implementing smart regulation: how are we doing?

National EnergyBoard

Office nationalde l’énergie

Implementing Smart Regulation:

How are we doing?

CAMPUT Conference May 2, 2005Quebec City

Ken VollmanChairman

National Energy Board


Office nationalde l’énergie Presentation outline Presentation outline

I. The Regulator’s Role: Recap of last year’s “protect and enable” message, and how we’ve been walking the talk

II. Current market context

III. Current challenges and how well we’re doing in addressing them

• A report card

IV. Summary comments



To protect To enable+

Outcomes in the public interest

=

I. The regulator’s roleI. The regulator’s role

Protect and enable: means to regulate in a way that seeks to protect against the negative impacts of energy development while enabling desirable outcomes determined to be in the interest of Canadians


Office nationalde l’énergie What does enabling entail?What does enabling entail?

Process sense– focus on results and cost effectiveness

– establish common information and regulatory requirements

– coordinate among/between agencies and departments

– publish service standards and agreements

– eliminate duplicative functions

Regulatory policies– facilitate the long-term efficiency of markets

– provide information and choice to all market participants

Allowing construction in the public interest– facilitate construction and development that is within approved terms and

conditions

The Board’s vision is to be a respected leader in energy regulation that protects and enables in the Canadian public interest.



Plan

Do

Measure

Improve

Quality Management System(and business process mapping)Quality Management System(and business process mapping)

Consistently achieve results aligned

with public interest objectives

Establishes clear accountabilities

and service standards

Enhances process clarity for all

participants

Measure achievements

Expectation of continuous

improvement


Office nationalde l’énergie Cooperation and partnershipsCooperation and partnerships

Northern Cooperation Plan for Mackenzie Gas Project

MOU between NEB and FERC

Atlantic offshore agreement

Canada- Quebec Agreement on Environmental

Assessment which may lead to a joint review of the

Rabaska project


Office nationalde l’énergie Enabling through regulatory policiesEnabling through regulatory policies

Continue the development of goal-oriented regulation

Shipper surveys (first ever)

Promote understanding of energy markets (EMAs)

Encouraged and provided resources to CCU

Making sure the rules of the game are clear for new

activities such as LNG imports and marine seismic

work



Enabling through regulatory policies (continued)Enabling through regulatory policies (continued)

Evaluating COGOA regime for frontier E&P

Applying risk management principles to our

compliance work

Stakeholder engagement– Revised code of conduct

Actively supporting CAMPUT



Facilitate construction of approved projectsFacilitate construction of approved projects

SMART conditions– specific, goal-oriented (Desired End Result)

– measurable

– achievable

Coordinate condition compliance and inspection with other regulators

Streamlined s.58 and clarified O&M


Office nationalde l’énergie II. Current market contextII. Current market context

Not much different from last year:– high, and volatile, prices

– supply lagging growing demand

– end of incremental solutions; need to make choices about new major projects

A long list of oil, gas and electricity projects are on our radar screen– tracking 10 oil pipeline projects and alternatives

– tracking 6 gas pipeline projects

– tracking 8 LNG projects

– tracking 4 international power lines



Location of major projects with NEB involvementLocation of major projects with NEB involvement

Oil P/L Gas P/L LNG Power line

11

1

12

11 17 25

27

2526

1718

2019

21

22

23

24

28

13

14

15

16

12

43

5 6

7

8

9

10


Office nationalde l’énergie Introducing the players, & driversIntroducing the players, & drivers

Industry Public RegulatorsDesired end result

Energyneeds met

Safety

Environmentalintegrity

Rightsrespected

Clarity

Timeliness

Efficiency

Marketchoices

Involvement

Legacy

Consultation

Enjoymentof property

Mandatedriven

Fairness

Parochial

Riskaverse

Long termstability

Funding Differingprocesses


Office nationalde l’énergie III. Current challengesIII. Current challenges

1) Fragmented responsibilities of approval agencies– erosion of integrated decision making

– coordination challenges

2) “Enabling” processes and policies

3) Alignment of regulatory policy with energy policy

4) Matters beyond our control

5) Regulatory capacity

6) Maintaining respect for regulatory process and decisions



Fragmented responsibilities of approval agenciesFragmented responsibilities of approval agencies

Regulatory complexity and fragmentation continues to grow

Regulators are addressing the issues through coordination, e.g.,– Atlantic offshore EA cooperation MOU

– Northern Cooperation Plan (14 agencies)

This solution has limited potential because regulators cannot concede their mandates

Rating


Office nationalde l’énergie “Enabling” processes and policies“Enabling” processes and policies

Processes– Implement QMS and business process mapping– improve communication of regulatory requirements (e.g., Filing Manual)– publish performance standards for application processing– reduce up-front burden for small projects– pursue cooperation and partnerships

Policies– continue goal-oriented regulation– provide choice to all market participants– enhance stakeholder engagement

Facilitating construction– use results oriented conditions– Coordinate compliance

Rating



Alignment of regulatory policy and energy policyAlignment of regulatory policy and energy policy

In recent times, regulatory policy has often been developed in advance of energy policy

In my view, regulators are well placed to bring policy gaps to the attention of government– expert knowledge of the issues;

– mandate to consider the broad public interest;

– requirement to take a long-term view; and

– inherent neutrality and objectivity.

Is there a role for CAMPUT?Rating


Office nationalde l’énergie Matters beyond our controlMatters beyond our control

Hearings can become a forum for airing concerns which could be better dealt with by other means– e.g., land use planning, revenue sharing, land claims

Hearing time is used inefficiently to debate matters which should be dealt with by standards or regulations– e.g., air quality standards, CO2 emissions

Rating


Office nationalde l’énergie Regulatory capacityRegulatory capacity

Attracting and retaining Board Members Competing for specialized staff expertise Government controls

Rating



Maintaining respect for regulatory process and decisionsMaintaining respect for regulatory process and decisions

Regulators must maintain their independence, impartiality and fairness

Stakeholders must feel they are engaged, their interests understood, and that they influence outcomes. Initiatives in this respect include:– incorporating consultation into all regulatory improvement projects

– encouraging staff to maintain and build networks

– updated our code of conduct

– creating a new business unit to coordinate all strategic initiatives

Rating


Office nationalde l’énergie IV. Summary CommentsIV. Summary Comments

Large infrastructure projects are needed to ensure our energy needs are met

Investors require clear and efficient regulatory processes

The public expects regulators to protect the environment and other public interests

The challenge to regulators is to effectively balance their protect and enabling roles


Office nationalde l’énergie Summary CommentsSummary Comments

The NEB is committed to partnering with other agencies and regulators to rationalize regulatory processes

The Board is actively pursuing Smart Regulation strategies

I would give us about a B- so far We’re doing a lot of things right but there is still a lot

of work ahead Challenge for this Conference is to identify specific

actions we can take in the next year

implementing smart regulation: how are we doing?

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