March/April 2013

Eye on Business

A primer on National Energy Board Act amendments

By Lars Olthafer and Katie Slipp

Many changes occurred to the environmental assessment and regulatory review processes for federally regulated energy development in 2012. The recently passed Jobs, Growth and Long-Term Prosperity Act addresses the federal government’s stated frustration over regulatory inefficiencies and codifies Ottawa’s commitment to streamlining reviews. The changes are intended to stimulate investment in Canadian natural resources by bringing more clarity to the review process. Among other things, the Jobs, Growth and Long-Term Prosperity Act amends the National Energy Board (NEB) Act to alter NEB’s powers over interprovincial and international energy development and to make the review process more predictable and timely, while ensuring continued environmental protection.

Many of these amendments will impact NEB-regulated entities. The following four examples may be of interest to the mining industry.

Certificates of public convenience and necessity now federal cabinet’s domain

The federal cabinet now has the power either to approve or deny certificates of public convenience and necessity, which authorize the construction and operation of pipelines. Prior to the amendments, the cabinet had the final authority to deny an application for a certificate that had been approved by NEB but no authority to approve an application that had been denied by NEB. NEB’s role in the certificate process is now limited to carrying out the environmental assessment and the regulatory review processes, and to recommending terms and conditions and a positive or negative disposition to the minister.

Whereas NEB’s denial of a certificate was formerly the final word, the expansion of cabinet powers and the narrowing of NEB powers suggest that government policy may become the primary driver behind certificate decisions.

Timelines set to prevent delays

A primary reason for the passage of the Jobs, Growth and Long-Term Prosperity Act and the resulting amendments to the NEB Act was to prevent unwarranted delays of energy projects. To this end, NEB must now finish its assessment of, and reporting on, a certificate or an exemption order application within 15 months of receiving a complete application. After that, the cabinet has three months to make its decision. This puts the onus on project proponents to ensure that applications are both thorough and complete prior to filing.

While timelines provide some certainty about the timing of decision-making, it is important for proponents to know that there are off-ramps from the process, which can put the timelines on hold, including exclusionary periods approved by the NEB chairperson and ministerial extensions. In this regard, legislated timelines are not absolute.

Criteria for obtaining export licences being revised

NEB Act amendments include changes to the licensing of oil and gas exports. In its interim guidance document, NEB confirmed that public hearings are no longer mandatory for such applications and that the only relevant consideration is whether the quantity of oil or gas to be exported will exceed the surplus remaining after due allowance is made for reasonably foreseeable requirements for use in Canada.

NEB recently issued its first export licence decision under the new regime, approving LNG Canada Development Inc.’s application for the export of liquefied natural gas. In this decision, NEB recognized that the export licence would not directly or indirectly authorize physical activities, such as construction, or result in potentially adverse environmental and social impacts that might be associated with those activities. Therefore, environmental and social factors did not need to be considered. NEB is currently reviewing its procedure for assessing export licence applications, and further requirements are expected to be put in place.

Non-compliance fines

Administrative monetary penalties (AMP) are fines NEB may impose for non-compliance with the regulatory regime. They are intended to encourage compliance without imposing excessive punishment for wrongful activity. Although details of the activities that trigger AMPs and specific amounts will be the subjects of future regulation, maximum AMPs will range from $25,000 for individuals to $100,000 for corporations. The AMP amount will depend on the violator’s history, on the economic benefit associated with the violation, and on efforts at mitigation and co-operation after a violation has occurred.

While the long-term impacts of NEB Act amendments are yet to be seen, it is expected that the changes will both encourage and expedite natural resource development under NEB jurisdiction, while helping to align the regulatory process with broader government policies.

Lars Olthafer is a partner and Katie Slipp is a senior associate in the regulatory and environmental practice group at Blake, Cassels & Graydon LLP. Olthafer and Slipp regularly advise and represent energy clients on regulatory and environmental compliance and approval processes, public and aboriginal consultation, and land rights acquisition and compensation, in the context of both provincially and federally regulated projects.
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