Canada: The Federal Government's Proposed Overhaul Of The National Energy Board

Last Updated: February 19 2018
Article by Toby Kruger

As reported in our initial blog post, on February 8, 2018, the federal government introduced Bill C-69, An Act to enact the Impact Assessment Act and the Canadian Energy Regulator Act, to amend the Navigation Protection Act and to make consequential amendments to other Acts, which, among other things, would enact the Canadian Energy Regulator Act ("CER Act") and repeal the National Energy Board Act in its entirety.

Bill C-69 is the federal government's proposed legislative response to the report of the Expert Panel on the modernization of the National Energy Board ("NEB"), released in May last year. While Bill C-69 does abolish the NEB and create the Canadian Energy Regulator ("CER") in its stead, the proposed legislation largely maintains the same basic structure of the existing legislation, with some important amendments. Some of the highlights are discussed below.

The CER will be in Calgary. Its role will be "to regulate the exploitation, development and transportation of energy within Parliament's jurisdiction." Like the NEB, the CER will maintain jurisdiction for overseeing the construction, operation and abandonment of pipelines and most interjurisdictional powerlines. The CER will also gain a new mandate for regulating offshore renewable energy projects. Like the NEB, the CER will continue to oversee matters with respect to traffic, tolls and tariffs on pipelines, and it will continue the NEB's mandate of maintaining an energy information service. The CER will also assume the NEB's existing obligations under the Canada Oil and Gas Operations Act and the Canada Petroleum Resources Act, among other statutes.

The CER will be governed by a board of directors appointed by the Governor in Council ("GIC", or cabinet). In contrast to the NEB, there will be no requirement for board members to reside in Calgary, and at least one of the directors must be an Indigenous person. Under the proposed legislation, the GIC may give the CER mandatory direction on broad policy matters with respect to the CER's mandate, thereby allowing the government of the day to directly guide the agency.

While the board of directors will be responsible for providing strategic direction and advice to the CER, the board may not give directions or advice with respect to any particular project decision, order or recommendation that comes before the CER. Rather, the proposed legislation contemplates the establishment of a Commission that will assume the adjudicative function of the CER and will have jurisdiction to deal with all matters arising under the CER Act. The Commission will essentially be a tribunal housed within the CER, comprised of up to 7 full time commissioners, at least one of which must be an Indigenous person.

The CER Act expressly states that when making a decision, an order or a recommendation, the Commission must consider any adverse effects that the decision, order or recommendation may have on the rights of the Indigenous peoples of Canada recognized and affirmed by section 35 of the Constitution Act, 1982. This essentially codifies the existing constitutional obligations that apply to the current-day NEB.

As with the NEB Act, the CER Act prohibits the construction, operation or abandonment of a pipeline without a certificate, which will now be issued by the CER rather than the NEB. The Commission will receive applications in respect of pipelines, and, as under the current system, will make a report and recommendation to the Minister as to whether the certificate should be issued and what conditions should be attached. The report is due 450 days after a completed application has been made. Like the NEB, in the course of evaluating an application, the Commission has broad discretion to take into account "all considerations that appear to it to be relevant and directly related to the pipeline," though the recommendation must take into account "any traditional knowledge of the Indigenous peoples of Canada that has been provided to the Commission and scientific information and data." The CER Act appears to give the CER a broader mandate to consider public comments than under the current NEB process, stating that "any member of the public" may make representations with respect to an application for a certificate, albeit in a manner specified by the Commission.

The ultimate decision on whether the CER should issue a certificate for a pipeline will be made by the GIC. The GIC's decision is due 90 days after it receives a report and recommendation from the Commission, though that time may be extended.

Where a proposed project such as a pipeline falls under the definition of a "designated project" under the Impact Assessment Act (see our blog post regarding the Impact Assessment Act and watch for our upcoming blog post on the Designated Projects Regulation), the project will be reviewed by a "review panel" established under the Impact Assessment Act. The roster for review panels includes members of the Commission. The review panel's task is to conduct both an assessment under the Impact Assessment Act and to discharge the Commission's duties under the CER Act, and submit a report for consideration by the Minister. The scope of public participation in a proceeding of a review panel is slightly different than that of a proceeding of the Commission, in that the review panel must "hold hearings in a manner that offers the public an opportunity to participate in the impact assessment."

Again, the ultimate decision on whether a project considered by a review panel should be approved rests with the GIC. The GIC must determine whether the adverse effects described in the review panel's report are in the public interest, and in doing so must consider the following factors, among others:

(a) the extent to which the proposed project contributes to sustainability;
 
(b) the impact that the designated project may have on any Indigenous group and any adverse impact that the designated project may have on the rights of the Indigenous peoples of Canada recognized and affirmed by section 35 of the Constitution Act, 1982; (a codification of the obligation that the GIC has under current legislation); and

(c) the extent to which the effects of the designated project hinder or contribute to the Government of Canada's ability to meet its environmental obligations and its commitments in respect of climate change.

The proposed CER Act contemplates that decisions of the GIC may be judicially reviewed by the Federal Court of Appeal, with leave. Appeals from decisions of the Commission may also be brought to the Federal Court of Appeal, with leave.

Like the NEB Act, the CER Act also contemplates processes for funding public participation in hearings, expressly incorporates the polluter pays principle, and maintains an administrative monetary penalties regime. Again, like the NEB Act, the CER Act allows the GIC to order the CER to supervise and control the interprovincial oil and gas trade, including by requiring persons moving designated oil or gas out of a province to obtain a license to do so. 

Bill C-69 will now be debated in Parliament and the public will have an opportunity to comment. Contact Keith Bergner or Toby Kruger for more information, and stay tuned to this blog for further information as Bill C-69 makes its way through the legislative process. 

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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