DISCUSSION PAPER DECISION-MAKING ROLES ON PROJECTS

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1 DISCUSSION PAPER DECISION-MAKING ROLES ON PROJECTS TOPIC: Roles and responsibilities for making decisions under the National Energy Board Act (NEB Act). CONTEXT: In 2012, there were legislative amendments to the NEB Act which, among other things, impacted decision making for some projects. Pipelines For international and interprovincial pipeline projects greater than 40 km in length, the National Energy Board (NEB) makes a recommendation to the Governor in Council (GIC) 1 and the GIC makes the decision on whether a project should be approved. Under the NEB Act, the NEB has up to 15 months to submit its recommendation report to the Minister of Natural Resources following receipt of an application the NEB determines to be complete and the GIC has up to three months to make a decision. 2 The NEB reviews applications it receives and conducts a hearing to allow the opportunity for participants in the hearing to express their point of view about a proposed project. Depending on the type of hearing, submissions can be either written or oral in format. Participants in the hearing can submit information that is relevant to the question of whether or not the application should be approved. This may include, for example, the need for the project, the design and safety of the project, environmental matters, potential impact of the project on the interests of Indigenous peoples and land owners. For additional information about hearings, please see the discussion paper on this issue. Information submitted to the NEB is made public on the NEB registry. After considering the information, the NEB prepares and submits a report to the GIC, via the Minister of Natural Resources. The report includes its recommendation on whether the project is in the Canadian public interest 3 and whether a certificate should be issued. A certificate authorizes a project to proceed subject to the terms and conditions that the NEB deems necessary or desirable. The report includes the NEB s reasons and the recommended necessary terms and conditions that the project must follow even if the NEB does not recommend approving the project. 1 The Governor in Council is the Governor General of Canada acting by and with the advice and consent of the federal Cabinet. 2 The Minister may extend the NEB s time limit by a maximum of three months. The GIC may, on the recommendation of the Minister, further extend the time limit by any additional period or periods of time. The GIC may also, on the recommendation of the Minister, extend its own decision making time limit by any additional period or periods of time. 3 See separate discussion paper on public interest. 1 Page

2 Once the GIC receives the NEB s recommendation report, GIC makes the decision. 4 There are three options available to the GIC when making its decision. The GIC can: 1. direct the NEB to issue a certificate; 2. direct the NEB to dismiss the application; or 3. refer the recommendation or any of the terms or conditions in the report back to the NEB for reconsideration. If GIC decides to refer the NEB s recommendation or any of the terms or conditions back to the NEB for reconsideration, the NEB reconsiders the matter and then it submits a reconsideration report to the GIC, through the Minister of Natural Resources. A reconsideration request may direct the NEB to conduct the reconsideration taking into account any factor specified by the GIC. The GIC will then consider the reconsideration report and make a decision among the above three options. There is no limit to the number of reconsiderations. For international and interprovincial pipeline projects 40 kilometres or less in length and pipeline facilities, the NEB makes the final decision on whether the project should be approved. Pipeline facilities include, for example, projects such as construction of, or modifications to tanks, storage facilities, pumps and compressors. The NEB may hold a public hearing regarding such projects. In all cases, whether requiring GIC approval or not, compliance with NEB regulations and associated standards must be met. Further discussion and questions related to that foundation for safety and environmental performance is outlined in the discussion paper on Safety and Environmental Protection. It is the responsibility of the pipeline company to negotiate with private landowners the amount of compensation related to the use of their lands. 5 A land compensation dispute regarding a pipeline may arise when a company and a land owner disagree on the compensation payable under the NEB Act for things such as land acquisition or damages caused by the pipeline or any product it transports. In the event of a land compensation dispute regarding a pipeline, the Minister of Natural Resources is responsible for overseeing the appointment of a negotiator to help parties negotiate a settlement, or an arbitration committee to make a decision on the settlement. For information regarding how potential impacts on Indigenous rights and interests are considered in the NEB process, please see the discussion paper on Indigenous Engagement and Consultation. For a licence to export oil or gas or to import gas, the NEB makes the decision including the necessary terms and conditions. An NEB decision to deny a licence is final. If the NEB decides to issue a licence, the decision is subject to the approval of the GIC. 6 The GIC can either approve or deny the decision. The NEB is not required to hold hearings for licences. However, for recent licence applications, the NEB has held written comment periods at its discretion. In determining whether an export licence should be issued, the NEB Act requires the NEB to only consider whether the exports would be surplus to Canadian requirements. 7 4 The interim principles, announced in January 2015, required additional information to be considered by GIC in its decision (e.g., upstream GHG assessment, additional Indigenous consultations). For further details, see: 5 See separate discussion paper on Land Acquisition and Compensation. 6 Under the National Energy Board Act Part VI (Oil and Gas) Regulations, the NEB makes the final decision to issue short-term orders to export oil or gas or import gas. 7 Under the National Energy Board Act, the surplus criterion is defined as the quantity of oil or gas to be exported does not exceed the surplus remaining after due allowance has been made for the reasonably foreseeable requirements for use in Canada, having regard to the trends in the discovery of oil or gas in Canada. 2 Page

3 Power lines International power line (IPL) 8 projects require either an NEB issued permit or certificate (more information below). 9,10 The NEB conducts an environmental assessment (EA) under the Canadian Environmental Assessment Act, 2012 for permit and certificate applications of IPLs with a voltage of 345 kv or more that require a total of 75 km or more of new right of way. The NEB assesses and considers environmental impacts of all other IPL permit and certificate applications under the NEB Act. The NEB also provides funding to facilitate the participation of the public in hearings with respect to new IPLs. If a company proceeds with a permit application, the NEB must issue the permit although the NEB may impose conditions on the permit. The NEB is required to issue the permit unless the GIC orders it to be constructed and operated under a certificate, or the company elects to change its permit application to a certificate. The decision to issue a certificate is subject to GIC approval, but a NEB decision to dismiss the application is final. Offshore and Canada Lands Under separate legislation, the NEB also has decision making accountabilities related to oil and gas development in specified areas 11 outside of Newfoundland and Nova Scotia where separate regulatory regimes have been established. This is not being examined during the NEB Modernization review. DISCUSSION QUESTIONS: 1. What principles should determine who should make the final decisions for the following projects and why: a. Major international and interprovincial pipeline projects (i.e., greater than 40 km in length)? b. Smaller international and interprovincial pipeline projects (i.e., 40 km in length or less)? c. International and designated interprovincial power line projects? d. Import and export licences? 8 Provinces review and approve permits or licenses for lines within their own borders and interprovincial lines that fall under provincial jurisdiction. 9 The applicant for an IPL project decides to submit an application for a Certificate of Public Convenience and Necessity (certificate) (NEB Act section 58.16), or a permit (NEB Act section 58.11) to the Board. GIC can decide to designate an IPL permit application as an IPL application subject to a certificate process, either independently or on the recommendation of the NEB. When evaluating whether or not to make a recommendation to GIC to designate a permit application as an IPL application subject to a certificate process, the Board must avoid the duplication of measures taken by the applicant and relevant provincial governments, and have regard to all considerations that appear relevant including: the environmental impacts of the IPL and the effect of the IPL on other provinces. 10 The NEB does not regulate System Operators (i.e. entities responsible for managing generating capacity and the transmission lines to ensure the system operates safely and efficiently). However, in some cases the power line owner may also be the System Operator (e.g., Hydro Quebec, Ontario Hydro). 11 Areas to which such responsibilities relate include Nunavut; Sable Island; the Inuvialuit Settlement Region onshore; that part of the onshore that is under the administration of a federal minister (including Normal Wells Proven area and other miscellaneous parcels); that part of the internal waters of Canada or the territorial sea of Canada that is not situated in a province other than the Northwest Territories, or in that part of the onshore that is not under the administration of a federal minister; and the continental shelf of Canada, but does not include the adjoining area as defined in section 2 of the Yukon Act. 3 Page

4 2. What is the role of government policy in guiding NEB oversight and decision making? a. As the lead Minister of the Crown, is there a role for the Minister of Natural Resources to clarify policy outcomes that are expected? b. How should the NEB incorporate and reflect whole of government policy direction, such as the new Federal Sustainable Development Strategy for Canada and Canada s Mid- Century Long-Term Low-Greenhouse Gas Development Strategy, when setting out hearing orders, lists of issues, and ultimately, recommended decisions and conditions? 3. What are your views with respect to the role(s) of other parties in the final decision-making process, such as Indigenous groups, provinces/territories or municipalities? a. Do you see an enhanced role for some or all of these parties? If so, please describe what these roles should be for each, with a short rationale for why. 4. What are your views with respect to the current three options available to the GIC when making its decision for pipelines greater than 40 km in length? What can be improved? 5. What are your views with regard to the legislated timelines for project reviews (i.e., 15 months for NEB recommendation and 3 months for a GIC decision)? 6. What are your views with respect to NEB s discretion to hold hearings for export licences? 7. In determining whether an export licence should be issued, what are your views with respect to NEB s obligation to only consider whether the exports would be a surplus to Canadian requirements (see footnote 7)? 8. What are your views with regard to the land acquisition process and dispute resolution? What are your views with respect to the responsibility of the pipeline company to negotiate with landowners regarding the amount of compensation? 4 Page

5 Discussion Paper ANNEX: Pipelines, Power Lines, and Export and Import Decision-Making Type of Application International or Interprovincial Pipeline Facilities International Powerline Facilities The NEB assesses the application and makes a decision on whether or not to issue an order. The NEB also determines the terms and conditions that the order will be subject to. s. 58 The NEB assesses the application and makes a recommendation to the GIC on whether or not to issue a certificate. The NEB is required to recommend terms and conditions that will attach to the certificate, even if the NEB does not recommend approving the project. s. 52 The NEB must issue the permit, 1 although the NEB may impose terms and conditions. s The NEB makes the decision on whether or not to issue a certificate and may impose terms and conditions. The decision to issue a certificate is subject to GIC approval, but an NEB decision to dismiss the application is final. s If the NEB decides to issue certificate GIC can: direct the NEB to issue a certificate; direct the NEB to dismiss the application; or refer the recommendation or any of the terms or conditions in the report back to the NEB for reconsideration. GIC can either approve or deny the issuance of a certificate. Oil and Gas Exports and Gas Imports The NEB makes the decision including the necessary terms and conditions, but the decision to issue a licence for oil and gas exports and gas imports is subject to the approval of the GIC. An NEB decision to dismiss the application is final. The NEB makes the final decision to issue short term orders to export oil or gas or import gas. If the NEB decides to issue licence GIC can either approve or deny the issuance of a licence for oil and gas export and gas import. Note: This is not an exhaustive list of NEB/GIC decision-making. Maximum timelines for the NEB are the following: international or interprovincial pipeline facilities 15 months; international power line facilities requiring a certificate 15 months; international power line facilities requiring a permit none; oil and gas exports and gas imports 6 months for licences, none for orders. For all decisions or recommendations described above that need to go to GIC for final decision, GIC has a maximum of 3 months to make its decision, but this can be extended, as can the NEB s timelines in certain circumstances. 1 Unless GIC designates the international power line to go through the certificate process upon recommendation by the Board to the Minister or by GIC making the designation order on its own initiative. The applicant can also elect a certificate application. 2 s. 4 of the National Energy Board Act Part VI (Oil and Gas) Regulations specify that GIC approval is required prior to the issuance of a licence. s Page