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Message from the Chair and CEO

I am pleased to present this 2012-13 Report on Plans and Priorities for the National Energy Board (NEB or Board). As Canada’s federal energy regulator, it is part of our responsibility to decide if proposed energy infrastructure projects are in the public interest. The public interest is inclusive of all Canadians and refers to a balance of economic, environmental and social considerations that changes as society’s values and preferences evolve over time.

Through our public hearing process on specific projects, we have the opportunity to hear directly from Canadians about what matters to them. By engaging Canadians who are affected by a proposed energy project through our hearing process and other public forums, we can stay focused on what matters most to them: public and worker safety, security, environmental protection and economic impacts. In the coming year, we expect to see a record number of applications for energy projects. We will continue to perform our regulatory responsibilities in a diligent and timely manner.

Along with a shared commitment to actively listening with open minds, our Board Members and our staff are guided by the principles of natural justice and procedural fairness. Board Members, as decision makers, must be impartial and make decisions based on the evidence that is presented. As an independent Board, we take these principles very seriously.

Further, we will continue to ensure we have a clear and robust regulatory framework and exercise oversight of the facilities and activities we regulate—from project planning and public consultation, to dealing with applications and, when projects are approved, their construction, operation and abandonment. That oversight also extends to the tolls and tariffs pipelines may charge. In so doing, we realize our vision of being active and effective in Canada’s pursuit of a sustainable energy future.

Section I: Organizational Overview

Raison d’être

Responsibilities

The main responsibilities of the NEB are established in the National Energy Board Act (NEB Act) and include regulating:

• The construction, operation, and abandonment of pipelines that cross international borders or provincial/territorial boundaries, as well as the associated pipeline tolls and tariffs;
• The construction and operation of international power lines and designated interprovincial power lines; and
• Imports of natural gas and exports of crude oil, natural gas liquids, natural gas, refined petroleum products and electricity.

Additionally, the Board has regulatory responsibilities for oil and gas exploration and production activities on frontier lands not otherwise regulated under joint federal/provincial accords. These regulatory responsibilities are set out in the Canada Oil and Gas Operations Act and the Canada Petroleum Resources Act. These responsibilities apply to the west coast offshore, the Northwest Territories, Nunavut, the Arctic offshore, Hudson Bay, parts of the Gulf of St. Lawrence and Bay of Fundy, and onshore Sable Island.

The NEB conducts environmental assessments (EA) during its review of applications for projects under its jurisdiction. For certain projects, an EA is also required by federal legislation, such as the Canadian Environmental Assessment Act, the Mackenzie Valley Resource Management Act, the Inuvialuit Final Agreement or the Nunavut Land Claims Agreement. Certain Board inspectors are appointed Health and Safety Officers by the Minister of Labour to administer Part II of the Canada Labour Code as it applies to NEB-regulated facilities and activities.

The Board also monitors aspects of energy supply, demand, production, development and trade that fall within the jurisdiction of the federal government. The Board reports to Parliament through the Minister of Natural Resources.

Strategic Outcome and Program Activity Architecture (PAA)

The diagram below illustrates the NEB’s strategic outcome and program activity architecture. The Board’s program activities and program sub-activities all contribute to achieving the strategic outcome.

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The NEB made minor refinements to its PAA and the supporting performance measurement framework, effective 1 April 2012. The revised strategic outcome and program descriptions focus more clearly on core responsibilities, and the strengthened performance measurement indicators will improve the Board’s ability to measure and monitor results achieved for Canadians.

Organizational Priorities

The following organizational priorities will be the focus of the Board’s attention and resources during this reporting period. These priorities and the associated plans are aimed at continuing to deliver on the Board’s strategic outcome.

Priority	Type*	Strategic Outcome and/or Program Activity(ies)
Continual improvement of safety and environmental outcomes.	New	Energy Regulation
Description
Why is this a priority? Safety and environmental protection are of paramount importance to the Board. As an independent federal regulator, the Board promotes safety and security, environmental protection and economic efficiency in the Canadian public interest within the mandate set by the Parliament of Canada. Plans for meeting the priority Continue implementing the Action Plan on Safety and Environmental Protection to further improve results in four pillars of safety and environmental protection: worker safety, integrity of installations, damage prevention, and emergency preparedness and response. Collect new leading performance measures from NEB-regulated pipeline companies in addition to those currently gathered through incident reporting requirements in the Onshore Pipeline Regulations, 1999. This performance information will enhance NEB risk-modeling for compliance verification planning, and provide industry with information to improve performance on a company-by-company basis.
* Type is defined as follows: previously committed to – committed to in the first or second fiscal year prior to the subject year of the report; ongoing – committed to at least three fiscal years prior to the subject year of the report; and new – newly committed to in the reporting year of the RPP or DPR.

Priority	Type	Strategic Outcome and/or Program Activity(ies)
A robust regulatory framework for the North.	New	Energy Regulation
Description
Why is this a priority? The NEB is the federal body responsible for regulating oil and gas exploration and production activities on frontier lands not otherwise regulated under joint federal/provincial accords. In 2011, the NEB conducted a comprehensive review of the regulatory framework for Arctic offshore drilling, which resulted in the clarification of filing requirements for offshore drilling in the Canadian Arctic. A clear and comprehensive regulatory framework, with supporting processes and tools, is essential for achieving the Board’s strategic outcome and supporting the Government of Canada’s priorities in Canada’s North. Plans for meeting the priority Continue engagement with northern communities and organizations. Develop a Drilling and Production Regulatory Framework.

Priority	Type	Strategic Outcome and/or Program Activity(ies)
A flexible and efficient organization able to meet new and ongoing priorities.	New	Internal Services Energy Regulation
Description
Why is this a priority? A nimble organization is required to continually manage the achievement of the Board’s strategic outcome and priorities in an effective and efficient manner. An increase in industry activity is resulting in unprecedented demand on NEB services. Plans for meeting the priority Strengthen the Board’s integrated planning process to better link financial and human resource allocations to activities and outcomes. Strengthen the NEB’s risk management processes and its integration with strategic planning. Assess and address current and emerging resource needs through the Board’s Regulatory Resourcing Framework. Implement new ways of doing business that strengthen processes and streamline work–e.g., Land Matters Group.

Risk Analysis

In 2011, the NEB regulated approximately 71,000 kilometres of pipelines and 1,400 kilometres of power lines across Canada. These pipelines shipped approximately $103 billion¹ worth of crude oil, petroleum products, natural gas liquids and natural gas to Canadian and export customers at an estimated transportation cost of $6.1 billion. NEB-regulated international power lines transmitted approximately $2.5 billion of electricity into and out of Canada.

The NEB’s responsibilities are not only shaped by emerging energy trends,² but also by the proactive consideration of safety, environmental, societal and economic trends that may influence the Board’s ability to carry out its responsibilities in the Canadian public interest. Within this climate of constant change, the NEB faces a range of risks to achieving its mandate. Some of the sources and drivers of risk are internal (e.g., capacity to efficiently and effectively achieve its strategic outcome during a period of high industry activity), while other sources of risks and drivers are external (e.g., global events and incidents such as the 2010 oil spill in the United States’ Gulf Coast). This changing landscape strongly influences the NEB’s priorities, performance and service delivery.

To continually improve decision-making and facilitate strong management practices in this environment, the NEB integrates risk management in all functions across the organization. This integration occurs strategically and operationally. The key corporate-wide strategic risks facing the Board are listed below. All five risks have the potential to affect the achievement of the NEB’s strategic outcome and expected results at the program activity level.

Resource Constraints: There is a risk that the volume of applications and demand on programs will be higher than expected. If not adequately resourced, the quality of program delivery could be affected.

In response, the NEB will monitor activity levels and ensure resource planning is strategically managed. Resource constraints will be communicated to the Treasury Board Secretariat so that funding levels continue to be appropriate to carry out its mandate.

Loss of reputation as a regulator: There is a risk that the Board will be unable to maintain public confidence if its actions are not considered expert, efficient, effective and neutral.

The Board will continue to issue decisions that are responsive, transparent, independent and evidence-based. Data management processes will be strengthened to ensure regulatory compliance remains robust.

Changes in expectations from Parliamentarians and the public: There is a risk that the public interest may change rapidly and the Board may not adapt to that change quickly enough. The public interest is inclusive of all Canadians and refers to a balance of economic, environmental and social considerations that changes as a society’s values and preferences evolve over time.

The Board will monitor trends via reports, media and political debates, as well as engage stakeholders to ensure their views are understood.

Inability to recruit and retain staff: There is a risk that the NEB will be unable to compete with industry and other employers to attract and retain the skilled staff required to deliver its mandate.

The Board will continue to implement its People Strategy as well as other human resources initiatives that promote strong management practices, strategic recruitment, investment in people and effective work-life balance principles.

Inability to deliver effective internal services: There is a risk that an ineffective alignment of the Board’s internal services and regulatory programs will impact the NEB’s ability to proactively manage program delivery and internal and external challenges.

In response, the Board will continue to strengthen internal/administrative functions such as integrated planning.

Planning Summary

Financial Resources ($ millions)

2012-13	2013-14	2014-15
62.5	56.9	56.9

Human Resources (Full Time Equivalent - FTE)

2012-13	2013-14	2014-15
393.6	393.6	393.6

Strategic Outcome: Pipelines, power lines, energy development and energy trade are regulated in the Canadian public interest.

Performance Indicators	Targets
Number of pipeline failures on NEB-regulated pipelines resulting in the release of liquid or gas.	Zero
Number of fatalities related to the construction and operation of NEB-regulated facilities.	Zero
Canadian prices for oil and gas are in line with continental prices.	The price that Canadians pay for oil and gas is similar to export prices, based on comparison of relative prices.

Planning Summary Table
($ millions)

Program Activity	Forecast Spending 2011-12	Planned Spending			Alignment to Government of Canada Outcomes
		2012-13	2013-14	2014-15
Energy Regulation	32.9	35.6	31.7	31.7	Strong Economic Growth
Energy Information	7.6	6.7	6.5	6.5	Strong Economic Growth
Total Planned Spending		42.3	38.2	38.2

Planning Summary Table
($ millions)

Program Activity	Forecast Spending 2011-12	Planned Spending
		2012-13	2013-14	2014-15
Internal Services	22.8	20.2	18.7	18.7
Total Planned Spending		20.2	18.7	18.7

Expenditure Profile

The NEB is funded through parliamentary appropriations. The Government of Canada recovers approximately 90 percent of the appropriation from the regulated industry. The revenues are deposited directly into the Consolidated Revenue Fund. This process is regulated by the Cost Recovery Regulations under the NEB Act.

The NEB spending trend shows expenditure increases until 2011-12, after which a gradual decrease in planned spending is expected.

In 2009-10 the spending increase was primarily due to the Board’s decision in February 2009 to transfer jurisdiction of TransCanada PipeLine Limited’s NOVA Gas Transmission Ltd. (NGTL) system to the NEB. Funding was received for the additional FTEs required as a result of this increased regulatory responsibility. These FTE positions were partially filled in 2009-10.

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In 2010-11 and 2011-12, spending increased as the NEB realized the full impact of the transfer in jurisdiction of the NGTL system and finished staffing the additional FTE positions. As well, spending increased due to new funds received for the Arctic Review initiative. Spending peaked in 2011-12, with an Operating Budget Carry-Forward of $2.3 million from 2010-11 and $1.6 million for the Arctic Review.

Moving into 2012-13 and 2013-14, planned spending is anticipated to decrease. The overall reduction in allocation and spending is due partly to the collective bargaining process. The NEB did not receive up-front funding to continue special allowances when the collective agreement expired in October 2011. Special allowance funding is calculated and provided as part of the in-year process of Supplementary Estimates and therefore is not included in the forecast for planned spending. Any future provisions for special allowances are subject to a collective bargaining process. However, this overall decrease in planned spending will be partially offset in 2012-13 by increased costs for the Participant Funding Program, which will receive an additional $3.0 million ($4.5 million in total) due to a projected high hearing workload. In 2013-14 and 2014-15, the Participant Funding Program will revert back to its baseline funding level of $1.5 million.

Estimates by Vote

For information on the NEB’s organizational appropriations, please see the 2012-13 Main Estimates publication.³

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