Articles

The Report of the Expert Panel on the Modernization of the National Energy Board and the Response of the Government of Canada

Author:  | September 2017 – Volume 5, issue 3 2017

1. Introduction

This article provides a summary of and preliminary comments on the Report of the Expert Panel on the Modernization of the National Energy Board1 (NEB Expert Panel Report) which was released in May 2017.2 This report is one of four recently released reports examining different aspects of how the federal government reviews and regulates major projects. The other three reports deal with a review of environmental assessment procedures,3 habitat protection under the Fisheries Act4 and, the role of the Navigation Protection Act.5 In June 2017, days after the comment period for the NEB Expert Report had closed, the Government of Canada released a discussion paper entitled, Environmental and Regulatory Reviews.6 That discussion paper outlines the changes that the government is considering for federal assessment and regulatory processes in response to these different reports. Accordingly, this article also comments on that discussion paper insofar as it deals with proposed changes to the National Energy Board.

The NEB Expert Panel Report begins with an overview of “What the Panel Heard” and then articulates a set of five principles which underlie the Panel’s recommendations. The Panel follows this with a statement of its vision for Canada’s regulator of energy infrastructure and then a set of recommendations focused around six key themes for realizing the Panel’s vision. These recommendations constitute the meat of the report. The six key themes are: (1) mandate, (2) relationships with Indigenous Peoples, (3) governance and decision-making, (4) public participation, (5) Î-kanatak Askiy Operations (Keeping the land pure), and (6) respect for landowners.

Volume II contains a set of annexes. Annex II of Volume II contains “Preliminary Findings Regarding Potential Legislative and Regulatory Changes”. These draft provisions do little to supplement the discussion in Volume I.

The key changes proposed by the panel are as follows:

  • Align the role of the national energy regulator with a clear articulation of national energy and climate policy;
  • Replace the NEB with a new agency to be called the Canadian Energy Transmission Commission (CETC);
  • Adopt a corporate governance model for the Commission and move the Board of Directors to Ottawa;
  • Create a new Canadian Energy Information Agency;
  • Establish a two-step decision-making process for new energy transmission projects:
    • Step one, under the authority of a body such as the Major Projects Office, will assess whether a proposed project is in the national interest;
    • Step two, under the authority of the CETC and the Canadian Environmental Assessment Agency, will engage in detailed regulatory approval;
  • Create an Indigenous Major Projects Office;
  • Provide greater emphasis on life-cycle regulation of projects and in this context the panel adopts Indigenous language terms to help capture the importance of respecting Indigenous world views;
  • Create a Public Intervenor Office;
  • Create Regional Multi-Stakeholder Committees;
  • Provide an enhanced role for municipalities in proceedings;
  • Create a Landowners’ Ombudsman;
  • Establish stronger standards for land agents and review compensation rules for infrastructure rights of way; and
  • Enhance the role of Indigenous Peoples throughout all elements of the process.

This is evidently an ambitious package of proposed reforms.

Three themes pervade the Panel’s analysis. The first theme is the need to re-establish the trust of Canadians in the national energy regulator. The second theme is the importance of establishing a respectful relationship with Canada’s Indigenous peoples. While this is clearly a large national project which extends far beyond national energy issues, the Panel attempts to articulate what a re-envisaged relationship might mean for a national energy regulator. And the third theme is that a national energy regulator cannot do it all and should not be expected to do so. We need a national energy strategy and furthermore we need to think carefully about those information and project approval functions that are best assumed by a national energy regulator and those which should be discharged by cabinet or by another office of government.

2. Background to the report

In June 2016, Minister Jim Carr announced his intention to establish an expert panel to advise on the “modernization” of the National Energy Board.7 He provided Draft terms of reference8 for the expert panel which were finalized several months later.9 The terms of reference emphasised that the Panel was to “conduct a targeted review of the NEB’s structure, role, and mandate” with the goal of positioning the NEB as a “modern, efficient, and effective energy regulator and regain public trust”. Issues to be considered included: governance, mandate, decision-making roles, life-cycle regulation, indigenous engagement and public participation. Other matters were evidently out of scope including the economic (tolls and tariffs) regulation of pipelines under Part IV of the National Energy Board Act10 and the Board’s upstream oil and gas responsibilities under the Canada Oil and Gas Operations Act.11

In considering the NEB’s structure, role and mandate, the Panel was specifically directed to consider “the relationship between NEB processes and the Aboriginal and treaty rights of Indigenous peoples, as well as the relationship between NEB processes and the principles outlined in the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP).”12 The terms of reference made it plain that the Minister expected to see significant stakeholder engagement as well as direct engagement with Indigenous organizations and communities.

The following sections provide an overview of the Expert Panel’s Report following the main headings used by the Panel.

3. An Overview of What the Panel Heard

The Panel made four main points under this heading.13 First, the Panel indicated that it had heard broad agreement that NEB project hearings were being used as a de facto forum for debates about Canada’s energy policy and climate change but that nobody considered that this was a good idea. It was happening because there was no alternative and more suitable forum. Second, the Panel heard that there was a crisis of confidence in the NEB. Many apparently regarded the Board as “captured” by the industry it regulated and many found its decision-making opaque. Third, the Panel heard that it was time to establish a new relationship with Indigenous peoples in Canada. And finally, the Panel emphasised that it had heard that creative win-win solutions should be possible in which “the interests and rights of the various parties involved [could] be acceptably accommodated in the interest of all Canadians.”14

4. The Five Principles

The Panel distilled “five fundamental principles” to guide its recommendations:15

  1. Living the Nation-to-Nation Relationship
  2. Alignment of NEB Activities to National Policy Goals
  3. Transparency of Processes and Decision-Making and Restoring Confidence
  4. Public Engagement throughout the Lifecycle
  5. Results Matter: Regulatory Efficiency and Effectiveness

5. The Panel’s Vision

Prior to articulating specific recommendations, the Panel set out what it describes as “an overall vision of the future of energy transmission infrastructure regulation in Canada.” That “vision” seems to consist of four elements or building blocks.16

The first element is “policy and leadership”. Here the panel called for a “fully realized” Canadian energy strategy led by the Minister of Natural Resources but in partnership with Indigenous peoples, the provinces and the territories.17

A second element comprises “an enhanced government role for the collection, analysis, and dissemination of information about energy production, transmission, use, future trends, and associated carbon emissions, to inform policy-makers, industry, Indigenous peoples, academia, civil society, and Canadians.”18 The Panel considers that this function should be discharged by a new Canadian Energy Information Agency.

A third element involves enhanced pre-project “engagement” between project proponents and others “to establish stronger, good faith relationships between the regulator, the Crown, industry, Indigenous peoples, and interested parties.”19 Engagement is to be distinguished from consultation.

A fourth element involves splitting the project review and approval process into two.20 The first step is an assessment of the alignment of the project with the national interest. This assessment would not be undertaken by the NEB or the proposed successor CETC but would be undertaken instead by something like the current Major Projects Management Office housed in Natural Resources Canada. The result of the review would be a recommendation by the Minister of Natural Resources to the Governor in Council. The Panel explicitly acknowledges that this step one decision is ultimately a political decision to be made by democratically elected and accountable government officers at the highest level. The second step is a more detailed project licensing review based on an assessment of technical considerations and risk mitigation. This assessment is to be undertaken by the new CETC in conjunction with the Canadian Environmental Assessment Agency (CEAA). A five-person joint review panels will be chaired by an “independent panel member” i.e. independent of either the CETC or CEAA.

A fourth element of the Panel’s vision emphasises the CETC’s responsibility for the subsequent operations of any approved infrastructure. To properly describe these responsibilities and to recognize the significance of Indigenous world views, the Panel adopted a Cree word Î-kanatak Askiy Operations (meaning “keeping the land pure”). Under this heading the Panel referenced the adoption of best practices, proactive monitoring and preparedness (with greater transparency and accessibility) which should also extend to emergency and compliance response. A cycle of continuous improvement should pervade every aspect of the CETC.

6. The Detailed Recommendations of the Panel

Finally, the Panel laid out its specific recommendations (some 46 in all).21 I will not reproduce all of the recommendations here. Instead, I will summarize and comment on what seem to me to be some of the Expert Panel’s more significant recommendations under the following headings: (1) better alignment between energy policy and the role of a national energy regulator, (2) a new independent Canadian Energy Information Agency, (3) a new national energy regulator with a new governance model, (4) a two-step decision making process for new projects, and (5) relationships with Indigenous people.

6.1 Better alignment between energy policy and the role of a national energy regulator

The report contains a series of recommendations designed to ensure closer alignment between “a formal Canadian energy strategy which plots a course for the future of energy in Canada, balancing environmental, social, and economic objectives” and the role of a national regulator.22 The report contemplates that the Department of Natural Resources will play a leadership role in establishing such a strategy in conjunction with the provinces, territories and Indigenous peoples. There is also a suggestion that this will ensure better alignment between climate and energy policy.23

I strongly agree with the goals of better alignment between climate and energy policy and between these policies and the roles and responsibilities of a national energy regulator. That said, the Panel gives the reader no sense of what a Herculean task it will be to secure the agreement of the provinces and territories (and Indigenous peoples) on the elements of national energy strategy. Certainly, I don’t find it particularly encouraging for the Panel to suggest24 that the work initiated under the Canadian Energy Strategy25 released by the Council of the Federation (i.e. the provinces and territories) has “great potential” for fulfilling what the Panel has in mind. In my view that Strategy (which operates at the level of the lowest common denominator) offers very little guidance to decision-makers and thus demonstrates how difficult it will be for the federal, provincial and territorial governments and Indigenous peoples to elaborate something more useful.

It might have made more sense for the Expert Panel to focus on those matters which are clearly within federal jurisdiction. The Panel might also have had more to say about just how we integrate energy policy and climate policy into decision making by the national energy regulator. This is not a trivial concern. An administrative tribunal cannot just apply policy (assuming that the policy is discernible) as if it were law – it needs to be told to do so. In the present context, the Panel might usefully have considered options for implementing this goal. One option would be to include a statutory requirement that the national energy regulator take into account Canada’s obligations and commitments under international climate agreements. Another option would be to include a provision allowing the Minister (or the Governor in Council) to provide directions to the national energy regulator (either generally or specifically) with respect to the integration of energy and climate policy.26

6.2 A new independent Canadian Energy Information Agency

The Panel recommended that the federal government should create a new independent Canadian Energy Information Agency, with a mandate that would include “collection and dissemination of energy data, as well as the production of an annual public report on Canada’s energy system, and quantitative analysis of the alignment with Canadian energy strategy goals.”27 The Agency would report to the Minister of Natural Resources.

In my opinion the Panel fails to offer a convincing argument for the creation of a separate information agency. I think that it would lead to a duplication of function and thus inter alia violate the principle of regulatory efficiency and effectiveness articulated by the Panel. A national energy regulator needs to be able to draw upon a rich range of data and resources. It needs to monitor and understand how the sector is operating and to identify and understand trends in costs, prices and technologies. To ask another agency to fulfil these and other functions will lead to duplication and inefficiency since the national energy regulator will still need its own in-house expertise in relation to these matters. The Panel suggests that a national energy regulator faces a conflict of interest in carrying out both an information function and a project regulation function but I cannot see where the conflict is. Why should the collection, organization, presentation and publication of energy data affect how the new energy regulator makes step 2 decisions about an energy transmission system (and vice versa). That said, I do agree that the national energy regulator needs much more guidance as to how to integrate climate change and greenhouse gas policy (and Canada’s international legal obligations) into its information metrics, especially in relation to supply and demand projections. I think that the national energy regulator might also be encouraged to provide a broader range of information reports dealing, for example, with trends in the renewables sector28 or with the generic energy challenges faced by isolated communities (both Indigenous and non-Indigenous).

6.3 A new national energy regulator with a new governance model

The Expert Review Panel proposes that the NEB should be replaced by a new national energy regulator to be known as the Canadian Energy Transmission Commission (CETC). The new CETC is to be governed by a board of directors with responsibility for “strategy and oversight” of the CETC’s activities.29 “Hearing panels” and “regulatory decisions” would be the responsibility of “Hearing Commissioners”. The board of directors will be based in Ottawa; hearing commissioners may live anywhere in the country.30

It is not clear to me that the Expert Review Panel ever justifies why it is necessary to change the name of the national energy regulator.31 It is perhaps simply a re-branding proposal to re-establish trust in the office of a national energy regulator much as the Province of Alberta decided to divide, re-vamp and re-name its energy regulatory authorities following the so-called “spy-scandal”.32 More important however are the proposals relating to the governance model and the geographical division of the regulator (board of directors in Ottawa, core staff in Calgary and commissioners spread out across the country). As for the governance model (which evidently draws some inspiration from the model of the Alberta Energy Regulator established by the Responsible Energy Development Act33), the Panel again fails to justify its proposed change other than its observation that the Board members of the current NEB do “not operate as a traditional Board of Directors”.34 That is hardly to the point. It seems to me that the Panel has simply bought into the assumption that a corporate model of decision making is: (a) a good (or the best) model of governance and decision-making, and (b) an appropriate model for a body performing a regulatory function. But why is that? Is the language and structure of a corporations the best fit for a regulatory authority performing governmental functions? Nor is it clear why the Panel remains wedded to this approach even when it drops the name “Board” from the proposed title of the new agency.

I also think that the proposal to split the new regulator geographically requires much more justification. For the first part of its life the NEB was located in Ottawa. The Board moved to Calgary in 1991. My own recollection is that part of the reason for the move was to share the benefits of government offices and employment more equally across the country rather than leaving all of those benefits to accrue to the Ottawa/Hull region and to Ontario and Quebec. Locating the Board in the energy capital of Canada also reduced the need for counsel and experts to travel to hearings in Ottawa (although the NEB has long scheduled project hearings in the location of the project). These (especially the first) are not trivial considerations within the context of the Canadian federation. The Panel’s proposal will unravel this objective and for reasons that are not fully worked through. For example, why does the board of directors need to be in Ottawa? Is it to makes its board be more amenable to government policy direction? The real issue as noted above is whether the national energy regulator receives adequate legal direction to do so.

Since the Panel proposes that hearing commissioners may live anywhere in the country, under the Panel’s proposals the real core of the regulator, including its staff, will come to be located sooner or later where the regulator’s board of directors is located i.e. Ottawa. It is hard to tell precisely what is embraced in the Panel’s “hearing commissioners” model of business and thus the implications of that model need much more exploration. Certainly the Panel intends that the commissioners will have a much more diverse background than the background of current Board members. It seems likely as well that there will be larger number of commissioners than that of current Board members. These new Commissioners will be called upon from time-to-time as their expertise and background fits the bill. This begins to look more like an ad hoc model of commissioners rather than a standing tribunal in which a smaller number of commissioners\board members develop expertise through continued engagement.

This model prompts several observations. The first is that not all of the Board’s work is project driven. A significant part of the Board’s work deals with the economic regulation of pipelines. These pipelines are repeat customers before the Board, either in hearings or through negotiated settlements and regular reporting requirements. Familiarity with the different types of regulated pipelines and their different business models and contractual arrangements should improve the efficiency of the regulatory relationship. The model of “hearing commissioners” hardly seems suited to those elements of the Board’s work that are not project related.

Second, a model of ad hoc hearing commissioners who are called upon less frequently may well increase the diversity of values taken into account in decision-making, but it may also make those same commissioners more dependent on the expertise of the staff. This may be especially the case insofar as the two-step model proposed by the Panel will necessarily result in the most significant policy issues being dealt with by a different body as part of step one of any project approval stage. Step two will necessarily be more technical in nature.

6.4 A two-step project decision-making process

As noted in the introduction and referenced in the last paragraph, the Expert Panel proposes a two-step decision-making process for large new energy projects. The first step would involve a determination of whether the proposed project was in the national interest.35 The national interest determination would be made by the Governor in Council based upon a recommendation of the Minister of Natural Resources “based on advice from a whole-of-government perspective”. The review would not be undertaken by the new national energy regulator but by something like the current major projects office. Assuming that the project passes this hurdle the second step of the review would involve detailed project review and approval.36 This step would generally be undertaken by a five person joint hearing panel – with at least one Indigenous member – and comprised of two Commissioners from the CETC, two from the Canadian Environmental Assessment Agency and “a final independent Commissioner”.37

Policy makers, lawyers, and academics concerned with major project decision-making, have long concerned themselves with the question of whether it is desirable and possible to separate out the “go-no go” decision from the more detailed technical assessment of a project. In principle, the idea is attractive insofar as it serves to focus on key issues from the outset and should, if it works, avoid considerable unnecessary investment. However, as a matter of practice I think that the idea will be difficult to implement, partly because of the challenges of providing a necessary information base for the first order decision and convincingly distinguishing between what is at stake at each of the two decision-making stages. Not only will it be difficult to get it right I also think that the outcome however conceived will generate a lot of litigation as parties argue about whether issues should be dealt with in step one or deferred to step two.38

I think that this can perhaps best be illustrated in the present context by thinking about how to operationalize the duty to consult in a two stage decision-making process. The Panel clearly considers, and rightly so, that both stages in the process will require consultation with Indigenous communities and perhaps consent. But how will the consultation obligations be apportioned between these two stages of decision-making? For example, if an impact and benefit agreement serves in part to discharge the obligation to consult, or as evidence of consent, when would/should such agreement be negotiated? What level of project detail would be necessary to support such negotiations? What level of project detail would be necessary to support an assessment of national interest, especially if one or more of the Indigenous communities along the linear route remained opposed to the project?

The tension inherent in this last point is well illustrated by the following passage in the Panel’s report in which the Panel explains why it uses the term “national interest” rather than “public interest”:39

We have used the term “national interest” here to mean something more inclusive than the conventional “public interest”. Explained simply, a determination of whether any type of proposal is in the public interest involves trade-offs between factors like projected economic benefits, risks to the environment, and so on. Every project involves some degree of balancing these fundamental interests, and the art of sound decision-making is all about weighing these factors and judging appropriately on that basis. The critical distinction, however, when it comes to Indigenous peoples, is that they do not simply bring interests to the table. Rather, Indigenous peoples retain a set of rights under the Constitution. While interests can be traded against each other, rights cannot.

The Panel went on to say:40

It is for this reason that we conceive of the national interest consisting of both the typical public interest determination (informed by clear policy and assessed through extensive study and engagement with all stakeholders) and a specific determination of the impact of a project on Indigenous peoples based on nation-to-nation formal Consultation.

In sum, the national interest would appear to be the public interest plus an accommodation of the rights of Indigenous people. But even with this explanation I think that the question of the appropriate standard of consultation to be met at this stage of the decision-making is far from clear. Is the Panel suggesting that the concept of unjustifiable infringement (most recently endorsed by the Supreme Court of Canada in Tsilhqot’in Nation v British Columbia41) does not apply to linear projects? These are hard questions to answer, but it seems to me that the Panel ducks them both generally and in the specific context of the two-stage decision-making paradigm.

The difficulties may be equally apparent when we turn to consider other elements of a project proposal. As the Panel notes in passing42 the NEB also has, in addition to its project approval jurisdiction, tolls and tariffs responsibilities under Part IV of the National Energy Board Act, for interprovincial and international pipelines. In recent years the NEB has been persuaded that it needs to consider tolling methodology issues as part of its consideration of project approval (i.e. the recommendation of a certificate of public convenience and necessity). In some cases (e.g. Komie North43 and North Montney44) those issues have proven to be of fundamental importance. They are also issues which lie at the heart of the NEB’s core competence. Where should these issues be dealt with in a bifurcated approval scheme? At the first level because they are crucial go-no go issues? Or at the second level because they are issues within the core competence of the NEB and also relate to the on-going economic regulation of the facility once built? There is much to be said for both views.

In sum, while I think that it is useful to have a discussion about a staged decision-making process I am sceptical as to whether such an approach is workable or, at the end of the day, that it will result in increased efficiency. I am however convinced that the final decision on public interest should be made at the highest political level for reasons of democratic accountability. Ultimately the assessment of public interest is not a technical issue but a political issue although it may (and indeed should be) informed by good science and good technical advice. These are various ways of structuring decision-making to achieve this result. The two main iterations of the NEBA (pre and post the 2012 amendments effected by the Jobs, Growth and Long-term Prosperity Act45) offer two different models. I prefer the pre-Jobs, Growth model partly because the current model leads to duplicative litigation and partly because the final cabinet decision is cloaked by claims to cabinet confidentiality.46 The pre-Jobs, Growth model would be improved were the national energy regulator to receive clear guidance (as suggested above) with respect to national energy and climate policy.

6.5 Relationships with Indigenous Peoples

As noted in the introduction, the Panel was specifically directed to consider “the relationship between NEB processes and the Aboriginal and treaty rights of Indigenous peoples, as well as the relationship between NEB processes and the principles outlined in the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP).” It is evident that the Panel took this responsibility very seriously although it also understood that a Ministerial Working Group led by Minister of Justice had been charged with providing “further direction in this area”.47 In the end, the Panel had a lot to say about the relationship between Indigenous people and the national energy regulator and indeed national energy policy. Some of these recommendations operated at a fairly general level such as Recommendation 2.1.1 which indicated that “Indigenous peoples should have a nation-to-nation role in determining Canada’s national energy strategy, and we look to the Minister of Natural Resources to define how this commitment can be met …” 48 Similarly there are recommendations dealing with early engagement (as opposed to consultation) with Indigenous communities.49 Other recommendations however were much more specific such as the proposal (Recommendation 2.2.1) that the government fund an Indigenous Major Projects Office (IMPO)50 and create an Elders External Advisory Council.51 Other recommendations dealt with the duty consult,52 the need for the incorporation of Indigenous knowledge in decision-making,53 the involvement of Indigenous people in energy infrastructure monitoring,54 and the recognition of Indigenous world views by using an Indigenous (Cree) language term to reference the ongoing responsibility to regulate infrastructure operations “to keep the land pure” (Î-kanatak Askiy Operations).55

There is much to commend in these recommendations. For example, I think that the Panel’s recommendations with respect to consultation (and specifically that the CETC should not itself have the duty to consult which should instead be discharged by the major projects management office) is sound. I think that the Major Projects Management Office is well suited for this role precisely because it should have all-of-government responsibility as well as the necessary authority and therefore it should be well placed to ensure that the honour of the Crown is maintained.56

However, I think that other elements of the recommendations require further thought or elaboration and in one case the panel seems to have missed the opportunity to give its advice on the appropriate role of the CETC (or other national energy regulator) with respect to two related matters engaging the discharge of the duty to consult.

One set of recommendations that requires further reflection is the set of recommendations related to the IMPO. According to the Panel the responsibilities of the IMPO (which would be under the governance of Indigenous peoples, determined as they see fit) would include “defining clear processes, guidelines, and accountabilities for formal consultation by the government on energy transmission infrastructure, regulatory processes and assessing compliance with those guidelines.”57  The Panel also contemplated that the IMPO would represent and support Indigenous communities “in the strategic and licensing decision phases of projects, and in facilitating Indigenous involvement in the full lifecycle of all projects, to the degree desired by the Indigenous communities in question.”58 In addition, the Office would define and disseminate best practices, including coordinating and/or supporting Environmental Assessments and regulatory reviews, to help interested Indigenous communities enhance the quality of their participation in formal Consultation and engagement processes.59

In sum, the Panel envisages that the IMPO should have at least three main roles: (1) developing consultation guidelines, (2) advocacy and (3) advice on best practices. The first two roles are problematic. The proposed role of IMPO with respect to consultation guidelines is open to the objection that the design of consultation processes should be a collaborative exercise. While consultation guidelines might to this point have been a unilateral exercise of discretion or power by settler society governments, it hardly seems to be a solution to transfer this responsibility to the IMPO which takes its direction from Indigenous peoples – especially when such matters extend to questions of accountabilities. I think that the advocacy roles that the Panel contemplates for the IMPO may be equally problematic. Indigenous communities from coast to coast to coast (as the Report itself recognizes) have vastly different interests and governance structures and face differing resource development pressures (and economic opportunities). While I can imagine that there is value in developing resource materials that can be broadly shared between different communities (the third role), it will be much more challenging for such an Office to make decisions about how to allocate scarce resources which must necessarily involve that Office in deciding whether to represent community A rather than community B, or to take position X rather than position Y. The conflict of interest issues that may arise suggest that this proposal is more likely to be a source of conflict than reconciliation.

As for the missing elements in the Panel’s discussion, these are the issues of the Crown’s consultation responsibility if the proponent is not the Crown, and the responsibility of the regulator to determine (or not) whether Crown consultation responsibilities have been discharged. It is true that these issues are also before the Supreme Court of Canada in two pending appeals (Chippewas of the Thames First Nation v Enbridge Pipelines Inc et al60 and Hamlet of Clyde River et al v Petroleum Geo-Services Inc (PGS) et al),61 but, regardless of the Court’s response to these questions, it would have been useful to have the Panel’s views on these two important matters. My own view is that where the national energy regulator has a decision-making role then it should, as part of discharging its responsibilities, act in accordance with law, and, if its authority extends to determining questions of law (this turns on the terms of the relevant statute(s)),62 then it must reach a conclusion as to whether or not the Crown has discharged its responsibilities before it makes its decision. And in doing so, it makes no difference whether the applicant for the approval is an agent of the Crown or a private party – each is seeking a statutory authorization to proceed with its project.63

6.6 Final observations on the Expert Panel Report

Minister Carr gave this Expert Panel a challenging and difficult task and very little time within which to accomplish that task. Indeed, the original announcement of the decision to create the Panel in June 2016 would have had the Panel reporting out by January 31, 2017. In the end this was extended to May 15, 2017 due to delays in finalizing the composition of the Panel; but this was still a far too aggressive timeline within which to expect the Panel to develop a thoughtful and well-reasoned report while drawing on significant engagement with stakeholders and Indigenous communities.

I think that the Panel has offered useful recommendations both to the Government of Canada and more generally the people of Canada, and in particular to the Indigenous peoples of Canada. These recommendations merit debate. But not all of the Panel’s recommendations are supported by comprehensive reasons justifying the Panel’s specific conclusions and recommendations.

7. The Discussion Paper

As noted in the introduction, the Government of Canada has decided to respond to the four reports that it has received including that of the Expert Panel on the Modernization of the NEB by issuing a Discussion Paper. That Paper outlines the changes that the government is considering in order to “regain public trust; protect the environment; advance reconciliation with Indigenous peoples; and, ensure good projects go ahead and resources get to market.”64 The Paper emphasises that some elements of the overall regulatory process are working and should continue and in that context the Paper refers specifically to the continuing need for “a strong role for expert regulators in energy transmission, nuclear and offshore oil and gas.”65 The Paper endorses five guiding principles and is organized around seven crosscutting areas of change. The five principles are as follows:66

  1. Fair, predictable and transparent environmental assessment and regulatory processes that build on what works.
  2. Participation of Indigenous peoples in all phases that advances the Government’s commitment to the United Nations Declaration on the Rights of Indigenous Peoples and reconciliation.
  3. Inclusive and meaningful public engagement.
  4. Timely, evidence-based decisions reflecting the best available science and Indigenous knowledge.
  5. One project – one assessment, with the scale of assessment aligned with the scale and potential impacts of the project.

The seven crosscutting areas of change are (1) Addressing Cumulative Effects, (2) Early Engagement and Planning, (3) Transparency and Public Participation, (4) Science, Evidence and Indigenous Knowledge, (5) Impact Assessment (6) Partnering with Indigenous Peoples, and (7) Cooperation with Jurisdictions. The Discussion Paper does not directly engage with the various reports to which it is responding and there is no tabulated response in which the Discussion Paper summarizes the relevant recommendations and then provides the Government’s proposed response.

I will not provide either a detailed overview or a critical assessment of the Discussion Paper but I will aim to touch upon the same key issues highlighted in my review of the NEB expert panel report: alignment between energy and climate policy; an independent energy information authority; governance; project decision making; and relationships with Indigenous people.67

The Discussion Paper does not directly respond to the call for a better alignment between energy policy and the role of a national energy regulator. However, the section on “addressing cumulative effects” may seem to give a nod in this direction insofar as the Paper contemplates the use of national environmental frameworks, strategic environmental assessments (SEAs) and regional assessments as a way of addressing cumulative impacts. For example, the paper suggests that “a strategic assessment of the Pan-Canadian Framework [for Clean Growth and Climate Change] would provide guidance on how to determine how life-cycle greenhouse gas emissions associated with individual projects are assessed”.68 What is missing however is any articulation of a clear link between Canada’s international GHG reduction obligations and the role of an energy regulator. I think that the greater use of SEAs is to be applauded69 but it is not clear to me that the suite of measures referenced under the heading of cumulative impacts will lead to better alignment between energy policy and the role of a national energy regulator. In other words, from my perspective, the issues of energy and climate policy alignment and the alignment of policy with the decisions of a national energy regulator are different from the issues associated with landscape level cumulative impacts (which most of necessity deal with a range of ecological and economic issues that go far beyond climate change issues).

On the specific issue of an energy information agency the government does seem to be receptive to the Expert’s panel’s recommendations insofar as the Paper suggests that the Government is considering a “a separate model to deliver timely and credible energy information to Canadians.”70 The government is perhaps less impressed by the Expert Panel’s proposal for a new national energy regulator such as the CETC. Thus the Discussion Paper refers to amending NEBA rather than creating a new agency. However, the Paper does seem to favour many of the organizational and governance changes recommended by the Expert Panel including: separating the roles of Chief Executive Officer and Chairperson of the Board; creating a corporate-style executive board to lead and provide strategic direction to the NEB organization; creating separate Hearing Commissioners to review projects and provide regulatory authorizations; enhancing the diversity of the Board and Hearing Commissioners; increasing Indigenous representation among the Board and Hearing Commissioners and requiring expertise in Indigenous knowledge; and eliminating the residency requirement for Board and Hearing Commissioners.71 The Paper does not endorse the suggestion of splitting the Board and moving the executive of the Board to Ottawa.72

Neither does the Paper seem to endorse the concept of a two-step project decision-making process although the paper does reference the need for “a new early planning phase led by proponents with clear direction from government” although perhaps this is better thought of as early engagement rather than a first step in in a two-step project review process.73 The Paper does favour joint assessments for major energy transmission, nuclear and offshore oil and gas projects74 as well as final political approval for major projects,75 although it also contemplates that the NEB will have the authority to make final decisions on “certain functions such as import/export licenses, and variances or transfers to certificates and licenses” (presumably on the basis that these do not raise significant policy issues).

The Discussion Paper deals with relationships with Indigenous people under all\most of the headings. Thus, Indigenous knowledge is referenced under the heading of cumulative impacts and dealt with extensively in the section entitled “Science, Evidence and Indigenous Knowledge”76 while the section on early engagement and planning refers to “direct engagement between Crown representatives and Indigenous peoples to discuss and understand potential project impacts to facilitate early planning and issue identification”.77 This seems to be directly responsive to the recommendations of the NEB Expert Panel Report. The Discussion Paper anticipates that the relevant legislation will “explicitly require assessment of impacts on Indigenous peoples”78 and, with respect to consultation, will establish “a single government agency responsible for impact assessment and for coordinating consultations with Indigenous peoples for federally designated projects”.79 This proposition is re-framed a few pages later in subtly different terms as a statement to the effect that the Government is considering creating “A single government agency with increased capacity to coordinate consultation and accommodation for federally designated projects.”80 While neither passage explains what is meant by the term “federally designated project” the proposal is similar to that advocated by the NEB Expert Panel Report81 as is the goal of “[c]larifying roles for consultation and accommodation in regulatory processes to ensure the honour of the Crown is respected”.82  Perhaps of most interest is the statement that the Government will aim at early engagement and participation “based on recognition of Indigenous rights and interests from the outset, seeking to achieve free, prior and informed consent through processes based on mutual respect and dialogue”.83 The language adopted here clearly owes something to the relevant articles of the UN Declaration on the Rights of Indigenous Peoples84 although it is a softer version of FPIC than the formulations found in that text.85 Much like the Expert Report however, the Discussion Paper seems to duck some of the hard issues such as the scope for the application of the doctrine of justifiable infringement in the context of linear projects, and the role of the NEB in assessing (or not) whether the Crown has discharged its obligation to consult and accommodate. Finally, the Discussion Paper does not specifically address the Expert Panel’s proposal to create an Indigenous Major Project office but it implicitly replaces that with the suggestion that the Government is considering “Strengthening the approach for Indigenous peoples to build capacity for participation in processes and help coordinate Crown consultations”.86

8. Conclusions

The current federal government came to power committed to subjecting federal assessment and project review rules and regulations to scrutiny and reform. The government had already reached the conclusion that Canadians had lost faith in these processes including a loss of faith in the national energy regulator, the NEB. Yet, as the Discussion Paper concedes not all is broken, and indeed as the Expert Review Panel concedes, the NEB actually enjoys a world-class reputation as a regulator. Going forward therefore the challenge must be to build on those elements that are working well and to strengthen or replace those parts that are broken. Seen in this light it is perhaps then not surprising that the Discussion Paper is considerably more cautious than the Expert Review Panel in its proposals. Thus the Discussion Paper does not suggest replacing the NEB with a  new entity; it does not suggest adoption of a two-step project review; and neither does it endorse the significant number of new offices (including an Indigenous Major Projects Office, a Public Intervenor Office and a Landowners’ Ombudsperson) recommended by the Expert Review Panel. Nor is it clear from the Paper how serious the government is about a closer integration between climate and energy policy and many of the details are missing with respect to important aspects of the envisaged relationship between government and indigenous peoples. Much work therefore still remains. But it does appear that the government is seriously considering others of the Panel’s proposals with respect to matters such as an energy information office and the governance of the Board.  I remain somewhat sceptical of some of these proposals absent more cogent argumentation. And that points to a final concern with respect to the Discussion Paper which is that it fails to provide supporting reasons for its choices as between those recommendations the government appears to be favouring and those that it seems more inclined to reject. It will be hard to regain the trust of Canadians in the proposed new assessment and review regime unless the government’s final decisions are accompanied by more robust and rigorous reasons for the choices that have been made.

* Nigel Bankes, Professor of Law, The University of Calgary and Adjunct Professor, University of Tromsø. Thanks to Stéphanie Gagné, Legal Intern, Canadian Gas Association for her assistance with the footnotes.

  1.   Expert Panel on the Modernization of the National Energy Board, Forward, Together: Enabling Canada’s Clean, Safe, and Secure Energy Future (Ottawa: 2017), online: <https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/pdf/NEB-Modernization-Report-EN-WebReady.pdf> [Expert Panel Report].
  2.   This article draws heavily on a previously published blog post: Nigel Bankes, “The NEB Modernization Report” (14 June, 2017), online: ABlawg <http://ablawg.ca/wp-content/uploads/2017/06/ Blog_NB_NEB_panel_recommendations.pdf>.
  3.   Expert Panel Review of Environmental Assessment Processes, Building Common Ground: A New Vision for Impact Assessment in Canada (Ottawa: CEAA, 2017), online: <https://www.canada.ca/en/services/environment/conservation/assessments/environmental-reviews/environmental-assessment-processes/building-common-ground.html>.
  4.   Standing Committee on Fisheries and Oceans, Review of changes made in 2012 to the Fisheries Act: enhancing the protection of fish and fish habitat and the management of Canadian fisheries (Ottawa: February 2017), online: <http://www.ourcommons.ca/Committees/en/FOPO/StudyActivity?studyActivityId=9156509>.
  5.   Report of the Standing Committee on Transport, Infrastructure and Communities, A Study of the Navigation Protection Act (Ottawa: March 2017), online: <http://www.ourcommons.ca/DocumentViewer/en/42-1/TRAN/report-11>.
  6.   Government of Canada, Environmental and Regulatory Review, Discussion Paper (Ottawa: June 2017), online: <https://www.canada.ca/content/dam/themes/environment/conservation/environmental-reviews/share-your-views/proposed-approach/discussion-paper-june-2017-eng.pdf>[Discussion Paper].
  7.   In doing so, Minister Carr was following the instructions contained in his mandate letter from Prime Minister Trudeau, Office of the Prime Minister, Minister of Natural Resources Mandate Letter, online: <http://pm.gc.ca/eng/minister-natural-resources-mandate-letter>.
  8.   Government of Canada, National Energy Board (NEB) Modernization Expert Panel: Draft Terms of Reference, online: <https://www.canada.ca/en/services/environment/conservation/assessments/environmental-reviews/share-your-views/draft-terms-reference-neb.html>.
  9.   National Energy Board Modernization Expert Panel, Terms of Reference, online: <http://www.neb-modernization.ca/terms-of-reference>.
  10.   National Energy Board Act, RSC 1985, c N-7.
  11.   Canada Oil and Gas Operations Act, RSC 1985, c O-7.
  12.   United Nations Declaration on the Rights of Indigenous Peoples, 107th plenary meeting, 2007, UN Doc A/ 61/ L.67, online: <http://www.un.org/esa/socdev/unpfii/documents/DRIPS_en.pdf> [UN Declaration].
  13.   Expert Panel Report, supra note 1 at 6-9.
  14.   Expert Panel Report, ibid at 9.
  15.   Expert Panel Report, ibid at 10-15.
  16.   Expert Panel Report, ibid at 16.
  17.   Expert Panel Report, ibid at 19-20.
  18.   Expert Panel Report, ibid at 20.
  19.   Expert Panel Report, ibid at 21.
  20.   Expert Panel Report, ibid at 21-26.
  21.   Expert Panel Report, ibid at 31-87.
  22.   Expert Panel Report, ibid at 33, Recommendation 1.1.1.
  23.   Expert Panel Report, ibid at 35, Recommendation 1.2.1.
  24.   Expert Panel Report, ibid at 34.
  25.   Canadian’s Premiers, Canadian Energy Strategy (Ottawa: July 2015), online: <https://www.canadaspremiers.ca/phocadownload/publications/canadian_energy_strategy_eng_fnl.pdf>.
  26.   Examples include the provisions of the Ontario Energy Board Act, SO 1998 c 15, s 27 dealing with ministerial directions in relation to energy conservation programs, while s 3 of British Columbia’s Utilities Commission Act, RSBC 1996, c 473 offers a more general example.
  27.   Expert Panel Report, supra note 1 at 36.
  28.   I acknowledge that the NEB has done some of this work. See, for example, National Energy Board, Canada’s Renewable Power Landscape: Energy Market Analysis (Calgary: NEB, 2016), online: <https://www.neb-one.gc.ca/nrg/sttstc/lctrct/rprt/2016cndrnwblpwr/index-eng.html>.
  29.   Expert Panel Report, ibid at 62, Recommendation 3.3.1.
  30.   Expert Panel Report, supra note 1 at 64.
  31.   The Expert Panel Report does offer (ibid at 17) a quip by way of analogy with the famed Holy Roman Empire i.e. that none of the elements of its title are really true. The point is somewhat forced. The NEB is national in scope even though it deals only with a portion of energy infrastructure and trade. The NEB is concerned with energy even though it does not deal with the entirety of energy value chain. And the NEB is a board, at least as that term is understood in administrative law (where it is a synonym for tribunal).
  32.   The former provincial regulator, citing security concerns, hired a private security firm who then “listened in” on intervenors’ meetings. For detailed discussion see Alice Woolley, “Enemies of the State? The Alberta Energy and Utilities Board, Landowners, Spies, a 500kV Transmission Line and Why Procedure Matters” (2008) 26 Journal of Energy and Natural Resources Law 234.
  33.   Responsible Energy Development Act, SA 2012, c R-17.3.
  34.   Expert Panel Report, supra note 1 at 17.
  35.   Expert Panel Report, ibid at 36-37, Recommendation 1.4.1 at 57-58 and Recommendation 3.1.1.
  36.   Expert Panel Report, ibid at 38-39 and Recommendation 1.5.1.
  37.   Expert Panel Report, ibid at 41, Recommendation 1.5.2. The concept of an “independent Commissioner” needs much more justification. What does “independence” mean in this context? The rule of law requires that any joint review panel discharge its statutory obligations within the framework of whatever combination of statutes under which it is operating. The independent Commissioner cannot be free of this obligation. And if all that the Panel means by this term is that the independent Commissioner should not have an institutional link with either CEAA or the national energy regulator it needs to articulate what additional value this proposal will add to the Panel’s recommendations on the diversity of hearing Commissioners.
  38.   And the opportunities for litigation in the current scheme in which the Board makes a recommendation to the Governor in Council are already legion. For two examples see Gitxaala Nation v Canada, 2016 FCA 187 (Northern Gateway Project) and the most recent case management decision in the ongoing challenges to the approval of the TransMountain expansion project: Tsleil-Wautoth Nation v AG Canada, 2017 FCA 128. In the latter decision Justice Stratas summarizes as follows at paras 2 and 5: Before the Court are fifteen applications for judicial review, now consolidated, in which, collectively, twenty-seven parties seek to quash certain administrative decisions approving the Trans Mountain Expansion Project. The decisions are a Report dated May 19, 2016 by the National Energy Board, purportedly acting under section 52 of the National Energy Board Act, RSC 1985, c N-7 and the Order in Council, PC 2016-1069, dated November 29, 2016 and made by the Governor in Council… These consolidated applications have been progressing quickly. In the space of roughly three months, counsel have worked hard getting the matter ready for hearing, guided by 3 sets of detailed reasons, 8 orders and 14 directions (including the reasons and order on these motions).
  39.   Expert Panel Report, ibid at 36.
  40.   Expert Panel Report, ibid at 36 (emphasis added).
  41.   Tsilhqot’in Nation v British Columbia, 2014 SCC 44.
  42.   Expert Panel Report, supra note 1 at 17 contains, I think, the only acknowledgement of the tolls and tariffs jurisdiction of the NEB.
  43.   For the NEB Komie North report see National Energy Board, NOVA Gas Transmission Ltd, GH-001-2012, online: <https://apps.neb-one.gc.ca/REGDOCS/Item/Filing/A50255>.
  44.   For the NEB North Montney Report see National Energy Board, NOVA Gas Transmission Ltd, GH-001-2014, online: <https://apps.neb-one.gc.ca/REGDOCS/Item/Filing/A69520>.
  45.   Jobs, Growth and Long-term Prosperity Act, SC 2012, c 19.
  46.   See Gitxaala Nation v Canada, supra note 37.
  47.   Expert Panel Report, supra note 1 at 36 and Recommendation 1.4.1.
  48.   Expert Panel Report, ibid at 37.
  49.   Expert Panel Report, ibid at 54 and Recommendation 2.4.1.
  50.   Expert Panel Report, ibid at 51.
  51.   Expert Panel Report, ibid at 66, Recommendation 3.4.3.
  52.   Expert Panel Report, ibid at 52-53 and Recommendation 2.3.1.
  53.   Expert Panel Report, ibid at 64, Recommendation 3.4.1.
  54.   Expert panel Report, ibid at 80 and Recommendation 5.2.2.
  55.   Expert Panel Report, ibid at 76.
  56.   It is difficult for a regulator to discharge both its quasi-judicial responsibilities as well the quasi-fiduciary duties associated with the honour of the Crown: Quebec (Attorney General) v Canada (National Energy Board), [1994] 1 SCR 159.
  57.   Expert Panel Report, ibid at 51.
  58.   Expert Panel Report, ibid at 51.
  59.   Expert Panel Report, ibid at 51.
  60.   Chippewas of the Thames First Nation v Enbridge Pipelines Inc et al, 2015 FCA 222.
  61.   Hamlet of Clyde River et al v Petroleum Geo-Services Inc (PGS) et al, 2015 FCA 179.
  62.   Rio Tinto Alcan Inc v Carrier Sekani Tribal Council, 2010 SCC 43.
  63.   See Nigel Bankes, “The Supreme Court of Canada Grants Leave in Two Cases Involving the National Energy Board and the Rights of Indigenous Communities” (2016) 4:2 Energy Regulation Quarterly.
  64.   Discussion Paper, supra note 6 at 3.
  65.   Ibid at 6.
  66.   Ibid at 7.
  67.   This section of the paper draws on Nigel Bankes “The Federal Response to the Report of the Expert Panel on the Modernization of the National Energy Board” (14 July 2017), online: ABlawg, <http://ablawg.ca/wpcontent/uploads/2017/07/Blog_NB_Discussion_Paper.pdf>.
  68.   Ibid at 9.
  69.   See Meinhard Doelle, Nigel Bankes & Louie Porta, “Using Strategic Environmental Assessments to Guide Oil and Gas Exploration Decisions in the Beaufort Sea: Lessons Learned from Atlantic Canada” (2013) 22:1 RECIEL 103 – 116.
  70.   Discussion Paper, supra note 6 at 20.
  71.   Ibid at 20.
  72.   Ibid at 20.
  73.   Ibid at 18. The paper also references a desire to identify an “initial list of issues” on which feedback should be sought.
  74.   Ibid at 13.
  75.   Ibid at 18: “Decision making retained by Minister(s) or Cabinet based on whether the project is in the public interest, to ensure accountable government”.
  76.   Ibid at 12.
  77.   Ibid at 10.
  78.   Ibid at 13 and repeated at 18.
  79.   Ibid at 13.
  80.   Ibid at 15.
  81.   Ibid at 15. In the context of the duty to consult one would have thought that a federally designated project should be any project where the federal Crown has knowledge, real or constructive, of the potential existence of an Aboriginal right or title and contemplates federal conduct that might adversely affect that right or title: Haida Nation v British Columbia (Minister of Forests), 2004 SCC 73 at para 35. The decision of the BC Supreme Court in Coastal First Nations v British Columbia (Environment), 2016 BCSC 34 suggests that neither level of government will be able to pass off its consultation obligations to another level of government by, in this case “designating” a project as federal. A project is federal for this purpose if federal statutory powers are engaged.
  82.   Ibid at 15.
  83.   Ibid at 15.
  84.   UN Declaration, supra note 12.
  85.   Compare the formulation here “seeking to achieve FPIC” with that found in Article 19 and 32(2) of the UN Declaration, ibid.
  86.   Discussion Paper, supra note 6 at 20.

 

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