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Section II: Analysis of Program Activities by Strategic Outcome

Strategic Outcome

The NEB has a single strategic outcome to which all its program activities and their expected results contribute:

Safe and secure pipelines and power lines built and operated in a manner that protects the environment and enables efficient energy markets.

Program Activity: Energy Regulation

This program provides the Canadian public, project proponents and other government agencies with regulation of international and designated interprovincial power lines; construction, operations, and tolls and tariffs on international and interprovincial pipelines; energy trade; and exploration and development in certain frontier and offshore areas. The companies that are regulated by the Board create wealth for Canadians through the transport of oil, natural gas and natural gas liquids, and through the export of hydrocarbons and electricity. As a regulatory agency, the Board’s role is to help create a framework which allows these economic activities to occur when they are in the public interest. The public interest is inclusive of all Canadians and refers to a balance of economic, environmental and social interests that change as society’s values and preferences evolve over time.

2010-11 Financial Resources ($ millions)

Planned Spending	Total Authorities	Actual Spending
23.9	32.8	30.8

2010-11 Human Resources (FTEs)

Planned	Actual	Difference
178.2	194.6	16.4

Expected Results	Performance Indicators	Targets	Performance Status
NEB-regulated facilities and activities are safe and secure The environment is protected throughout the lifecycle of NEB-regulated facilities and activities Canadians benefit from efficient energy infrastructure and markets The rights and interests of those affected by NEB-regulated facilities and activities are respected	Companies have adequate and effectively implemented safety, integrity and environmental management systems and programs	100% of companies regulated by the NEB have safety, integrity and environmental systems and programs in place	Unable to assess Adequacy and effectiveness of company management systems are assessed through the NEB audit compliance process. Three audits were completed this year, and while the NEB is able to assess the adequacy and effectiveness of the management systems and programs for the companies that were audited, it is unable to meet the target of 100 per cent of companies. As a result, this measure cannot be assessed adequately due to the small sample size.
	Percent of planned compliance activities completed	100% of planned compliance activities are completed	Mostly met 97 per cent of planned safety, security and environmental compliance activities were completed. Planned compliance activities not completed in 2010-11 are included in the 2011-12 Compliance Verification Plan.
	The Board’s regulatory processes are measurably efficient and effective	All NEB service standards for its regulatory services are met	Mostly met Met service standards on 277 of 284 regulatory services delivered.[f]
	Percent of planned financial regulatory audits completed	100% of planned financial regulatory audits are completed	Met all 100 per cent of planned financial regulatory audits were completed.
	Stakeholders are satisfied with NEB processes, information and interaction	80% of stakeholders who provide feedback are satisfied with NEB processes, information and interaction	Unable to assess This measure cannot be assessed as the sample size of data collected was too small to reach a conclusion.

[f] NEB Service Standard Results, http://www.neb-one.gc.ca/clf-nsi/rpblctn/rprt/dprtmntlprfrmncrprt/2010-2011srvcstndrd-eng.html

Performance Summary and Analysis of Program Activity

Generally, the NEB performed well against its expected results, performance indicators and targets. In 2010-11, the Board focused efforts on its organizational priorities to meet expected results for the Energy Regulation Program and, ultimately, its strategic outcome.

Safety, Security and Environmental Protection

Industry Performance

The safety of the public and the people who build and operate NEB-regulated pipelines, and the protection of the environment, are of paramount importance to the Board. The Board uses data from its compliance verifications (e.g. inspections and audits) and compulsory reporting of environmental and safety incidents by regulated companies under the Onshore Pipeline Regulations, 1999 (OPR-99) to manage its compliance oversight activities. This information is supplemented by a voluntary reporting initiative for safety and environmental performance indicators.^[2] Injury frequencies, incident trends, compliance activity scorecards and other indicators help the NEB identify where improvement is needed and which companies require a higher level of compliance oversight.

Overall, the pipeline industry continued to be a safe mode of transportation for delivering energy to Canadians in 2010-11.^[3]

Under the OPR-99:

• There were no disabling injuries and one fatality^[4] on NEB-regulated pipelines, compared with three disabling injuries and no fatalities in 2009-10.
• There was one pipeline failure, down from four failures in 2009-10.
• There were no major releases of liquid hydrocarbon into the environment. This is down from three major releases in 2009-10.
• There were 67 natural gas releases, an increase from 49 releases in 2009-10.
• There were 84 unauthorized crossing activities,^[5] which is a significant decrease from 145 in 2009-10.

Under the OPR-99 and the COGO Act:

• There were 185 incidents.^[6] This is an increase from 157 incidents in 2009-10.

Under the COGO Act:

• There were ten releases of 100 L or more of hydrocarbons or other contaminants reported under the COGO Act (from oil and gas exploration and production facilities located in the Northwest Territories). This is comparable to 11 releases in 2009-10.

The NEB follows up on every reported incident to determine whether company corrective actions are appropriate. The NEB takes a proactive approach to preventing incidents and Board staff use compliance tools such as inspections, audits and participation in company emergency response exercises to promote improved safety performance of NEB-regulated facilities. When required, the NEB takes direct action. In 2010-11, the Board:

• Ordered pressure restrictions for five pipelines as a precautionary measure to mitigate safety concerns;
• Issued a safety advisory to industry regarding the evaluation of hazards associated with shallow dents on pipelines in response to two incidents caused by fatigue crack failure;
• Authorized Board Members under Section 15 of the NEB Act to participate in technical compliance meetings to reinforce the Board’s expectations and to report back to the full Board;
• Observed the response efforts by U.S. authorities to the Enbridge pipeline spill near Marshall, Michigan to learn from the incident; and
• As co-champion of the Canadian Common Ground Alliance, worked with national and regional partners to promote safe construction practices near buried infrastructure through workshops and tradeshows held across Canada.

In recent years, the Board has observed an increasing trend in the number and severity of incidents being reported by NEB-regulated companies. To understand the reasons behind this recent trend, the Board analyzed over 100 incidents related to safety, integrity and damage prevention programs. The analysis identified both technical and management system root causes for the incidents. The Board shared the results of this analysis at a full-day workshop to discuss strategies to reduce incidents. More than 60 participants from NEB-regulated companies, industry associations, consultants and other regulators attended the workshop. The outcomes and lessons learned from the incident analysis and workshop discussions will be integrated into ongoing NEB activities, projects and process enhancements.

Northern and Offshore Initiatives

In May 2010, the Board announced that it would review Arctic safety and environmental offshore drilling requirements.^[7] The review is examining the best available information concerning the hazards and risks associated with offshore drilling activities in the Canadian Arctic, and the safety measures to both prevent and respond to accidents and malfunctions. The outcome of the review will be a public report clarifying the filing requirements for applications for offshore drilling in the Canadian Arctic. In 2010-11, Board Members and staff met with Aboriginal groups, Northern governments and Northern communities to gain an understanding of their perspective on offshore drilling activities. The Arctic Offshore Drilling Review will be completed by the end of 2011.

In late 2010, the Board hosted a Northwest Territories (NWT) Board Forum meeting. The NWT Board Forum gives organizations involved in land use planning, environmental assessment, land and water regulation, and resource management an opportunity to learn from one another and to coordinate activities. NWT Board Forum members noted that this Forum provided a number of positive results including the development of a strategic plan for the Forum and the identification of cooperation arrangements and training requirements for Board Forum members.

The NEB also worked with the Canada-Newfoundland and Labrador Offshore Petroleum Board and the Canada-Nova Scotia Offshore Petroleum Board to develop joint guidance notes in support of the Canada Oil and Gas Drilling and Production Regulations. This cooperation resulted in the Environmental Protection Plan Guidelines and Safety Plan Guidelines being co-published and released in March 2011. The guidelines provide interested parties with an understanding of regulatory requirements and how to meet those requirements through the use of best practices, codes and standards.

Protecting the Environment

In 2010-11, the NEB signed a Memorandum of Understanding with the Minister of the Environment to recognize the NEB as a substitute authority for environmental assessments conducted by a review panel under the CEA Act. This means the NEB will be able to independently conduct environmental assessments for most NEB projects that would formerly have required a review panel, thereby increasing efficiency in the federal environmental assessment process.

During the year, the Board initiated a project to update the environmental and socio-economic assessment (ESA) sections of its Filing Manual for pipeline applications. The Filing Manual update project provided an opportunity for interested parties and the Board to engage in dialogue, improve understanding of environmental and socio-economic review processes currently in place, and generate options for improvement to the ESA section of the Filing Manual. In November 2010, the Board released a draft version and invited public review and comment to ensure that the perspectives of stakeholders are understood and considered for the update. Over 50 individuals and organizations participated in the process, including Environmental Non-Government Organizations (ENGOs), Aboriginal groups, other federal departments, provincial or territorial governments, academics, regulated companies, environmental planners, consultants and other industry-related organizations. The revised ESA section of the Filing Manual will be released in 2011.

The NEB also developed a draft Remediation Process Guide for NEB-regulated companies in consultation with stakeholders. The Guide provides a clear process for companies to follow when collecting and submitting information to the NEB about soil remediation and groundwater contamination. It will be finalized and released in 2011. Information about environmental protection on the NEB’s website has also been enhanced.^[8]

The Management System Approach

The Board’s OPR-99 requires NEB-regulated companies to develop and implement management and protection programs. These programs promote the safety and security of people, pipelines and property, and the protection of the environment. In January 2011, the NEB requested public comment on a Notice of Proposed Regulatory Change (NOPRC 2011-01). This proposed amendment clarifies Board expectations that companies have a systematic, comprehensive and proactive approach to managing risk, and satisfying requirements under the NEB Act and the OPR-99.

The NEB released Proposed Regulatory Change 2010-01 in May 2010, setting the expectation that companies shall develop, document, implement and maintain a security program in accordance with the Canadian Standards Association Standard CSA Z246.1-09. The Standard includes criteria for establishing a security management program to identify and manage security threats and associated risks. It also requires companies to have mitigation and response processes and procedures to prevent and minimize adverse impacts of security incidents on people, the environment, assets, and economic stability. The effective date for Proposed Regulatory Change 2010-01 is 1 April 2011.

The Board also reviewed its audit program of NEB-regulated companies’ management and protection programs and published a standardized evaluation and audit protocol. The audit protocol will provide guidance on, and influence companies’ management and protection programs, to meet legal requirements and conditions within applicable Board Certificates or Orders. The NEB also continued to develop a data management tool to support its risk-based approach to verifying company compliance.

Respecting the Rights and Interests of those Affected by NEB-regulated Facilities

Throughout the year, the NEB continued work on a number of initiatives related to ensuring that the rights and interests of those affected by NEB-regulated facilities and activities are respected.

During the Land Matters Consultation Initiative (LMCI) consultation process in 2008-09, landowners told the NEB that a lack of participant funding was a significant barrier to participating in certain NEB regulatory processes. In July 2010, the NEB gained legislative authority to establish a Participant Funding Program (PFP) under the NEB Act. Under the PFP, funding is available to individuals, landowners, incorporated non-industry not-for-profit organizations, and Aboriginal groups who are interested in participating in oral facility hearings. In 2010-11, $250,000 in participant funding was made available to support public participation in two hearing processes.^[9]

The NEB also made progress on several other LMCI commitments. Specifically the Board:

• Successfully piloted a multi-stakeholder group to develop and release Guidance for Safe Crossings of NEB-Regulated Pipelines Using Agricultural Vehicles and Mobile Equipment;
• Continued to develop the NEB’s public participation program and examined the feasibility of extending the management system approach to encompass the rights and interests of those affected by NEB-regulated facilities and activities. The multi-stakeholder group will continue this work;
• Released a renewed version of the publication Pipeline Regulation in Canada: A Guide for Landowners and the Public;
• Updated the NEB website to include a section dedicated to Public Participation and Land Matters;^[10]
• Continued work on a 5-year Action Plan towards reaching a 2014 milestone for pipeline companies to start collecting funds for pipeline abandonment through pipeline tolls; and
• Established a multi-stakeholder committee to research the physical issues of pipeline abandonment and to develop a knowledge base for future decisions.

While much progress was made in 2010-11, some LMCI actions have not yet been completed and will continue in 2011-12.

Efficient Energy Infrastructure and Markets

To fulfill its strategic outcome, the NEB promotes efficient energy infrastructure and markets. As part of its regulatory mandate, the NEB regulates international and interprovincial pipeline and electrical transmission facilities, pipeline tolls and tariffs, and energy imports and exports.

In 2010-11, the NEB regulated approximately 71,000 kilometres of pipelines and 1,400 kilometres of power lines across Canada. Canada exported approximately $80.1 billion worth of crude oil, petroleum products, natural gas, and natural gas liquids under NEB export authorizations. While most of this was shipped by pipeline, a small portion was transported by tankers, trucks, and rail. NEB-regulated international power lines enabled electricity exports worth approximately $1.9 billion. The Canadian energy industry accounted for 6.7 per cent of Canada’s GDP in 2010-11. Revenue generated from Canadian energy exports totalled $97.4 billion and accounted for 23.7 per cent of total Canadian export revenue.

An important part of promoting efficient energy infrastructure and markets is making timely regulatory decisions in the Canadian public interest. During the fiscal year, the Board issued six hearing decisions on major applications, notably the Mackenzie Gas Project, Nova Gas Transmission Ltd.’s Horn River Project, and the Westcoast Energy Inc. Dawson Gas Processing Facility and associated pipelines. During the year, the NEB also continued to support the efforts of the Major Projects Management Office to clarify and streamline major project assessments. The NEB met most of its regulatory process service standards in 2010-11.

To continually improve application assessment processes, the Board made changes to increase the efficiency of processing short-term import orders for natural gas and short-term export orders for oil, natural gas, natural gas liquids and petroleum products. The NEB removed the requirement for applicants to submit hard copies of their applications if using the Online Application System. This reduced processing times for these applications. The Regulatory Tracking System, an internal online tool to track and monitor application assessment, was also introduced in 2010-11.

Lessons Learned

An important innovation within the Energy Regulation Program in 2010-11 was the launch of the new Participant Funding Program. The Board’s higher than anticipated hearing load in 2010-11 resulted in an accelerated learning curve for the program. Staff had to deliver strong administrative oversight for the PFP, while making sure that it was compatible with existing application and early stakeholder engagement processes. Despite these challenges, implementation was successful and, in 2010-11, the NEB awarded participant funding to support public participation in two hearing processes. Delivery of the program will continue to be a learning process as Board staff track and monitor current hearings to which participant funding applies to improve the program in 2011-12.

Program Activity: Energy Information

The program provides the Board, industry, policy makers, and the Canadian public with energy industry and market surveillance, including the outlook for supply and demand of energy commodities in Canada, to assist in decision making regarding energy infrastructure and markets. This program informs Canadians on energy market developments and issues related to the Board’s regulatory mandate, which are primarily in the gas, oil and electricity market sectors, and under Part VI of the National Energy Board Act by providing market analysis to determine whether Canadians are able to access energy at fair market prices.

2010-11 Financial Resources ($ millions)

Planned Spending	Total Authorities	Actual Spending
4.0	7.6	7.2

2010-11 Human Resources (FTEs)

Planned	Actual	Difference
30.2	44.9	14.7

Expected Results	Performance Indicators	Targets	Performance Status
Canadians benefit from efficient energy infrastructure and markets	Feedback from internal and external clients on Energy Information Program products via questionnaires after workshops, comment cards with publications, interviews with clients NEB website provides timely and relevant energy market information	80% of feedback from clients indicates they find Energy Information Program products useful and relevant 5% increase in visits to content on the NEB website from previous year	Exceeded Feedback indicates that 87 per cent of clients find Energy Information Program products useful and relevant. Unable to assess In 2010-11, the NEB had 470,675 visits to energy information content on its website. However, 2009-10 comparison data is unavailable due to issues with the web tracking tool, so the NEB cannot assess 2010-11 performance against the target.

Performance Summary and Analysis of Program Activity

Through the Energy Information Program (EIP), the NEB provides objective, accurate and timely information about Canada's energy system. In 2010-11, the NEB streamlined the EIP to confirm its alignment with the NEB’s mandate. The Board’s EIP is directly linked to the ongoing monitoring requirements under the import and export (Part VI) aspects of the NEB Act. The NEB monitors energy markets and provides its view of the reasonably foreseeable requirements for energy use in Canada having regard to trends in the discovery of oil and gas. This analysis then informs the Board’s regulatory decisions. It also enables the NEB to produce publicly available assessments of energy trends, events and issues which may affect Canadian energy markets and the supply and demand for energy.

In 2010-11, the NEB continued to build its capacity to collect and analyze energy market information through several initiatives. Specifically it:

• Updated the natural gas liquids component of the Commodities Tracking System. This is part of a project to enhance data quality by converting to an online system for gathering export and import data;
• Collected market intelligence by monitoring market trends; reviewed external research related to energy market developments; and attended and participated in conferences, workshops and seminars;
• Improved analytical tools to aid in analyzing complex energy markets and to allow the Board to contribute to national and international energy analysis; and
• Continued to engage stakeholders who collect and disseminate energy information.

The Board published a range of energy information reports in 2010-11.^[11] Topics included natural gas resource assessments, natural gas supply costs in Western Canada, Canadian natural gas deliverability projections, an energy overview of 2009, top energy stories of 2010, energy demand in the industrial sector, energy use in the North, and summer and winter Energy Outlooks. The NEB also continued to update the Energy Pricing Information for Canadian Consumers web page throughout the year. Additionally, the Board improved the accessibility of its EIP products by producing more concise reports on more varied topics, emphasizing plainer language, and continuing to use its website as a more accessible delivery mechanism for reports.

In 2010-11, internal EIP products that keep Board Members and staff informed of current and emerging energy issues were streamlined, resulting in improved quality of materials and shorter distribution times. The Board also engaged a number of ENGOs on its key products and leveraged its working relationship with the Canadian Environmental Network to explore how the EIP could be of greater interest to ENGOs.

Lessons Learned

In 2010-11, NEB analysis reaffirmed that Canada has abundant energy resources. Supply continued to increase, while demand for resources moderated. Canadian energy markets remain complex and are constantly evolving. For this reason, there is a need for careful monitoring of these markets and the dissemination of data and analysis on energy markets and issues facing the energy sector. This has been, and will continue to be, the focus of the NEB’s EIP.

During the year, the NEB streamlined the EIP to confirm its alignment with the Board’s regulatory mandate to monitor energy markets. The Board also introduced new measurement tools to assess client satisfaction with the EIP. The results will directly influence future aspects of the program to better meet Canadians’ energy information needs.

Program Activity: Internal Services

Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

2010-11 Financial Resources ($ millions)

Planned Spending	Total Authorities	Actual Spending
24.6	22.7	20.8

2010-11 Human Resources (FTEs)

Planned	Actual	Difference
184.1	134.8	49.3

Please note: The difference between planned FTEs and actual FTEs is due to the fact that the planned FTE number in the 2010-11 RPP was estimated far in advance of actual, detailed planning for the fiscal year. When planning was completed, the original planned number was out of date.

Performance Summary and Analysis of Program Activity

The People Strategy

Historically, attraction and retention of quality staff has been a challenge for the NEB in a competitive energy sector labour market. While the oil industry increased employment levels this year, the relatively low levels of activity in natural gas exploration and development reduced competition in Calgary’s labour market in 2010-11. This helped slow the NEB’s employee turnover rate. The organization’s attrition rate was 6.9 per cent, which is the lowest it has been in the past eight years. The NEB hired 47 full-time employees in 2010-11, representing 7.5 per cent of its total FTE complement by the end of the year. These employees were hired to meet the Board’s growing workload and to fill existing vacancies.

The continued implementation of the NEB People Strategy to create a positive working environment was another factor that contributed to staff retention during the year. In 2010-11, the NEB actively promoted leadership development to improve the NEB’s performance. The Board launched an Emerging Leaders Program to supplement existing leadership programs. The NEB also renewed its commitment to enhancing current leadership through the People Leadership Action Plan. Implementation of the plan will result in revised leadership competencies, behaviours and measures that will be incorporated into leaders’ annual accountabilities.

The Board also started redesigning its job classification system in 2010-11. The NEB’s current classification system was considered cutting edge when it was implemented in the 1990s, but has since become outdated. It is expected that the move to a new classification structure will promote improved career progression and performance management, thereby leading to higher employee satisfaction and retention.

In past years, the NEB’s Staffing Management Accountability Framework identified the need for the NEB to develop an organizational strategic human resources plan to help the organization proactively anticipate emerging human resource needs. Work on the plan began in 2010-11 and will continue in 2011-12.

The Board’s success in creating a positive work environment has been externally recognized. The NEB was named one of Canada’s Top 100 Employers for 2011, one of Alberta’s Top 50 Employers, and one of Canada’s Top Family-Friendly Employers. In a survey conducted by Towers Watson, the NEB again this year showed higher employee engagement scores than the Canadian norm.^[12]

Improving Corporate Effectiveness and Resource Management

During the year, the organization worked to revise its financial governance structure to improve integration of expenditure management and budgets. This included implementing a live finance reporting system for expenditures and budgets which allows managers real-time access to budgets. Information Management and Information Technology planning were also aligned with the revised financial governance structure to enable a seamless integration of IM/IT considerations in financial management decisions. New strategic IM and IT plans were developed during the year. As well, the NEB continued work on its essential record conversion project, converting 69,634 essential records during the year.

In 2010-11, significant changes were made to the NEB’s Access to Information and Privacy program. The NEB saw an unprecedented number of Access to Information Act requests during the year. To meet demand, the Board assigned additional resources through internal reallocation, and developed new processes and awareness materials.

In 2010-11, the NEB worked to improve its corporate processes, tools, and behaviours to enhance organizational performance. In 2010, the NEB began recording and managing all of its work activities in the Work Management Tool (WMT). The WMT is a one-stop tool to support the business planning process and its implementation, and is aligned with the NEB’s resource planning tool. The WMT will enhance the NEB’s ability to proactively assess and address current and emerging resource needs. As well, the Board’s Quality Management System (QMS) continues to provide a useful mechanism to document processes and record improvements. During the year, the NEB continued to work on having all of its QMS processes meet baseline requirements in 2010-11. This target was not achieved in 2010-11 due to competing demands. For 2011-12, the NEB will continue to work on improving its processes.

Lessons Learned

Competing priorities and workload growth put pressures on the NEB’s internal services program during the year. To maximize existing internal services resources, internal services staff needs to be engaged early in planning processes. To achieve this, the NEB will work to strengthen its integrated planning process in 2011-12. In fall 2010, the NEB underwent its second Management Accountability Framework (MAF) Assessment. The Board will implement action plans to address identified deficiencies and to continue to build on strengths.

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