ARCHIVED - Northern Pipeline Agency Canada

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Section II: Agency Context

2.1 Agency Overview

2.1.1 Mandate and Mission

In 1977, following extensive regulatory hearings in both countries, the governments of Canada and the United States executed an Agreement on Principles Applicable to a Northern Natural Gas Pipeline.This agreement provided a framework for the construction and operation of the Alaska Highway Gas Pipeline Project.

In 1978, Parliament enacted theNorthern Pipeline Actto:

• give effect to the agreement; and
• establish the NPA to oversee the planning and construction of the Canadian portion of the project by Foothills.

Implementing legislation was also passed by the United States in the form of the Alaska

Natural Gas Transportation Act.

Prior to the commencement of construction of any particular section of the pipeline, Foothills is required to obtain a series of specific approvals from the Agency pursuant to theActand the terms and conditions specified under the Act.These approvals relate to socio-economic and environmental factors, routing issues, technical design, and other matters such as demonstration of financing. Approval authority rests with the Agency's Commissioner and Designated Officer, the latter being a member of the National Energy Board (NEB). In some cases, approval from the Board is also necessary.

The Agency also monitors the actual construction by Foothills for compliance with its various undertakings and for sound environmental and engineering practices.

2.1.2 Strategic Outcome

The Agency has one strategic outcome as listed below. The Agency will cease to exist one year after the date on which leave to open the last section or part of the pipeline is given by the NEB. The operation of the pipeline is regulated by the Board pursuant to the National Energy Board Act.

Strategic Outcome:

Facilitate the planning and construction of the Canadian portion of the Alaska Highway Gas Pipeline Project while maximizing social and economic benefits and minimizing adverse social and environmental effects.

Key Partners:

Agency demands were primarily managed through an arrangement that the Agency has with Natural Resources Canada (NRCan) for financial and administrative services. Agency staff have worked closely with federal departments to develop strategies for environmental and socio economic assessments. The Yukon Territorial Government monitored the easement agreement as discussed in Section 3.2. The Agency also worked closely with other federal departments, primarily NRCan and Justice Canada, on issues relating to Alaska pipeline development.

Key Targets and Overall Results:

The objectives of the Act, establishing the Agency and certifying the pipeline, are to:

• carry out and give effect to the 1977 agreement between Canada and the United States underpinning the project;
• carry out, through the Agency, federal responsibilities in relation to the pipeline;
• facilitate the efficient and expeditious planning and construction of the pipeline;
• facilitate consultation and co-ordination with the governments of the provinces and territories traversed by the pipeline;
• maximize the social and economic benefits of the pipeline while minimizing any adverse social and environmental impacts; and
• advance national economic and energy interests and to maximize related industrial benefits by ensuring the highest possible degree of Canadian participation.

As discussed in Section III, during this reporting period, Agency staff focused on the development of socio-economic assessment strategies, in anticipation of a filing by Foothills in the fall of 2005. Actual implementation of these plans depends upon details of the Foothills filing.

Program, resources and results linkages:

The Agency examined key environmental, socio-economic and First Nations concerns to ensure it would be able to effectively regulate a Foothills project. The Agency had no active programs or initiatives related to the strategic outcome during the reporting period. The Agency engaged a skeletal staff (3 to 5 persons) to ensure preparedness in the event of a decision to continue with the pipeline.

Management Practices:

The Agency relies on the management practices implemented by NRCan, (www.nrcan.gc.ca) as well as administrative arrangements to maximize efficiencies in respect of financial management and reporting requirements.

2.2 Societal Context

2.2.1 External Factors

Perception of a growing North American market for natural gas, combined with concerns about limitations on supply from traditional sources, and strong natural gas prices, has resulted in strong interest in the pipeline as an option for bringing northern gas to market.  Before the construction of the pipeline can begin, the NPA is responsible for ensuring that the regulatory system in Canada is in a state of readiness to respond to any request from Foothills Pipe Lines Ltd. to resuscitate the pipeline project. Before taking any decision to proceed with construction under the NPA, Foothills Pipe Lines Ltd. will need to resolve a number of commercial issues, and will need to conclude an agreement with the State of Alaska with respect to transportation rights in Alaska. As well, the ongoing process under the Alaska Gasline Inducement Act will significantly influence the decision on whether to proceed with a project under the Northern Pipeline Act. 

2.3 Challenges

During 2006-2007, the primary challenge for the Agency continued to be ensuring a state of readiness in an environment of uncertainty. In the absence of Foothills initiating an action or formal request of the Agency, responses to questions as to how Phase II of the pipeline would be regulated after a 20-year hiatus were largely speculative. The difficulty in addressing these was compounded during the reporting period by the need to utilize the limited resources of the Agency to maintain and increase awareness of obligations under the Act.

The longer-term challenge for the Agency is to be in a position to regulate pipeline construction effectively if industry decides to proceed with Phase II of the pipeline.

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