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Home > Speeches and Presentations > Speeches and Presentations 2009 > The North American Policy and Regulatory Grid - Leveraging Partnerships

The North American Policy and Regulatory Grid - Leveraging Partnerships

Presented by
Gaétan Caron
Chair and Chief Executive Officer
National Energy Board

CAMPUT Conference 2009
« Changing Tides »
Saint John, New Brunswick

12 May 2009

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Hello everyone, my name is Gaétan Caron, and I am the Chair of the National Energy Board. I'm pleased to be here today, and look forward to this opportunity to exchange our ideas and thoughts in the CAMPUT forum.

The theme of the conference is "changing tides" - implying that we're all sailing in the same ocean. As regulators, we certainly experience that reality with an increasingly open world, and in North America, with integrated energy markets. We constantly see how the decisions of one country or board may have a ripple effect on other jurisdictions. And of course, when there are step changes in society, the changing tides affect all of us.

Given this environment, something that's of growing interest and concern for all of us is the question: what degree of collaboration is feasible and appropriate among regulators in the North American context? And related to this, what's our appropriate connection to the policy environment in which we find ourselves?

The Policy and Regulatory Grid

Let me address the last question first. When we look at the policy and regulatory grid, it's commonly understood that regulators do not create government policy. To the extent that legislation creates a regulatory agency or a regulatory framework, regulators implement the policy inherent in the legislation. In that sense, we are an instrument of public policy, or the implementation of a policy choice. Agencies such as the National Energy Board (NEB or Board) are creatures of statutes. We have no intrinsic jurisdiction - we are required to do what the legislation directs us to do. Does this mean that agencies such as ours have no business in the policy world, and likewise that it's not appropriate for us to communicate or collaborate in this area?

In fact, I believe it is appropriate and necessary for a regulator to be mindful of the policy environment in which it operates. This is because the policy environment is part of the context in which the regulator makes independent decisions, in the public interest. Public policies inform independent decision making in the public interest. Regulators need to have a holistic picture and understanding of the world, including the policy environment, in which they exist in order to make their independent decisions.

The Policy and Regulatory Grid

What does making decisions in the public interest mean? The NEB has defined "public interest" as "inclusive of all Canadians, and refers to a balance of economic, environmental and social interests that changes as society's values and preferences evolve over time. As a regulator, the Board weighs the relevant impacts on these interests when making decisions". An input for this context is the policy environment. Government policies may inform a regulator's independent judgment of the balance to be struck in taking decisions in the public interest.

For example, when we see that changes in energy markets are being increasingly driven by environmental policy, this is an area that we as regulators must discuss and understand. We know that we must also be aware of the issues and concerns driving public policy change - which come from different sectors of the public. For this reason, the NEB has conducted a number of initiatives recently with various stakeholders that build understanding both about the NEB's role, and about stakeholder concerns. I'll describe a few of these later in this presentation.

Conversely, there is scope for independent regulatory agencies to inform policy. I am using the verb "inform" deliberately, as distinct from "influence" or "lobby". We sometimes receive feedback on the impact of government policies, either in the hearing room, or as part of our market monitoring function, or our public engagement initiatives. Sometimes also we hear views about the mandate contained in our enabling legislation - something I believe is for the policy arm of government to act upon, or choose not to act upon. The point is that we have valuable knowledge which is not always ready and available to policy makers in our specialized areas.

We as regulators benefit from communicating together and with our stakeholders on government policy through forums such as these, so we remain in touch with current social, economic and environmental trends, science and policies.

An Inter-connected World

And now to the next question: the desirable and appropriate degree of collaboration among regulators in the North American context. From our perspective, the answer is - lots! We know that it's only with this kind of collaboration that we will be able to be an efficient and effective regulator.

And from our perspective, this isn't limited to North America. We recognize the degree of interdependence between jurisdictions within Canada, in North America, and the world. We also recognize that the regulatory agencies in these jurisdictions have their own mandates and legislative frameworks within which they must work and that each regulator must maintain its independence in decision making. This creates a dynamic and challenging context for collaboration that can obviously change over time.

The benefits of collaboration are many. Together, as collaborators, we can identify best practices, and where appropriate, develop new regulatory approaches and processes that respond to changes in our environmental, social, economic and policy framework.

Today, the NEB benefits from continual exchanges of technical information and best practices through provincial and national organizations, and also through organizations outside Canada, such as FERC (Federal Energy Regulatory Commission) in the US, the Mexican CRE (Comisión Reguladora de Energía), and Ofgem (Office of the Gas and Electricity Markets) in the UK.

In the next few slides, I'm going to provide some examples of the NEB's approach to collaboration.

The Major Projects Management Office (MPMO)

In 2007, the Major Projects Management Office, or MPMO, was set up to improve coordination within Canada's regulatory system. The goal of the MPMO, which is operated through Natural Resources Canada, is to provide industry with a single, efficient point of entry into federal processes while ensuring that projects are built in a safe manner and the environment is protected. Applicants for large federal energy projects are required to file their Project Descriptions with the MPMO, which then has the responsibility for coordinating the federal regulatory process.

The NEB has participated from the start with the development of the MPMO. Every month, all the Deputy Ministers and Agency heads involved in natural resources projects meet in Ottawa to monitor the progress of major projects where the federal government has a major role to play. I sit on the MPMO Deputy Minister Committee.

The key tool we use to hold each other accountable is the Project Agreement. The example agreement I am providing here is that of the Bruce Power New Nuclear Power Plant Project on the MPMO website. The left hand side is the front page of the agreement. The right hand side is the signature page, where the Deputy Ministers of Natural Resources Canada, Fisheries and Oceans Canada, Transport Canada, Environment Canada, and Indian and Northern Affairs Canada, as well as the Presidents of the Canadian Nuclear Safety Commission and the Canadian Environmental Assessment Agency, commit to top quality project assessments and to the meeting of specific timeframes to do this top quality work. This is more than a process improvement - this is a cultural change, which I observe happening every month in every one of us sitting at the MPMO table. All of that is happening without new legislation.

The NEB has been able to make a major contribution to the MPMO through sharing our experience and expertise in our environmental regulatory coordination role. We are also a full partner in the MPMO's efforts to improve the clarity and efficiency of federal project assessment processes.

CAMPUT Strategic Plan

Collaboration also occurs as we implement the CAMPUT Strategic Plan, which you can find on the CAMPUT website. We need to update it soon but the key messages in it are still very valid. One of our two goals is effective regulation, as evidenced by the existence of consistent and effective regulatory regimes throughout Canada, and the effective engagement of stakeholders in the development of a successful regulatory compact.

This conference is an example of what must happen for coordination and integration to happen. I see the annual conference as an incubator of new ideas, notably through the participation of delegates in the Q&A sessions after the remarks have been delivered by the speakers. The carbon dialogue, co-sponsored by the Canadian Gas Association, the Canadian Electricity Association, the Ontario Energy Board, the Alberta Utilities Commission, and CAMPUT, is another example of concrete solutions to important issues being sought in a collaborative way. This is an example of regulators working to assess regulatory mechanisms that incorporate market principles with the desired outcome of efficient regulatory processes.

Another measure of success under this goal is that policy makers are well informed of regulatory developments as an input to the development of effective public policies. Twice CAMPUT has made presentations to the Council of Energy Ministers of Canada. Each individual regulator also has the opportunity to inform policy within their own jurisdiction.

I believe we have a lot to learn from the much bigger, US version of CAMPUT - the National Association of Regulatory Utility Commissioners (NARUC). NARUC is much more active. A Canadian version of their approach might be very different, but their deep degree of involvement in policy making, within a legal framework regarding regulatory independence which is very comparable to Canada, is telling me that, in Canada, much more is possible by way of informing policy. I believe that we are only at the beginning of the journey.

Memoranda of Understanding (MOU)

I am also a big supporter of leveraging goodwill between people who simply want to work together, or enjoy working together. Among our oldest examples of MOUs (Memoranda of Understanding) is the one we have with the US Federal Energy Regulatory Commission (FERC) [PDF 294 KB]. The result of this collaboration is what has been coined by a former NEB Chair as "conscious parallelism". I have been in touch with FERC people for about 25 years, as part of our bi-lateral meetings with them, and now our staff are doing the same through tri-laterals with the Mexican regulatory board. As of today, we have not had a pipeline project in Canada which ends at the border and which does not connect, at exactly the same time as the Canadian segment is completed, with the US component. There are no laws and regulations that ask that we do that, but the evidence shows that the ongoing and frequent collaboration, even if only by way of exchanging publicly available information, is very supportive of getting to coherent and coordinated outcomes.

The NEB maintains a very large number of other MOUs with other organizations, including the following:

• First Nations Tax Commission
• Northwest Territories Water Board
• Canada-Nova Scotia Offshore Petroleum Board
• North American Electric Reliability Corporation [PDF 334 KB]
• Oil & Gas Commission of British Columbia
• Human Resources and Social Development Canada (Canada Labour Code)

A complete list of MOUs is available on the NEB website.

In different ways, these different agreements contribute to the same thing: people are aware of each other's actions, and are in a good position to exchange views on best practices, which increases opportunities for consistency of regulatory regimes across jurisdictions.

Cooperation with the US Pipeline and Hazardous Materials Safety Administration (PHMSA)

Another example of international cooperation worth a specific mention is the NEB - PHMSA (Pipeline and Hazardous Materials Safety Administration) MOU, which came into effect on November 22, 2005. The arrangement recognizes that the physical regulation of cross border pipelines is shared and that compliance information is pertinent to both the NEB and PHMSA. The MOU provides for, among other things, observation of audits, operational staff exchanges and annual meetings between senior staff of our organizations and cross border standardization. It specifically references the importance of cooperation on the Alaska pipeline.

To date, NEB staff have observed at least four audits conducted by PHMSA of companies which operate pipeline systems on both sides of the border. The results of these audits have been incorporated in the Board's risk based approach to providing compliance oversight.

To date, staff exchanges have not taken place but staff have participated in a number of cooperative learning and development opportunities. In addition, the NEB and PHMSA jointly sponsor the International Pipeline Conference held every two years in Calgary. The NEB has provided significant input into a number of PHMSA technical meetings and publications including the 2008 Baker report comparing Canadian and US pipeline standards.

Both agencies share their recommendations on research spending and are actively engaged in Pipeline Research Council International (PRCI), Program on Energy Research and Development (PERD) and other research programs in advisory roles.

Benefits of North American Coordination

Here are a few examples of the benefits of North American coordination.

We in Canada are ready to process any project related to Alaskan gas, either under our own legislation or in support of the Northern Pipeline Agency, to whom we would be prepared to provide a great deal of technical support.

This state of readiness is in part the result of an ongoing exchange of publicly available information within the federal government and our US partners. While we remain independent and sovereign, we plan our respective work on the basis of common assumptions as to possible timing, scope of filings, and the like. This is priceless.

Benefits of North American Coordination - TransCanada Alberta System

Another example of the practical benefits of promoting these relationships, networks and information links is the recent decision regarding the TransCanada Alberta System.

On April 29, 2009, we were ready to assume jurisdiction over the TransCanada Alberta system just a few months after releasing our Reasons for Decision on the jurisdictional question. This potentially formidable transition is proceeding smoothly in large measure due to our quality networks within Alberta, notably with the Energy Resources Conservation Board and the Alberta Utilities Commission. This again is priceless.

National Association of Regulatory Utility Regulators (NARUC)

I would like to expand on the remarks I made about National Association of Regulatory Utility Commissioners (NARUC) earlier.

In my view, the degree of coordination in North America will be improved if more Canadians participated in NARUC public meetings. I see NARUC as a formidable market place for ideas, attracting almost 1000 people when they meet. At these meetings, you see federal and state regulators, industry, academia, interested parties, media, and more.

I have attended two of these meetings to date. I have been struck by the apparently low participation of Canadians at the events. If we expect to have an influence in North American regulation, and if we value best practices, I believe we have an opportunity here, which would be easy to seize.

I do plan to attend the Seattle summer meetings in July. In fact, I have been asked by NARUC to contribute to two sessions, one on the Canadian carbon dialogue, before the International Relations Committee, and one on a North American Vision for energy, where the Chairman of FERC, the President of Mexico's CRE and myself will share our perspective. Please do not leave me alone and sleepless in Seattle.

As a benefit of more Canadians attending NARUC events, I would expect increased American participation at CAMPUT events, in that order.

More is Needed!

The journey is not over and the NEB is continually looking for ways to improve its regulatory processes as it produces top quality environmental assessments, Reasons for Decision, energy information products, appropriate dispute resolution services, community engagement, to name a few of our business lines.

One area which requires ongoing attention is the meaningful engagement of key stakeholders, where we can and we must learn from each other. I believe this is part of coordination of regulatory regimes in North America, where we can learn a lot more from each other from Cancun to Tuktoyaktuk and beyond!

Examples of what the NEB has done in this regard include:

• Our Land Matters Consultation Initiative
  Some landowners have expressed concerns with potential socio-economic impacts of pipelines and pipeline abandonment. In 2007, the NEB decided to conduct consultation on these matters, and held meetings and workshops with 25 communities across Canada. As a result of the feedback that the Board received, the NEB concluded that it will extend its regulatory program for safety, security and protecting the environment to encompassing respecting the rights and interests of those affected by NEB-regulated facilities and activities.
• Our Environmental Non-governmental Organizations (ENGO) engagement project
  Over the past few years, we've found an increasing demand from ENGOs to understand more about our processes. Through this initiative, we have worked to establish positive working relationships with ENGOs, in support of improved environmental outcomes from NEB regulatory activities. We have met with a number of ENGO organizations over the past year to communicate our mandate, and to obtain feedback regarding how we might better communicate with this community. We expect to issue a status report soon on what we have heard and what we intend to do about it.
• Our Aboriginal engagement efforts
  The NEB has seen an increase in interest from Aboriginal people regarding the impact of energy projects on their communities. The NEB is addressing this interest through outreach to Aboriginal communities that may be affected by Board decisions to explain the Board processes and duties; providing information on how to be engaged in the Board's processes, thereby better enabling Aboriginal participants to provide appropriate input into NEB deliberations; and gathering information on and respecting local community protocol so as to permit the inclusion of community practices in related NEB processes.

A Vision of Where the NEB is Going

During the Q&A session which follows, I would be pleased to receive suggestions on how the NEB can continually improve collaboration among regulatory systems beyond these initiatives.

One thing is clear in my mind: the interactions within the policy and regulatory grid are becoming more and more important to us as regulators in North America and beyond.

As public policy evolves, and as communication and coordination across jurisdictions become more integral to the way we work, we find ourselves right in the middle of those tides of change - let's make sure our boats are ready to sail toward our common destination.

We need to prepare for the future through ongoing dialogue such as this, which ultimately contributes to improving the social, environmental and economic outcomes of regulation. Our discussions in that direction here today bode well for our collective future.

 

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Date Modified:

2011-10-28