Canada: Bill C-38 Expected To Have Significant Impact On National Energy Board Powers

Bill C-38, the Jobs, Growth and Long-term Prosperity Act (Bill) was passed by the federal government on June 29, 2012. The Bill effects various amendments to the National Energy Board Act (NEB Act). Amendments related to final decision-making on certificates of public convenience and necessity (CPCN), time limits for review, and export licence applications became effective on July 6, 2012. Separate Cabinet orders still have to be made on amendments regarding authorizations for the construction of pipelines or power lines near utilities, facilities and/or navigable waters, offence provisions related to construction or other activities near pipelines, and the ability to impose administrative monetary penalties (AMPs).

In addition to changes to the NEB Act, the National Energy Board (NEB) is now one of three responsible authorities charged with carrying out environmental assessment under the Canadian Environmental Enhancement Act 2012 (CEAA). A detailed overview of the changes in the CEAA can be found in our May 2012 and July 2012 Blakes Bulletins.

The following provides an overview of some of the key amendments to the NEB Act:

  • Certificates of Public Convenience and Necessity. Under the previous regime, the Governor in Council (GIC) could deny a CPCN application that had been approved by the NEB but could not approve an application that had been denied by the NEB. One of the key amendments to the NEB Act is that final decision-making to approve or deny a CPCN now lies with the GIC. The NEB's role is to carry out the environmental assessment and regulatory review process and recommend terms and conditions to the Minister (regardless of the recommended disposition). Upon making its final decision, the GIC will direct the NEB to deny or issue the CPCN and associated decision statement.
  • Timelines for Review. The amendments to the NEB Act provide that the NEB must complete its assessment of a CPCN or exemption order application and submit its report to the Minister within 15 months from receipt of a complete application. The GIC then has an additional three months to make a decision. Although these timelines will help ensure that applications are assessed in a timely manner, it is important to note that they are not absolute and that there are off-ramps from the process, including exclusion periods approved by the NEB panel chair, ministerial extensions and NEB discretion.

The Bill includes transition provisions for existing applications, with timelines for assessment by a review panel to be established jointly by the Minister of Environment and the NEB. Assessment timelines have yet to be set for the majority of existing applications.

  • Export Licences. Amendments to the NEB Act also change the requirements for the gas export licence application process. On July 11, 2012, the NEB released its Interim Memorandum of Guidance Concerning Oil and Gas Export Applications (the Interim Memorandum), which sets out the NEB's preliminary guidance on this issue. The NEB has confirmed that in accordance with the amendments, public hearings for gas export and import licences are no longer mandatory and that the NEB must only satisfy itself that 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. On this basis, the Interim Memorandum provides that applicants are no longer required to file information regarding environmental and social effects as set out in the National Energy Board Act Part VI (Oil and Gas) Regulation. The NEB also confirmed that it will no longer impose conditions related to the protection and restoration of the environment or any social effects directly related to those environmental effects.

    Beginning in the summer of 2012, the NEB will review the Market-Based Procedure for assessment of gas export licence applications during which an opportunity will be provided for public comment. Given that the guidance published to date is interim and that review is pending, we expect that more information about the requirements for gas export and import licence applications, including filing exemptions, will be forthcoming.
  • Construction of Pipelines and Power Lines Near Utilities or Facilities..The Bill also amends the requirements related to pipelines and power lines that are located on, over, along or under a utility or facility, respectively. Once the amendments come into force, one of the following must be met: (a) the CPCN or order includes a term relating to the utility or facility; (b) the NEB grants leave to construct in the vicinity of the utility or facility; or (c) construction meets the requirements of regulations. Contravention of these requirements is an offence and can result in liability on summary conviction to a maximum C$100,000 fine and/or to imprisonment for no more than one year or on conviction on indictment to a maximum fine of C$1-million and/or imprisonment for no more than five years. The NEB has not indicated when it expects these amendments to come into force.
  • Pipelines and Power Lines Crossing Navigable Waters. Amendments in the Bill also contemplate the transfer of jurisdiction over navigable water crossings in relation to pipelines and international power lines from Transport Canada to the NEB. These amendments are not yet in force, and it is expected that it will take approximately one year for the NEB to review the legislation and determine a clear method of implementation. Contravention of these provisions can result in summary conviction or conviction on indictment as described above.
  • Construction and Other Activities Near Pipelines. In response to public safety concerns related to construction or other activities near or across pipelines, the amendments in the Bill include stronger enforcement provisions. In particular, a party will be guilty of an offence if it constructs a facility across a pipeline or excavates within 30 metres of a pipeline without leave of the NEB or operates a vehicle or mobile equipment across a pipeline in certain circumstances without leave of the company. Contravention of these provisions can result in summary conviction or conviction on indictment as described above.
  • Administrative Monetary Penalties. Amendments in the Bill will also allow the NEB to create a system of AMPs through eventual regulation. AMPs are fines that may be imposed by the NEB for non-compliance with the regulatory regime and are intended to encourage compliance without punishment or retribution for wrongful activity.

    Under the pending amendments to the NEB Act, the contravention of any provision that is meant to encourage safety and environmental protection may be subject to an AMP. The maximum AMP payable for each violation is C$25,000 for individuals and C$100,000 for any other person, with each day a violation continues considered as a separate violation. Violations will be classified as serious or very serious, and a baseline penalty will be set that may be adjusted up or down depending on, among other things, history, economic benefit associated with the violation, mitigation and co-operation with the NEB after a violation has occurred.

Details as to the particular types of activities that will be considered violations that trigger an AMP will be the subject of a pending regulation. The NEB intends to engage stakeholders in developing this regulation and has committed to putting the regulation in place within a year of the passing of the Bill.

The changes to NEB powers brought about by the amendments described above are significant, for example, AMPs and the strengthened offence provisions, and will impact the applications and approvals process. While the NEB's authority in respect of CPCN approval has been somewhat narrowed, on the whole, the changes are expected to provide the NEB with greater flexibility with respect to its regulation and oversight of interprovincial and international energy development.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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