Dismantle National Energy Board, panel advises Ottawa

Power Play: Crisis of confidence in NEB National Energy Board Review Panel’s Gary Merasty says that if recommendations are taken seriously the NEB will be fundamentally changed.

OTTAWA -- A panel advising the government on how to overhaul the National Energy Board says Canada's current system for reviewing and regulating energy projects is broken and facing a crisis of confidence in the eyes of the public.

The five-member panel, appointed by Natural Resources Minister Jim Carr, delivered a 100-page report Monday that calls for a full-blown rethink of how the system works, including the dismantling of the National Energy Board into two separate agencies, along with a comprehensive and coherent national energy policy to guide them.

"Today the regulatory function is making de facto policy through its decisions," says the report, which followed several months of public hearings and meetings with stakeholders.

Without a functioning national energy policy, the panel concluded, the board has an impossible task: regulating the growth of the industry while marrying that growth with the government's economic and climate-change goals.

Instead, it says Ottawa should take the time to develop its policy incorporating its vision on energy, the environment and the economy, the report says. That way, when an energy project of major national significance is proposed, it would go to cabinet first to determine if it aligns with that vision, including significant and meaningful consultation with indigenous communities.

A reconstituted National Energy Board, renamed the Canadian Energy Transmission Commission, would then partner with the Canadian Environmental Assessment Agency to spend up to two years assessing the technical and environmental components of the proposal. Together they would have full authority to grant licences to projects, without going back to cabinet for final approval.

The entire process should take up to three years, up from the current 18 months. The current timeline, put in place in 2012 by the former government, is unrealistic and leads to rushed decisions and limits on public engagement, the panel found.

The report recommends that smaller-scale projects not considered to be of national significance be allowed to bypass the cabinet review and go straight to the joint technical and environmental assessment.

The Canadian Energy Transmission Commission would replace the National Energy Board, but without the function to produce and analyze energy industry data. That role would go to a new Canadian Energy Information Agency, to ensure the production and analysis of information is completely separate from the use of that information to assess project proposals.

The panel suggests their vision for the new national regulator needs to be taken in its entirety or it won't work. Carr said he is thankful for the panel's work, but refused to commit to anything in the report.

"In another life, when I wrote reports to government, I was always very hopeful that each and every one of my recommendations would be accepted," he said.

"If we accepted each and every one of the recommendations of the various pieces of advice we're getting, that means that we wouldn't have any tough decisions to make. And I can tell you, we will have tough decisions to make."

Carr has posted the report online for public comment until June 14. He said the government will meet in the fall to determine the reforms to be made to both the NEB and the Canadian Environmental Assessment Agency. A separate expert panel reviewed the latter and reported back earlier this year.

Trevor McLeod, director at the Natural Resources Centre at the Canada West Foundation, said reconciling the two panel reports will be one of the government's biggest challenges.

"The federal government's going to have a very difficult task of figuring out which structure they rely on, and how they put these two things together," McLeod said.

Mark Pinney, manager of markets and transportation at the Canadian Association of Petroleum Producers, expressed concern about the competitive impacts of the longer review timeline.

"A three-year process is a potential area of concern, because we're trying to compete in an increasingly competitive global marketplace," he said.

"You want to make sure you don't get left behind or miss windows of market opportunity because the regulatory process is too protracted."

In a written statement, the group Environmental Defence praised some of the report's recommendations, but expressed trepidation about allowing cabinet to assess the national-interest value of a project before a comprehensive environmental review.

Environmental Defence also wants the review of the proposed Energy East pipeline put on hold until the NEB overhaul is done, something Carr isn't entertaining. He already pledged existing proposals would be reviewed with the current system with additional requirements for environmental review and indigenous consultation.