’s evening before a crackling fireplace enjoying the Chairman’s charm, wit and the warmth of his personality; we sampled some good wine and Alaska Salmon and listened to recitations of Robert Service’s poetry.
You were called away on a trip, but participating in that special occasion were Bob Pickett, then Chair of the Regulatory Commission of Alaska (RCA), Dr. Mark Myers (NGP Photo), now Vice Chancellor for Research, University of Alaska - Fairbanks; Jennifer Loten, then Canadian Consul; my lovely wife, Ann Norman (i.e. as hostess, NGP Photo) and many others. It was an evening we remember fondly—in the company of this outstanding Canadian official and friend.
John K. Norman, Former Chair, Alaska Oil & Gas Conservation Commission (AOGCC)
NARUC Executive Director Chuck Gray's (NGP Photo) Comment:
During his tenure at the NEB, Gaétan Caron was also a strong leader on the NARUC Committee on Gas and Committee on International Relations, where he served as Vice Chairman. He helped build a strong bond between CAMPUT – the Canadian Association of Utility Commissioners, Members of Utility Tribunals – and NARUC. His work was also critical to the success of the World Forum on Energy Regulation that was held in Quebec City in May 2012.
I wish Gaétan nothing but the best in his new endeavors.
Mike Smith (NGP Photo), Executive Director of the Interstate Oil and Gas Compact Commission (IOGCC), also weighed in today with his best wishes to Caron for "Life after the NEB".
Speaking with us as some 300 IOGCC members and affiliates gather for the Mid Year Issues Summit in Biloxi, Smith noted that while IOGCC members include the Governors and their representatives from America's several dozen oil & gas producing states, the gathering also attracts regulators from six Canadian provinces and the Yukon Territory.
"We have strong cross border relationships," Smith said, "producing a healthy exchange of best practices which is in the interest of both countries.
"We meet together at venues in both countries", he said, "and enjoy a constant stream of communications. Many of the companies we regulate do business in both Canadian and US jurisdictions. Therefore, the sort of cooperation and diligence represented by Chairman Caron and his provincial, regulatory counterparts is why the North American oil and gas industry can so, 'efficiently maximize oil and natural gas resources through sound regulatory practices while protecting our nation's health, safety and the environment'.
"To you as you plan your departure from National Energy Board, Mr. Chairman," he concluded, "we offer our warmest wishes for the next phase of your career and hope you'll join us at our meetings whenever possible."
Reflections On 35 Years With The National Energy Board
Gaétan Caron (NGP Photo), Chair and CEO, National Energy Board (NEB)
Alberta Energy Regulator’s Forum
14 May 2014 (See more accolades to departing Chairman Caron in tomorrow's posting, here, or scroll down.)
Thank you for the opportunity to speak with you today.
Slide 1. I will start my presentation with a brief overview of the National Energy Board so that you can better understand the perspective that I am bringing to today’s discussion.
I will then highlight some findings from the Board’s research, particularly our flagship information product: the Energy Futures report.
Commentary: Find this NEB link to Chairman Caron's historical, retirement speech yesterday and, in the event that link is lost, we have recreated his notes here.
We believe Canadians and many American citizens will benefit from his legacy of responsible decision making that should serve as an example to regulators everywhere.
In a previous life, your author had the honor of serving on the Regulatory Commission of Alaska and as a Vice Chairman of the Gas Committee for the National Association of Regulatory Utility Commissioners. That Association (NARUC), in turn, appointed me to serve as its "official representative" to the Interstate Oil and Gas Compact Commission (IOGCC). Both institutions recommend implementation of national policy positions that affect North American natural gas, oil, pipeline, industry safety, conservation and related issues. Chairman Caron and Canadian provincial regulators actively participate in NARUC and IOGCC meetings.
In those three capacities, I had the further honor of coming to know Chairman Caron and believe him to be one of the most well studied, courageous, judicious, decisive, diplomatic, unpretentious and thoughtful regulators in the modern history of North America. A spiritual man with strong convictions, Caron values family, friends, service to others and mentorship higher than self interest.
His appearances, wherever he has gone during a long and distinguished career, have reflected great credit on his country, his associations and his own abilities and integrity.
(Note that the above characterizations are intended to be precise and descriptive, not 'flowery'.)
The last paragraph of Chairman Caron's speech typifies his modest character which has always thrived more on complimenting the good work of others than elevating his own historical, significant achievements.
Here, continuing a theme, in what may be his last appearance before lawmakers, Chairman Caron described a safety program aimed more at cooperative government/industry coordination than on penalties. Those taking the time to absorb its message will better appreciate the Chairman's many qualities, as well as what we believe will be a lasting legacy and example of reliable, regulatory decision making.
Paul wrote to Timothy, at the peak of his historical career, that I have fought the good fight. I have completed the race. I have kept the faith.
You have done the same, Chairman Caron. One of several differences, however, is that you have many more miles to go before you sleep.
Your countless fans, friends and followers will surely agree on one thing now: Canada needs your past accomplishment to continue on ... to be prologue to new legacies of service to your fellow citizens.
Since we are all gathered here to talk about natural gas, I will spend some extra time discussing the NEB’s Canadian natural gas outlook. (Emphasis added. -dh)
I will conclude with a few comments about two timely, natural gas-related issues: pipeline safety and propane.
Slide 2. I joined the Board in 1979. At the time, the National Energy Board was based in Ottawa and that is where the picture you see before you was taken, in 1962. These gentlemen were the first Members of the National Energy Board. They were, from left to right: Lee Briggs, Dr. Robert D. Howland, Chairman Ian N. McKinnon, Vice-Chairman Douglas M. Fraser and Maurice Royer.
The Board held its first hearing in 1960, just two months after Parliament created the National Energy Board. Our first hearing was focused on six applications to export natural gas. At the time, the Ottawa Journal wrote: “The power we have entrusted to this board is formidable. It must be both judge and prophet, a double wisdom which at times must seem a humbling duty.”
I can assure you that this duty is indeed humbling still today.
Slide 3. Behind me you will see another photo from the vaults. This is a newspaper cartoon from 1960 and it very clearly demonstrates the idea of the National Energy Board as a regulator that is sharply focused on economic regulation. Our approach to regulation has been premised on the belief that markets work. We rely on market forces to determine prices, supply, demand and trade in energy markets. At the same time, the NEB continuously monitors energy markets to provide Canadians with a high degree of certainty that they are functioning properly and that Canadians have access to energy at fair market prices. Since deregulation in the mid-1980s the Board has never had to intervene directly in markets. Of course, the Board can step in if, for some reason, markets are not functioning adequately. And parties always have the option of coming to the Board if they have concerns.
Slide 4. On April 20 2010, a new Board was born. While of course I don’t mean that officially the Government created a new Energy Board, still, I think many of you will agree that the world in which we all operate, including the NEB, changed irrevocably when the Deepwater Horizon suffered a catastrophic blow-out. The world watched as millions of barrels of oil gushed into the Gulf of Mexico for 70-plus days. And they all asked, could this happen here?
On April 20 2010, I was in a gymnasium in Inuvik listening to final argument for the Mackenzie Gas Project. Less than 18 months later, I would find myself in the same gymnasium, with many of the same people, asking ourselves, could an accident like the Deepwater Horizon happen here? And the answer of course is yes, unless we take steps to avoid it. So how do we go about preventing such an incident?
Slide 5. In addition to regulating certain pipelines and power lines, the National Energy Board has regulatory responsibilities North of 60, which include regulating offshore drilling. At the time of the Deepwater Horizon incident, we were organizing a small, technical conference to look at the issue of same season relief well capability. It became quickly apparent that, we needed to take a much more comprehensive approach.
Within weeks of the sinking of the Deepwater Horizon, the National Energy Board announced a review of the safety and environmental requirements for offshore drilling in the Canadian Arctic. Through the Arctic Review, the Board examined the best available information on the hazards, risks and safety measures associated with offshore drilling in the Canadian Arctic.
To gather the information we needed, we held more than 40 meetings in 11 communities across all three Northern territories. We looked at lessons learned from similar incidents. We also held a week-long roundtable meeting in Inuvik so participants could engage in face-to-face dialogue, ask questions and share their views. Nearly 200 people attended the Arctic Review Roundtable Meeting in September 2011. Through this extensive consultation, the Board developed filing requirements for future applications to drill in the Canadian Arctic offshore.
Slide 6. We have always considered safety to be of paramount importance. However, in the wake of incidents such as the blowout in the Gulf of Mexico, the San Bruno pipeline explosion and the pipeline spill in Kalamazoo, Michigan, the Board has established itself as a leader in terms of its expectations around safety culture.
When there is a strong safety culture, leadership focuses on safety as much as the bottom line, and employees have the confidence that they will be backed up from the very top of the organization if they stop or delay a project or facility operations over safety concerns. Time and time again, when we look at high performing organizations with great safety records, we see organizations with a commitment to a strong safety culture. We feel that this commitment, will help focus on preventing and reducing incidents before they happen, which is our number one goal.
Slide 7. Moving forward, we have a number of challenges ahead of us. One of our biggest challenges will be how we respond to a perfect storm of many applications to expand energy infrastructure in an environment of intense public scrutiny. The regulatory process is increasingly viewed as an arena where the public debate about whether the energy industry should receive approval for its plans to build and maintain infrastructure.
It wasn’t that long ago when most people in Canada had no idea who we were. When we reviewed an application from Trans Mountain Pipelines for its Anchor Loop Project in 2006, there were 8 intervenors. In our current review of the Trans Mountain Expansion Project, there are 400 intervenors.
Slide 8. To give you another example of the increase in interest in the NEB, in 2008, we received 82 inquiries from the media. In 2013, we responded to 612 media requests. This is our new reality: there is an increasing desire from the public to understand and have a say in energy issues, including how energy makes its way to market.
In response to this need, we have established a new Strategic Communications Plan to focus on more proactive communications with key audiences. Our staff have conducted more than 550 media interviews over the last year. Last year, we also launched a Twitter account to quickly relay important information, including updates on incidents. We have been holding larger media events, such as a press conference around the release of the Board’s Northern Gateway recommendation.
Slide 9. We are at a time now, when there is as much, if not more, interest in harvesting the resources of the North. As you may know, the Government of the Northwest Territories became responsible for the regulation of onshore oil and gas activities in the NWT outside of the Inuvialuit Settlement Region and the Norman Wells Proven Area. The National Energy Board is still the regulator for projects that fall under the Canada Oil and Gas Operations Act and the Canada Petroleum Resources Act in the offshore and the Norman Wells Proven Area. Furthermore, in accordance with territorial legislation that mirrors the Canada Oil and Gas Operations Act, we are responsible for regulating in the Inuvialuit Settlement Regions for a period of 20 years. We continue to regulate inter-provincial and pipelines that cross a provincial-territorial border under the National Energy Board Act.
We are expecting an application for the first ever deepwater drilling project in our Arctic waters. There is also a lot of interest in developing the Canol shale play. This will have implications for the National Energy Board as producers will want to get their product to market. Notwithstanding the new dynamic of devolution, the NEB will remain a high profile regulator of Northern and Arctic resources into the foreseeable future.
Slide 10. I was recently interviewed by a reporter and he asked if I had any lessons learned over my career. I told him I had learned to take the time to listen to our people. I am fortunate to be surrounded by 450 staff with strengths and technical expertise in a wide range of disciplines. Take advantage of their knowledge and experience and listen to your staff before you make decisions. As a result, we are able to make decisions based on intelligent, open conversations.
Slide 11. I would like to leave you with one final thought: my departure will not change the good work that is being done at the National Energy Board. When I leave on June 6, the 450 people who choose to work at the National Energy Board will continue to make strides towards continual improvement. In fact, if I have done my job right, my departure will be irrelevant.
(Here is a link to Chairman Caron's speaking notes and slide pack. -dh)
THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
Full Transcript Below
OTTAWA, Thursday, March 6, 2014
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8 a.m. to study the current state of “One Call” programs that identify critical underground infrastructure in Canada; and for the consideration of a draft budget.
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 the 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 are also available via the webcast on our 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 will introduce my deputy chair, Senator Mitchell, from Alberta.
Senator Tkachuk: Senator David Tkachuk from Saskatchewan.
Senator Boisvenu: Pierre-Hugues Boisvenu, Quebec.
Senator Massicotte: Paul Massicotte, Quebec.
Senator Black: Doug Black, Alberta.
Senator Wallace: John Wallace, New Brunswick.
Senator Seidman: Judith Seidman from Montreal, Quebec.
The Chair: I would also like to introduce our clerk, Lynn Gordon, and our two Library of Parliament analysts, Sam Banks and Marc LeBlanc.
Today we are continuing to examine the current state of the One Call or Call Before You Dig programs that identify critical underground infrastructure in Canada.
It gives me great pleasure to welcome our witness from the National Energy Board, Mr. Gaétan Caron, Chair and CEO. Thank you for being here, sir; you're a regular guest, and we appreciate it. We look forward to your remarks, and then we'll open it to questions and answers.
Gaétan Caron, Chair and CEO, National Energy Board of Canada: The safety of Canadians and the protection of the environment is the National Energy Board's top priority, so I welcome the opportunity to speak to you today on the important topic of preventing damage to pipelines and the role Canada's One Call services play in that.
Many rules and standards are borne out of tragedy, and the NEB's current framework governing work in the vicinity of pipelines is no exception. Having been at the board for nearly 35 years, I remember the incident in 1985 at the farm north of Oshawa, Ontario, where a high-pressure natural gas pipeline was accidentally ruptured by the blade of a 30-tonne plow. The escaping gas ignited, resulting in an explosion and fire that killed one person and injured four.
This, like all pipeline incidents, was preventable. A key outcome of this tragedy was the enactment of the board's pipeline crossing regulations that set the foundation of our Damage Prevention Framework.
Many years have passed since that incident, but one thing that has not changed is the board's resolve to continually improve how it is meeting its mandate to regulate pipelines for safety and environmental protection.
Our efforts in this regard are yielding important results. Our goal of zero incidents is not only the right goal but an achievable one. Overall in 2013, we saw a decrease in reportable incidents. The frequency of natural gas releases was down. While we saw an increase in the number of incidents with respect to liquids, overall release volumes were down significantly this year and have been declining since 2009. In 2013, all liquid releases from NEB-regulated energy facilities have been fully remediated, with the exceptions only where clean-up is underway and full remediation is expected.
Companies have been doing a better job of monitoring their facilities and reporting indents. I firmly believe that the facilities we regulate are safe and the environment in which they operate is well protected.
At the same time, our work is never finished. We strive to continue to improve, because the tragic incident I just described is a poignant reminder of the risk of unsafe activities.
That brings me to the topic of your important study here today.
The NEB is committed to continually reducing the risks around the facilities it regulates, and we amend our damage prevention framework in response to emerging trends or issues that could affect the safety and security of those facilities.
Unauthorized activities fall under the board's pipeline crossing regulations and include any excavation activity for which the appropriate permission or leave of the board is required and has not been obtained, or when safety instructions are not followed. The board actively collaborates with the broader damage prevention community, which includes other decision makers, regulators, infrastructure and facility owners, municipalities, and the digging and locating community in pursuit of natural best practices for working around pipelines and the reduction in the number of unauthorized activities.
The NEB is the designated federal regulatory champion for the Canadian Common Ground Alliance, the CCGA, from whom you heard last week. We share with them the same goal of promoting effective practices to reduce damages to underground infrastructure in order to best ensure public safety and environmental protection.
We supported the CCGA's application to the CRTC for shared use of a national three-digit number for Call Before You Dig services. While we were disappointed with the CRTC's decision to decline the request at that time, we recognize there are other options available that serve the same purpose as a three-digit number. For example, Click Before You Dig may be as effective or even more effective than Call Before You Dig.
The NEB must also create the conditions necessary to hold people accountable for carrying out their responsibilities around pipelines. We hosted a safety forum last spring in Calgary where nearly 400 participants representing the public, Aboriginal peoples, industry, academia, government and others discussed topics such as corporate leadership's role in building and maintaining a safety culture, the effectiveness of management systems, and the role of performance measurement in risk management. Other areas explored included how industry can work to strengthen public trust, and the evolving role of the regulator.
Our compliance monitoring and enforcement activities support the NEB's Damage Prevention Framework and are used to promote safety and environmental protection.
With the passing of the Jobs, Growth and Long-term Prosperity Act, Parliament provided the NEB with additional tools in our enforcement tool kit, such as the ability to issue monetary penalties, or AMPs as we call them. AMPs allow us to issue financial penalties ranging from up to $25,000 for an individual and $100,000 for corporations per violation per day, with no maximum total financial penalty.
Having said that, we expect most of our compliance efforts to focus mainly on individual awareness-building and holding companies accountable for their responsibilities to educate and inform.
One of the best ways to be safe is to call or click before you dig. This single contact initiates the key communication processes that will identify the location of pipelines and other buried utilities and provide critical information on how to work safely around them. A mandatory requirement to contact a One-Call centre best ensures that all underground facilities are considered in a decision to proceed with construction or excavation in areas over or near a pipeline.
The NEB has issued a notice of proposed regulatory change, number 2013-01. The proposed changes will require anyone planning construction or excavation activities within certain areas set out in the National Energy Board Act and its regulations to make a locate request by contacting a One-Call centre at least three working days before beginning those activities.
If a One-Call centre is not established in the area, parties will be required to contact the pipeline company directly. We will also require pipeline companies to be members of One-Call centres in geographical areas where one exists and the company has a pipeline.
Last summer this committee released an important report on the safe transportation of hydrocarbons in Canada. It placed great emphasis on the importance of safety culture within companies. We strongly agree with your committee in that respect.
These changes that I have just outlined build on the board’s commitment to the development of safety cultures in the companies we regulate, which is one of the fundamental ways to address pipeline safety, and further formalize safety culture within regulated safety requirements.
We will continue our efforts to improve pipeline safety and the protection of Canadians and the environment. While we are encouraged by the latest 2013 statistics that show a decrease in reportable incidents, we remain committed to continuing to improve the damage-prevention framework and working towards a reduction in all incidents, with the ultimate goal of seeing none at all.
Thank you once again, honourable senators, for the opportunity to speak to you today. In closing, let me assure you of the NEB’s resolve to continually improve the safety of Canadians and protection of the environment.
I would be delighted to answer any questions the committee has.
Senator Mitchell: Thank you, Mr. Caron, I appreciate it very much. It's nice to see you again. You're not quite to the level of Brenda Kenny, who is practically a member of this committee because she appears so often, but you're getting up there.
I'm interested in the jurisdictional issue, because probably the greatest number of pipelines and the greatest amount of underground infrastructure is really under provincial jurisdiction. You've touched upon that relationship a little bit.
I want to clarify that if there were a network of One-Call centres across the provinces, and that's what Common Ground is envisioning, there would be a central call or a click place, but there would be individual agencies. Then you would see — and in fact you probably do because they do exist — people going through those provincial bodies to identify federally regulated pipeline locations.
Mr. Caron: That's the vision, senator, exactly. That Click Before You Dig site already exists. For senators around this table who have a tablet, just type “Click Before You Dig.” You will find a map of Canada with every province shown, and you click on a province and you find exactly as you describe, senator.
Our goal or action in our proposed regulatory changes will make it mandatory for pipelines we regulate to go through that process three days before any activity occurs. Actually, it's for the pipelines to be a member of a One-Call centre, so they are identified when you click on the map, and for people who want to excavate or construct to go through that site as a matter of necessity.
Senator Mitchell: Is there a specific cost to the federal government for that? The way this process is structured, as I understand at least, is that the companies themselves pay per call by a third party. If a third party calls to dig, the company pays for that call, so it's not really a federal or direct government expense.
Mr. Caron: I don't know exactly whether the federal government or other levels of government contribute to this collaboration. It is a massive collaboration. It is based on goodwill, based on people wanting to keep people safe. So whether levels of government have contributions in dollars in the program, I do not know. I just know that it's a contribution from a wide range of parties.
It is adopted as a best practice because it works, and the results speak for themselves. When you call or click before you dig, your chances of hitting something you don't want to hit are considerably lower.
Senator Mitchell: One of the major focuses of Common Ground is to have legislation province by province, and Ontario has led the way with their Bill 8. Actually, we heard from the sponsor of that bill. Their argument is they don't want people to be forced to do this, but in fact it's not working on a voluntary basis particularly well. In the case of Ontario, for example, people might have to phone as many as 13 or 14 places before they dig.
In the U.S. case, even though the jurisdictional issues were much the same, the federal government actually did catalyze the process somehow.
Can you envision a way that the federal level could assist in doing that in Canada, or is that just not possible?
Mr. Caron: Senator, I believe that the Parliament of Canada is the supreme authority in this matter and could very well decide, perhaps under your recommendation, to proceed on that basis.
You're correct: the United States has a very different framework, different arrangement and structure, and they have a mandatory 811 system. In the U.S. you call 811, and as a result of common action at the federal and state level, this is how it proceeds.
In our case, it could be that it's not a three-digit number, but something by legislation requiring Click Before You Dig or something equivalent — there are many versions of the same thing — could be in place.
I can tell you, senator, something like that would create positive outcomes. Whether it's a wise policy move, I leave that to senators and policy-makers. We are administrators of legislation, so I will refrain from urging you to do so. But I will tell you, if you did so, positive outcomes will result.
Senator Seidman: I did want to ask what the Click Before You Dig program was but you've already told us, so that's great. I'm going to try that on my tablet.
Michael Sullivan, the executive director of the Canadian Common Ground Alliance, was here at the end of February, and I asked him about the lack of data on the One-Call systems, especially in terms of reduction of incidents and cost-effectiveness. He said that data existed — some data anyway — for B.C., Quebec and Ontario. I was wondering if the NEB collects this kind of data for federally regulated underground infrastructure.
Mr. Caron: Senator, I don't know. If we do, I will undertake to provide information to Ms. Gordon, the clerk, so you have it readily available.
Senator Seidman: That would be helpful, because I think one of the things the committee is trying to understand is something that seems so obvious that would really enhance safety, yet there's a certain amount of resistance, and so we're trying to understand why. Is it a question of cost? I'm not sure.
If we had data that showed reduction in incidents that would demonstrate cost-effectiveness, it would perhaps go some way in persuading other sectors and corporations to throw their hat into a One-Call system.
Mr. Caron: I understand clearly your interest, senator. I can say with great conviction that if we could make a direct connect between the existence of a One-Call centre and a safety outcome, when you debate the pros and cons and the benefit costs, it's very important information. You're talking about saving lives and protecting the environment there. So if that data exists, I undertake to provide it to Ms. Gordon for the committee.
Senator Seidman: I appreciate that. You said that you hosted a safety forum last spring. There were participants from across all stakeholder groups and interested parties. You said that you discussed topics such as the corporate leadership role in building and maintaining a safety culture, effectiveness of management systems and the role of performance measurement and risk management.
Could you tell me a bit about what you discussed, especially when it comes to the role of performance assessment and risk management?
Mr. Caron: Senator, it was actually beyond a discussion. I was amazed and impressed that after a day and a half of talking with such a large and broad group of people, and in my opening remarks I talked about the goal of zero incidents, there was unanimity of view that this ought to be the goal; and as my remarks said, it was not only a goal on paper but something you believe you can do. It's a goal that airplanes must land at destinations. It's not always met 100 per cent of the time, but that's the goal, and it's almost always met.
I was impressed that a broad range of people, who had many reasons to disagree, actually agreed, not only on the end goal but also on the means to the end. We had five CEOs of the largest pipeline companies in Canada on one panel. They also happened to lead pipeline companies that are among the largest in the United States. They were totally united on their personal responsibility as leaders to say that safety is number one, and I want the front line workers to believe me when I say that. For instance if they have concerns about their safety, I expect them to call a time out and let profits go to number two. Safety is number one. That safety culture is something that begins with me as CEO.
I was doubly surprised, senator, when I asked a question of the floor to these five CEOs. I said: One day, would you see yourselves being audited for compliance with respect to the existence of the safety culture in your company? We don't have yet any methodology to audit for compliance with safety culture, but we all have a feeling that it can be done; but we're not ready for it. Even then I was surprised by them saying: Come tomorrow and audit me. See what kind of culture I lead in my organization. That was the buzz, if you like, senator, for the day and a half that we kept agreeing on everything.
Senator Seidman: That's helpful. You also said in your presentation to us that the NEB must create the conditions necessary to hold people accountable. Now, you've given us this information that there really isn't yet a way to measure that culture of safety.
Mr. Caron: You can measure the outcome, senator, and that's why I gave you a glimpse of the new information we're trying to make transparently available to Canadians: the reduction in volume of oil escaping into the environment and the reduced number of incidents. We are starting to gain the capacity to mine our own data until evidence-based stories as to the safety outcome of our work. That will come together well with leadership in industry — a strong watchdog called the National Energy Board of Canada with the main goal to verify compliance. When we see non-compliance, we intervene, enforce and seek to penalize if necessary.
Senator Massicotte: Thank you, Mr. Caron, for joining us this morning. Your being here is very much appreciated.
As I listened to your presentation, I found the whole “click before you dig” idea quite interesting. You cited a decrease in the number of incidents as compared with the past. To be frank, that surprises me. I was under the impression that for the past year or so, more incidents had occurred given that a number of major projects are under way — projects I support, by the way. I was quite troubled, in fact. Are you telling me I was worried about nothing, then?
Mr. Caron: I would not go as far as to say you were wrong. On the contrary, you pay attention to what happens around the world, and the things that have happened in the past few years are not necessarily reassuring.
The explosion of the drilling platform in the Gulf of Mexico exemplifies that, as does the accident in San Bruno, just outside San Francisco, in which ten or so people were killed as a result of a fire caused by a ruptured gas pipeline. Events like that leave their mark on the public consciousness.
Canadians are aware of incidents like the Enbridge accident near the Kalamazoo River and the major oil spill in Alberta two years ago. We now know that energy grids can cause incidents that have repercussions for public safety.
Please bear in mind that not all of the incidents I mentioned came under the authority of the National Energy Board. Canadians are well-served by the jurisdiction of the NEB, as overseen by Parliament. And the proof is, on the one hand, in the lack of any significant tragedies so far — touch wood — and, on the other hand, in the implementation of specific measures based on facts that demonstrate ongoing improvement.
I would caution you, however, not to feel totally reassured. We are the safety watchdog and are always on the lookout for new ways to further improve our results.
Therefore, I will not tell you this morning that I am satisfied with our results, nor will I ever say such a thing. I am satisfied knowing that tomorrow will be better than yesterday and that, each and every day, we persist in our efforts to improve safety, above all, safety cultures and management systems, all of which reflect gradual steps in the right direction.
Senator Massicotte: Basically, we are doing well here, in Canada, but that is less so the case in the U.S. Is that an accurate summary?
Mr. Caron: I would be reluctant to make a general assessment of the situation; I would not want to paint everything with the same brush. At the federal regulatory level, we have not had the misfortune of experiencing accidents that leave an imprint on the public consciousness. Other jurisdictions have not been as lucky. That applies not just to the U.S., but also to Nigeria, which has faced a number of environmental problems, Russia and Australia, as far as drilling platforms are concerned.
I repeat, you should not draw comfort from the fact that we, in Canada, have not had any serious accidents. The NEB has to work very hard to ensure the ongoing safety of Canadians.
Senator Massicotte: I understand, but the U.S. regulatory regime seems fairly similar to ours. Some might think that more incidents occur in the U.S. simply because it covers a larger area, but we could also draw the inference that big problems could just as easily happen in Canada. Are Canadians right to be somewhat leery about the projects being proposed these days?
Mr. Caron: For the time being, I do not have any information for you to give Canadians. But I can tell you not only that new pipeline projects use new materials, a rather reassuring fact, but also that ageing grids are protected by our regulatory framework, which requires the companies in question to ensure a high level of maintenance.
As I was discussing with Senator Seidman, we have management programs and a constant eye to safety. Our job is to keep every pipeline in safe condition. If we have even the slightest doubt, we immediately get down to work to achieve the desired outcome: zero incidents.
Senator Massicotte: We visited big companies in Alberta, and their leaders assured us that, even in the case of older pipelines, testing was carried out and technology was available to address issues. They told us not to worry; they said there were no problems. Yet problems are continually emerging. And we no longer know whether our opinion is justified given that incidents are continually happening.
You said that your goal of zero incidents is achievable.
Mr. Caron: Yes.
Senator Massicotte: Goals are important. I hope to live till I am 130, but there is a greater likelihood that I will not. I accept that and realize my hope may not be realistic. Do you truly believe that your goal of zero incidents is an achievable reality in the next 20 or 25 years?
Mr. Caron: I believe in that goal. As an example, let us assume that a big company has 500 ten-wheelers. They are safe because they are properly maintained. But if they fell into disrepair, because brake checks and mechanical inspections were not done, these trucks would pose a major public safety risk. A well-run trucking company, one that invests in service and maintenance and periodically replaces old trucks with new ones, can call its fleet safe. The company has to work hard every day to ensure its fleet is well-maintained.
The same is true of pipelines. If a pipeline is neglected but continues to be used to transport natural gas and oil, without any regard for the possible consequences, the operating risks, scientifically speaking, will result in pipelines that are not safe.
But because we have a regulatory body like the NEB, which has considerable powers such as the ability to impose penalties, we fare better than other countries do as far as results go. And that is not to say we can just sit back and relax, quite the opposite.
The Chair: Just quickly, in respect to one of Senator Massicotte's questions, you mentioned the BP blowout in the Gulf. That's not a pipeline rupture. That was something totally different. That was a drilling accident. I don't know why you mentioned that, but you did.
Mr. Caron: Can I tell you why, senator? If you look at the root causes of major industrial accidents, you find that the root causes are depressingly similar. If you have not already, I urge you to invite Professor Mark Fleming of Saint Mary's University. He looks at industrial accident through the lens of psychology, and he finds that major accidents, including pipeline accidents, relevant to Senator Massicotte's question, are based on the fact that people don't do what they are supposed to do. Safety culture and weak management systems are why I drew a comparison, senator, with the offshore oil industry. I could discuss the space shuttle in the same kind of conversation.
Senator Black: Before I ask you the couple of questions I have, I want to put on the record my thanks to you for the contribution you've made to the National Energy Board and to Canadians for your years of service. I understand retirement is looming, and I think this committee would be remiss if we didn't publicly thank you for the contribution and the leadership that you have shown in some very difficult times.
Mr. Caron: Thank you so much.
Senator Black: I have a couple of questions for you. You've been very clear in respect to what your expectation is. Of course we understand that not only are there oil and gas pipelines buried, but there are sewer pipelines, cable, electricity and water. There are all kinds of other types of pipelines that are outside your purview. You would agree with that?
Mr. Caron: Yes, I do, senator.
Senator Black: In terms of effecting a solution here, are you satisfied with the results that we're seeing in both Ontario and Alberta through the system that they have implemented? Is that working, in your view?
Mr. Caron: I think it is, senator.
Senator Black: I see.
Mr. Caron: I will explain why. You could also instead ask people who do excavation to call the companies themselves but, if you call a pipeline company, you don't know if the person with whom you talk will know that there is also a power cable and this and that. The Click Before You Dig allows you to penetrate all layers of things you may find, so that's better than a direct call to the company you think might be affected by your digging operation.
Senator Black: Of course. In respect of Senator Seidman's excellent questioning, if we were to look at the incidence of incidents in Alberta and Ontario as compared to say New Brunswick or Nova Scotia, we should see better outcomes in terms of safety, should we not?
Mr. Caron: I would like data to say so, because that's my presumption and that's why I agree Senator Seidman's question was excellent in terms of the cause and effect relationship we are looking for here.
Senator Black: My last question relates to your view, if you feel able to offer a view, on constitutionality. Does the Government of Canada, in your view, have the constitutional authority, given property and civil rights in the province, to implement a One Call system nationally?
Mr. Caron: I will admit my lack of knowledge in the legal domain, senator, to be able to give you a clear answer to that. There is scope for leadership at the level at the federal government. We play that role already on a goodwill basis. No one has told us we do not have the legal basis to be the champion.
Senator Black: As a lawyer, I would be the last person to tell you that.
Mr. Caron: Who would sue you if they felt you went too far in promoting the safety of Canadians? I don't know. But that is not a legal answer to your question.
Senator Boisvenu: I do not have many questions, but there is something I am curious about. You mentioned a number of incidents that have led us to be very vigilant. How many of those were due to human error and how many were accidental, whether because of the materials used or faulty installation? How many of those incidents could have been prevented?
Mr. Caron: I appreciate your question because it forces me to do a bit of thinking. When it comes to accidents, I would put the proportion of human error at close to 100 per cent. Say an accident was the result of faulty metal products that caused the pipeline to rupture. If you trace the problem back to its source, you find out that an engineer failed to properly assess the soil conditions or how the steel would behave in order to prevent a possible rupture. Or a technician using a measurement tool to check for irregularities in the pipeline may have missed them or used a defective instrument to take the measurements.
I would say that just about every incident is preventable if management systems that underlie a safety culture are in place. Although technology can be a boon, it can also produce disappointing results if we fail to adequately consider the associated risks.
Senator Boisvenu: That brings me back to my question, then. How might a call or a click change the course of events?
Mr. Caron: The analysis of the incident that happened here in 1985, which I mentioned, clearly showed that the worker had not thought about the possibility of a pipeline beneath the site in question. Before using any equipment to dig, it is imperative that people call or click to find out what lies beneath the location in question, to ensure safety. The awareness should be automatic; you should not even have to think about it. It should be like putting on your seat belt when you get in the car.
Senator Boisvenu: You did not answer my question.
Mr. Caron: I apologize.
Senator Boisvenu: You said that things are constantly improving.
Mr. Caron: Yes.
Senator Boisvenu: How could a phone line have prevented the unfortunate incidents you mentioned? It seems to me that technology or human error was more to blame than accidental digging.
Were those incidents due to digging activities by people who had not inquired as to what might be underground before digging?
Mr. Caron: The answer is yes.
Senator Boisvenu: The majority of them?
Mr. Caron: When something happens involving a third party and a pipeline.
Senator Boisvenu: Very well.
Mr. Caron: Ruptures, however, are rare but can happen, from time to time, in sparsely populated areas. A natural gas pipeline ruptured just a few weeks ago. The pipeline burst. No one was injured because no one lives around there. It happened all of a sudden. Metallurgic elements or corrosion were to blame.
Senator Boisvenu: The majority of the incidents you reported were the result of digging activities?
Mr. Caron: No, not necessarily. I misled you.
Senator Boisvenu: What percentage, then?
Mr. Caron: Just under half. That means the incidents were caused by a third party, by human activity. The other ruptures were more spontaneous. They can be spontaneous leaks in that they were not caused or precipitated by a human action.
Senator Boisvenu: If an investment is made in the line, it has to be paid for. Will the pendulum swing back the other way?
Mr. Caron: That is what Senator Seidman was asking about.
The process already exists. I encourage you to check out Click Before You Dig and explore the Web site. It already works in a number of provinces. It does not involve new costs that a bunch of people will have to pay for. The system is already in place.
You will see it is operational in Alberta, Saskatchewan, British Columbia, Manitoba, Ontario, Quebec and New Brunswick, just in the Saint John area, though, not province-wide. I may be forgetting one.
That is for all drilling activities.
Senator Wallace: You mentioned in your comments that the NEB has issued a notice of proposed regulatory change that would require anybody excavating or involved in construction within certain locations of lines to make a request to a One Call centre.
Mr. Caron: That's right.
Senator Wallace: There is an issue of what is under provincial authority and what is under federal authority. The One Call centres are, I understand, under provincial control, and the information to be included within a provincial One Call centre would be for each province to determine.
If you proceed with this proposed regulatory change, do you have confidence that the standards you would expect for federally regulated lines will be present in each of the provinces within their One Call centres; does it exist today?
Mr. Caron: My answer is “yes” — in those provinces where it exists already. Our proposed regulatory change contemplates the possibility that a One Call centre does not exist in some areas, and the change is not attempting to force or impose anything on anybody, except we would require the pipeline companies we regulate to be members of the One Call centres that exist by province, and we would require those who want to excavate to click or call three days before they operate.
The additional burden, if you like, in terms of dollars on society is really only that requirement of the pipeline companies regulated to be members of that One Call centre and the people who can hurt themselves digging near pipelines — the obligation to call before they dig, which is non-negotiable.
So the incremental costs in terms of what is needed or what is perhaps surplus are almost nil, because they exist already, senator.
There is so much good will in the Canadian Common Ground Alliance that I don't know if you will find people resisting the basic notice of calling or clicking before digging.
Senator Wallace: It makes common sense. I'm trying to understand how it works in terms of these issues before federal and provincial authority.
Mr. Caron: We find the provincial systems, where they exist, are what we need for the federal pipelines to be kept safe in terms of excavation and digging.
Senator Wallace: As far as the information that federally regulated pipeline companies would be required to put into the system — locating their lines, the detailed information that some property owner can find out exactly where the line is and so on — would that require federal regulation to compel those companies to provide such information to each provincial One Call centre?
When someone calls this One Call centre provincially, where is that information regarding these federally regulated lines that would be examined retained?
Mr. Caron: If I am wrong, I will inform the clerk, but my understanding is that these One Call centres are brokers of information. If you call and the centre says, “You have to call TransCanada Pipelines and or Ontario Hydro” or whatever, then you link back to these companies that must have information about the location of their own facilities. That's my understanding.
Senator Wallace: So a One Call centre is a clearinghouse; the actual information is retained by the companies themselves?
Mr. Caron: Otherwise, we would be aware of major bureaucracies responsible for knowing everything about every infrastructure, and I don't think they exist. It must be within companies that own the lands.
Senator Wallace: Some companies have tried to do just that, but you are probably quite right.
Mr. Caron, you mentioned the U.S. system for One Call centres, and I'm wondering how you would compare what you know of the U.S. system; what could we learn that we could apply in Canada? Is it a template or model we could apply here, or are there significant differences that exist between the Canadian and U.S. systems?
Mr. Caron: Not necessarily. I could not give you the summary of why the CRTC rejected their request. As I said in my remarks, there are other ways to achieve the same outcome and perhaps at a lower cost.
I will draw an analogy to offshore drilling and pipeline regulations, per se, in terms of safety. I personally find that the style of U.S. regulation is more prescriptive and more — I apologize to my American friends — “catch people doing something wrong and draw them to a Senate committee” as the penalty or ultimate remorse; you draw them to a Senate committee and that's the accountability.
The Canadian model in terms of spirit is more one of “let's look for success and let's see what success looks like,” and if necessary, penalize through administrative monetary penalties. I'm exaggerating and dramatizing to draw out the differences.
I think Americans are learning a lot from what we do at the National Energy Board of Canada when we talk about safety culture and management systems. They have had that, but it's a question of emphasis. Our regulation model is about culture and management systems that produce consistent outcomes, and I think the One Call or the One Click strategy we have now with the proposed regulatory change is in that direction. People will want to follow our lead as opposed to fearing the consequences of not being compliant with our requirements.
Senator Wallace: Realistically, going forward, is a One Click system likely to be preferable to a One Call, or do you see both of them applying?
Mr. Caron: We will not have the placebo if we get one or the other. The path we are following now leads to success, and if we find it is not as successful as we were hoping, it might be a future case in front of the CRTC for 811 would work, or something equivalent.
I have no reason to believe this course of action will not succeed; otherwise I would be morally obliged to tell you today that I am nervous about where we are going, and I'm not.
Senator Ringuette: I will lead on from Senator Wallace's last question. Because there is a human danger and a potentially high cost in not moving forward on preventive measures, have you had discussions with the CRTC for them to try to implement the same kind of rules for membership obligations? Have you had a discussion with them in that regard?
Mr. Caron: Senator, we have treated the CRTC with the respect they deserve as a body like ours, independent and, I believe, quasi-judicial. We have participated in a process that led to an application and their decision with reasons. I totally respect the outcome. To the best of my knowledge, we have not had private conversations with CRTC staff to see how we could make a better case to proceed. We would not do that as a matter of style of communication with a quasi-judicial body like the CRTC. We give it our best shot in terms of a formal process of application. We got their decision with reasons. We respect that and will move forward with a different strategy that we believe will be as good if not superior in terms of outcome.
Senator Ringuette: We've had before this committee, a number of months ago on another study, a person who qualified himself as a whistle-blower. He had provided some information to your office. Would you foresee that down the road the One Call system could also include a call from whistle-blowers with regard to wrongdoing?
Mr. Caron: Absolutely, senator. Our policy is clear: We welcome the contribution of every Canadian, people who feel that something is not attended to in their conscience. If someone feels that someone is digging without calling and has attempted to contact the company and the company turns a blind eye out of carelessness or lack of culture, then NEB would welcome a call or an email, anonymous or otherwise, from a Canadian telling us that we may want to look into the matter. In the last case, we listened to the individual and issued a public audit report a few weeks ago that confirmed he made a good point with the company. The company has agreed to improve its methods. As a result, good things have happened thanks to the whistle-blower.
Senator Ringuette: In the meantime, he lost his job; but that's another issue.
Are you a member of the current One Call system?
Mr. Caron: Yes, we are the federal regulatory champion of the Canadian Common Ground Alliance. We have been asked and have been agreeable, so we play the role of federal champion of the whole thing.
Senator Ringuette: From my knowledge, Europe probably has the greatest number of pipelines and greatest density of population in a geography that has to accommodate those pipelines and the technological infrastructure.
Does the U.S. have a similar process to our Call Before You Dig or do they have another mechanism to deal with the issue that we are looking at?
Mr. Caron: You have given me a chance to make a third undertaking for Ms. Gordon as I don't know the answer; but I'm sure we have people at the NEB who know to some extent what the U.S. is doing. Through Ms. Gordon, the Clerk of the Committee, you will get the answer soon; and I am interested in the answer, too.
Senator Tkachuk: As a follow-up to Senator Boisvenu's line of questioning on the number of accidents caused, you said that under your jurisdiction, 50 per cent were by individuals digging, or something like that, and the other 50 per cent were by pipeline companies where something was wrong with the pipeline or there was a problem somewhere.
I know you had the conference in Calgary, but what motivation would there be for a pipeline company to not have a safety culture? This would be intriguing because you separated the question of safety and the question of profits. Having a pipeline break hurts a pipeline company's profits, stock price and property. It costs a ton of money. What excuse would they have for not having these protections for a pipeline?
Mr. Caron: This is a profound question that goes to the root of the issue of safety culture. The CEO might believe that she is committed to safety, but the frontline worker is not so sure. If you read the public report of the Gulf of Mexico blowout, you will see accounts of people on the platform concerned about smells, processes, vibrations and instabilities; but they did not speak up. They were tired and they knew the company was in a hurry to get to a different drilling site. They assumed someone else would say something, and they died because they didn’t do what they were supposed to do. The difference is not whether the company will embrace safety, at least as important as profits or revenues, but whether people believe it to be the case at the front line.
I would assume that many CEOs assume that safety is the number one issue in their company and the message diminishes through the ranks of the senior VPs, directors, team leaders and employees. That's what we see all the time. Major incidents are rare but they have high consequences. The public reports on major industrial accidents reveal depressingly similar root causes.
Senator Tkachuk: At the conference, did the companies address this issue? It seems to be totally opposite to what a pipeline company would be doing by not making sure that the pipeline is safe so that the product is carried because they get paid for the product they carry.
Mr. Caron: I agree with you that it's counterintuitive, but the facts are there when you read the reports on the investigations. They say the same thing.
Senator Tkachuk: For individuals, it's just ignorance. You think nothing will happen to you.
Mr. Caron: I don't think it's ignorance. I would not say so, senator.
Senator Tkachuk: For a third party.
Mr. Caron: Maybe for a third party digging.
Senator Tkachuk: People think nothing will happen to them. They put the thing down and boom; and the consequences are death. It's a problem.
Mr. Caron: You need to ask yourself what this ignorance is based upon. The pipeline company ought to have an information and education program to reach as many people as possible as to the importance of Click Before You Dig.
Senator Tkachuk: Some of it is self-evident. You have natural gas running to your house, power running to your house and a sewer line running to your house. How dumb do you have to be to understand that there are pipes running into your house? It's even more than that: It's human nature and accidents will happen and things like that.
Mr. Caron: I agree, senator.
The Chair: We're just about out of time here and we have three people who want to go a second round. I will ask them to ask their questions fairly succinctly, then maybe Mr. Caron can answer in that order; and we can wrap up.
Senator Mitchell: Thank you, it has been very good. My question relates to social licence. For example, most recently Premier Brad Wall was in the U.S. talking about the need to up our game a bit to get that. Would it not be the case, and maybe this is just a rhetorical question, that if we could demonstrate to Canadians and the world that we had a really solid One Call accident prevention system people would have more confidence in the security of their pipeline oil and other infrastructure transportation?
Senator Massicotte: You described the One-call Centre as a broker. But if it ever becomes operational, since it is just a broker, what will happen when someone calls? Who calls the city or the backhoe operator as far as the sewer system or water goes? Does the person have to call the power company or gas company separately? Does the person have to make eight different phone calls? That defeats the purpose.
Senator Seidman: One of the nice things about this committee is that we're environmentally respectful, so we all have tablets and we try to function on our tablets. I did do the “Welcome to Click Before You Dig” portal, and I have to tell you that I clicked on every province and territory listed here, and there are seven that do not have a One Call system. It says “Contact facility owners directly in this area,” and there are six that indeed have One Call systems.
Thank you. It's a great site.
Mr. Caron: I agree with Senator Mitchell. Social licence comes with strong systems. I agree with what you said. It also comes with the fact that there is a strong safety watchdog, supported by Parliament, called the National Energy Board, to whom you give additional monies for audits and inspections. This is part and parcel of the same. Public institutions and compliant companies, Senator Mitchell, bring confidence that the nation is on top of the safety of Canadians and their environment.
On the issue of the One-call Centre being a broker, if I am an excavator, I go on the Click before you dig Web site and I find out about the various companies with infrastructure on the site in question. Those companies get in direct contact with the person who clicked initially. The broker does all of that, senator. It connects the person to the electric company, the gas company, the steam company and so forth, and the report will indicate that that was done.
Senator Massicotte: Just to make sure I understand correctly, I either call or click and the centre will make sure that the utility companies call me back? I may have to deal with seven or eight companies. Do I wait on the line while they transfer my call to one company after another?
Mr. Caron: That is a fourth answer I will have to send the clerk in writing. I will provide the committee with the protocol, showing how the system works. It will contain that information specifically.
The Chair: Thank you, Senator Massicotte. Those are very good questions, sir.
Thank you, Mr. Caron, for being here. I have always enjoyed, at least for the length of time I've been here, your presentations. We wish you well after your 35 years. I think you said that you're retiring in June.
Mr. Caron: June 6, at 5 p.m.
The Chair: We will miss you, but we may call on your expertise again, even though you won't be head of the NEB. We appreciate all the things you have done. Thank you very much.
Honourable senators, I need a motion to adopt our report, subject to the chair being authorized to submit the application to the Standing Committee on Internal Economy, Budgets and Administration, and that the steering committee be empowered to approve the final version of it when it comes.
I have that motion from Senator MacDonald.
Thank you, everyone. We are adjourned.
(The committee adjourned.)