The National Energy Board (the NEB or the Board) is an independent federal regulatory agency that was established in 1959. The Board regulates the following specific aspects of the energy industry:

the construction and operation of interprovincial and international pipelines;
pipeline traffic, tolls and tariffs;
the construction and operation of international and designated interprovincial power lines;
the export and import of natural gas;
the export of oil and electricity; and
Frontier oil and gas activities.

Other responsibilities include:

providing energy advice to the Minister of Natural Resources in areas where the Board has expertise derived from its regulatory functions;
carrying out studies and preparing reports when requested by the Minister;
conducting studies into specific energy matters;
holding public inquiries when appropriate; and
monitoring current and future supplies of Canada's major energy commodities.

In addition to its responsibilities under the National Energy Board Act (NEB Act), the Board also has responsibilities under the Canada Oil and Gas Operations Act, the Canadian Environmental Assessment Act, the Northern Pipeline Act, and certain Provisions of the Canada Petroleum Resources Act. As a result of the Canada Transportation Act, which came into effect on 1 July 1996, the Board's jurisdiction has been broadened to also include pipelines that transport commodities other than oil or natural gas.

The Board's corporate purpose is to promote safety and security, environmental protection and efficient energy infrastructure and markets in the Canadian public interest within the mandate set by Parliament in the regulation of pipelines, energy development and trade. This principle guides the Board in carrying out and interpreting its regulatory responsibilities. The Board is accountable to Parliament, to which it reports, through the Minister of Natural Resources.

The Board deals with approximately 750 applications annually. For major applications, the Board holds public hearings where applicants and interested parties can participate. These hearings can be either written or oral proceedings and are usually held at locations across Canada where there is a particular interest in the application and which will be most affected by the Board's decision. Normally, a panel consisting of three Board Members is assigned to hear applications.

The Board operates as a court of record, very similar to a civil court. Its powers include the swearing in and examination of witnesses and the taking of evidence. Before a hearing, individuals, interest groups, companies and other organizations are given an opportunity to register as intervenors or interested parties and in this way actively participate in the process.

Why Was the National Energy Board Created?

In the early post-war years, western Canadian oil and gas resources were discovered and developed for interprovincial and international use. Important policy issues arose regarding the conditions for the construction of new pipelines and the approval of long-term exports, particularly of natural gas.

The 1957 government of Prime Minister Diefenbaker set up a Royal Commission on Energy to examine whether a national energy board should be created and what authority it should exercise. The Commission in 1959 recommended that a national energy board be established. Prior to the tabling of its report, the 1955 Royal Commission on Canada's Economic Prospects had also recommended that a national energy authority be created to regulate energy exports.

The government acted promptly on the Commission's recommendations, drafting a legislative proposal and introducing it to Parliament in May 1959. As a result, the National Energy Board Act was proclaimed in November of the same year. The Act transferred to the new Board responsibility for pipelines from the Board of Transport Commissioners and responsibility for oil, gas and electricity exports from the Minister of Trade and Commerce. In addition, it granted the Board responsibility for regulating tolls and tariffs and defined its jurisdiction and status as an independent court of record, an important new factor.

Since then, the Board has developed its expertise on energy matters and enjoys a respected national and international reputation. In 1991, the Board relocated from Ottawa, Ontario to Calgary, Alberta. In 1994, legislative amendments expanded the Board's jurisdiction to include decision making authority for Frontier lands [PDF: 226 KB] not administered through provincial/federal management agreements.

Who Is the National Energy Board?

Under the NEB Act, up to nine Board Members may be appointed by the Governor in Council. A Member is appointed initially for a seven-year term. Reappointment may be for seven years or less until the age of seventy. In addition, up to six temporary Board Members may also be appointed subject to terms and conditions set out by the Governor in Council. Members typically have a wide range of government and energy industry experience.

The Governor in Council designates the Chairman and Vice-Chairman of the Board from among the Members. The Chairman is the chief executive officer.

Members are assisted by approximately 280 employees who possess the diverse skills required to support the work of the Board. Employees may be financial analysts, computer specialists, economists, engineers, environmentalists, geologists, geophysicists, communications specialists, lawyers, human resource and library specialists or administrative staff.

What Are the Board's Responsibilities?

The Construction and Operation of Pipelines and Power Lines

Pipelines

Interprovincial and international oil and gas pipelines and additions to existing pipeline systems under federal jurisdiction require the Board's approval before they may be built. Public oral or written hearings are held for pipeline construction applications exceeding 40 kilometres in length or any other applications at the discretion of the Board. Pipelines which lie completely within the borders of a single province are regulated by that province's regulatory body.

In determining whether a pipeline project should proceed, the Board reviews, among other things, its economic, technical and financial feasibility, and the environmental and socio-economic impact of the project.

To ensure that engineering, safety and environmental requirements are met, the Board audits and inspects the construction and operation of pipelines. Since February 1987, Board inspectors have also been responsible for enforcing Part II of the Canada Labour Code, applying to the occupational safety and health of pipeline workers in the field.

The NEB shares responsibility with the Transportation Safety Board for incident investigation. The NEB investigates pipeline incidents to determine whether its regulations have been followed and if those regulations may need to be changed. The Transportation Safety Board investigates the cause and contributing factors. The NEB also monitors excavation activity by third parties near pipelines to ensure compliance with existing regulations.

See A Proposed Pipeline or Power Line Project: what you need to know - September 2004 [PDF: 1345 KB].

Power Lines

Most electric power lines and facilities fall within provincial jurisdiction. The Board authorizes the construction and operation of international power lines and designated interprovincial lines under federal jurisdiction.

In determining the suitability of an application, the Board reviews, among other things, the technical feasibility of the project, its effect on adjacent provinces and its environmental impact.

Almost all provinces bordering the U.S. have interconnections with neighbouring American utilities.

Environmental Protection

The Board's environmental responsibility includes ensuring environmental protection during the planning, construction, operation and abandonment of energy projects within its jurisdiction. When making its decisions, the Board may take into consideration environmental concerns related to air, land and water pollution, disturbance of renewable and non-renewable resources, the integrity of natural habitats, the disruption of land and resource use, and the protection of landowner rights.

Companies preparing an application to the Board are usually required to anticipate the environmental issues and concerns that the proposed project could create and to discuss these with all levels of government, public interest groups, and affected landowners.

If the project application is approved, the Board ensures that the company continues to protect the environment and public health and safety by auditing and inspecting the company's construction activities, the operation of its system, and the company's routine maintenance and monitoring procedures.

Environmental Assessment

Under the NEB Act, the Board is required to consider matters of public interest as they may be affected by the granting of an application. The Board has assumed a mandate for environmental protection as a component of the public interest. The Canadian Environmental Assessment Act (CEA Act) provides an additional mechanism to ensure that projects receive appropriate levels of assessment before they proceed. The CEA Act sets out uniform requirements for environmental assessments by all federal government departments and agencies. As a "responsible authority" under the CEA Act, the Board ensures that appropriate environmental assessments are conducted for projects under its jurisdiction, according to standards prescribed by the legislation.

Public Safety

Safety is a matter of primary public interest and has been included in the Board's mandate since 1959. The Board is responsible for ensuring companies comply with regulations concerning the safety of employees, the public, and the environment, as they may be affected by the design, construction, operation, maintenance and abandonment of a pipeline. For 35 years the Board has worked with CSA International to develop safety regulations and technical standards currently in effect for federally regulated pipelines.

In addition, through an agreement between the Board and Human Resources and Skills Development Canada, Board staff have been designated as Safety Officers for the occupational health and safety of pipeline company field staff. These health and safety duties are usually combined with other construction site and facility inspections.

Traffic, Tolls, and Tariffs

The Board regulates pipeline tolls and tariffs under its jurisdiction to ensure they are just and reasonable and that there is no undue discrimination in tariffs or services.

Pipelines under the Board's jurisdiction are divided into two groups: Group 1 consists of 10 major oil and gas pipeline companies and Group 2 encompasses the remaining smaller pipeline companies. This grouping tailors the degree of financial regulation to the extent of the public interest in a company's operations. To reduce the regulatory burden on smaller companies, the Board regulates three of the Group 1 pipelines and all of the Group 2 companies on a complaint basis. Under the complaint basis of regulation, the parties are encouraged to work out any problems with the pipeline company. If this is unsuccessful, a complaint may be filed with the Board.

When establishing tolls for the Group 1 companies, the Board traditionally examines their capital and operating costs to ensure that companies shipping oil or natural gas are protected from unjustified high transportation costs. Tolls set by the Board cover the cost of service plus a fair and reasonable return to investors.

Major toll applications normally warrant a public hearing. However, the requirement for lengthy and costly oral public hearings has been declining, in large part due to the advent of negotiated multi-year settlements. In 1994, the Board published its Guidelines for Negotiated Settlements of Traffic, Tolls and Tariffs [Document A0E4C1]. The guidelines are intended to facilitate a negotiated settlement process which will allow pipeline companies, producers, shippers, consumers, governments and other interested parties to resolve toll and tariff matters through consensus building and negotiation, without resorting to a lengthy hearing process. Any negotiated settlements must still be approved by the Board. Some of the largest pipeline companies regulated by the Board have reached multi-year incentive toll settlements with their stakeholders.

In 1994/95 the Board conducted a generic multi-pipeline cost of capital proceeding. Capital structure and rate of return on common equity for some Group 1 companies are set based upon an adjustment mechanism established in this proceeding. This mechanism has also helped to reduce the requirement for hearings.

A pipeline company's tariff contains the conditions under which transportation service is provided. The tariff includes conditions on accepting new shippers, on allocating capacity to shippers and on determining which position a prospective shipper will occupy on the waiting list for service.

The Board requires that pipeline companies operate according to the principle of "open access". This means that all parties must have access to transportation on a non-discriminatory basis. In addition, tolls for services provided under similar circumstances and conditions with respect to all traffic of the same description, carried over the same route, must be the same for all customers. The Board conducts compliance audits as part of its monitoring responsibility.

The Export and Import of Energy

The Board regulates the following specific forms of energy:

Natural Gas

The export and import of natural gas is authorized by the Board under either long-term licences or short-term orders. Following a public hearing, long-term licences may be issued for up to 25 years subject to Governor in Council approval. Short-term orders for a maximum period of two years can be issued without a public hearing and do not require Governor in Council approval.

Natural gas exports occur at several major export points along the Canada/United States border. The volume exported depends upon market supply and demand as well as available pipeline capacity. Canada's imports of natural gas are relatively small, compared to its exports, and are used primarily to serve markets in southern Ontario and British Columbia.

Propane, butanes and ethane are by-products extracted from natural gas processing and refinery processing of crude oil. Board approval is required for export, usually in the form of a short-term export order. Ethylene is a compound produced by cracking ethane and does not require approval for export purposes. All four products are classified as natural gas.

The Board monitors the supply and demand of natural gas, including the performance under existing export authorizations. This ensures that the quantity of gas exported does not exceed the surplus remaining after Canadian requirements have been met.

Oil

The Board authorizes oil exports by issuing short-term orders for periods less than one year for light crude oil and less than two years for heavy crude oil. These exports occur under short-term orders due to characteristics of the oil market. The Board does not regulate oil imports.

Canada produces enough oil to meet its own needs and has been a net exporter of oil for some time; however, oil is imported to supply both the Atlantic Provinces and Quebec. Most Canadian oil exports are to the American Midwest and Montana markets. Smaller volumes are shipped to the U.S. West and Gulf coasts.

The Board monitors the supply and demand of oil, as it does with natural gas, to ensure quantities exported do not exceed the surplus remaining after Canadian requirements have been met.

Electricity

Normally, permits are issued to export electricity without a public hearing unless the Governor in Council, after recommendation by the Board, designates a particular application for licensing or certification. The Board does not regulate electricity imports.

Issues which the Board considers when making its decisions may include the effect of exports on adjacent provinces, the environment and fair market access for Canadians.

The amount of electricity exported is influenced by several factors. First, the amount exported cannot exceed the limits set by the Board. Secondly, the weather plays an important role because approximately 70 per cent of exports are generated by hydro-electric facilities; low water levels in Canada reduce the amount of power generated and the amount available for export. Strong domestic demand can also reduce quantities available for export. Finally, the economics of export transactions influence the amount sold.

Frontier Oil and Gas Activities

The Board regulates Frontier lands and offshore areas not covered by provincial/federal management agreements.

Responsibilities include the regulation of oil and gas exploration, development and production, enhancing worker safety, and protecting the environment. Other Frontier activities include the calculation of discovered and undiscovered hydrocarbon resources, the development of emergency environmental contingency plans, and fostering research programs which support and complement the Board's regulatory responsibilities.

Northern Pipeline Agency

The Board provides technical and administrative assistance to the Northern Pipeline Agency which, under the Northern Pipeline Act, has primary responsibility for overseeing the planning and construction of the Canadian portion of the proposed Alaska Natural Gas Transportation System by Foothills Pipe Lines Ltd.

Energy Studies and Advisory Function

When required, the Board conducts studies or research into energy matters to meet its regulatory responsibilities. The Board may also hold inquiries on its own initiative, when appropriate. With this knowledge and expertise, the Board reports to and advises the Minister of Natural Resources on energy issues.

See our Energy Reports.

Cooperation with Other Agencies

The NEB co-operates with other agencies to reduce regulatory overlap and provide more efficient regulatory services.

Alberta Energy and Utilities Board ("AEUB")

The NEB has a Memorandum of Understanding (MOU) with the EUB on Pipeline Incident Response. The agreement provides for mutual assistance and a faster and more effective response by both boards to pipeline incidents in Alberta.

The NEB and the EUB maintained their commitment to using the common reserves database for oil and gas reserves in Alberta. Both boards are committed to developing more efficient methods for maintaining estimates of reserves and to exploring other opportunities for co-operation. Currently the Boards are working on a new assessment of gas resources in Alberta.

British Columbia Ministry of Energy and Mines (BCMEM)

The NEB and BCMEM maintained their commitment to using a common reserves database for oil and gas reserves in British Columbia. Both boards are committed to developing more efficient methods for maintaining estimates of reserves and to exploring other opportunities for co-operation.

Canada-Newfoundland and Labrador Offshore Petroleum Board (C-NLOPB) and
Canada-Nova Scotia Offshore Petroleum Board (C-NSOPB)

The Chairs of the NEB, the C-NLOPB and the C-NSOPB, together with executives from the Newfoundland, Labrador and Nova Scotia Departments of Energy and NRCan, form the Oil and Gas Administrators Advisory Council (OGAAC). The OGAAC membership discusses and decides on horizontal issues affecting their respective organizations to ensure convergence and collaboration on oil and gas exploration and production issues across Canada. The NEB, C-NLOPB and C-NSOPB staff also work together to review, update and amend regulations and guidelines affecting oil and gas activities on what are know as Accord Lands. These are offshore areas for which Accords have been signed with the Government of Canada regarding petroleum resources management and revenue sharing.

NEB staff also provides technical expertise to NRCan, C-NOLPB and C-NSOPB on technical matters of mutual interest, such as reservoir assessment, occupational safety and health, diving, drilling and production activities.

Canadian Association of Members of Public Utility Tribunal (CAMPUT)

CAMPUT is a non-profit organization of federal, provincial and territorial boards and commissions which are responsible for the regulation of the electric, water, gas and pipeline utilities in Canada. Members sit on the executive committee of the association, promoting the education and training of members and staff of public utility tribunals. The NEB also provides staff support to CAMPUT in the form of information provision and assistance in conference organization. During 2003, the NEB co-hosted the annual CAMPUT conference with the EUB. The conference, held in Banff, Alberta, was themed Markets in Transition - The Changing Face of Regulation.

Visit CAMPUT Web site.

Canadian Environmental Assessment Agency (CEAA)

NEB staff is actively engaged with CEAA matters, participating in CEAA's Senior Management Committee and acting as an observer on the Regulatory Advisory Committee. This involvement ensures effective co-ordination of regulatory responsibilities relating to environmental assessments.

Co-operation on the Environmental Impact Assessment and Regulatory Review of a Northern Gas Pipeline Project through the Northwest Territories

In 2002, the Board collaborated with other boards and agencies responsible for the environmental impact assessment and regulatory review of a proposed major natural gas pipeline through the Northwest Territories. This resulted in the Chairs of these boards and agencies releasing a Co-operation Plan which describes how they propose to co-ordinate their activities to ensure an efficient, flexible and timely process that reduces duplication and enhances public and northern participation in the review of a major pipeline application. The NEB's partners in the Plan include the Mackenzie Valley Land and Water Board, the Sahtu and Gwich'in Land and Water Boards, the NWT Water Board, the Mackenzie Valley Environmental Impact Review Board, the Environmental Impact Screening Committee and the Environmental Impact Review Board for the Inuvialuit Settlement Region, the Inuvialuit Game Council, the Inuvialuit Land Administration, the Canadian Environmental Assessment Agency, the Department of Indian Affairs and Northern Development, and observers from the Deh Cho First Nation, the Government of the Northwest Territories, and the Government of Yukon.

Human Resources and Skills Development Canada (HRSDC)

The NEB has an MOU with HRSDC to administer the Canada Labour Code for NEB-regulated facilities and activities and to co-ordinate these safety responsibilities under the COGO Act and the NEB Act.

Mackenzie Valley Environmental Impact Review Board (MVEIRB)

In late 2000, the NEB and the MVEIRB signed a joint MOU to establish a co-operative framework for environmental impact assessment in the Mackenzie Valley. In the case of transboundary pipeline projects, the NEB has responsibilities under both the Mackenzie Valley Resource Management Act and the CEA Act. This MOU facilitates the co-operation of two boards to reduce duplication and increase effectiveness of the environmental review process.

National Association of Regulatory Utility Commissioners (NARUC)

Board Members regularly participate in meetings of the U.S. NARUC, particularly with respect to developments in U.S. gas markets that may affect cross-border trade in natural gas.

Natural Resources Canada (NRCan)

In 1996, the NEB signed an MOU with NRCan to reduce duplication and increase co-operation between the agencies. This MOU covers items such as data collection, the enhancement of energy models and special studies. The MOU was renewed in January 2000.

Northern Pipeline Agency (NPA)

The NEB provides technical and administrative assistance to the NPA, which, under the Northern Pipeline Act, has primary responsibility for overseeing the planning and construction of the Canadian portion of the Alaska Natural Gas Transportation System by Foothills Pipe Lines Ltd.

Pipeline Technical Regulatory Authorities of Canada Council (PTRACC)

The NEB chairs a staff committee of federal and provincial technical regulators. PTRACC meets regularly throughout the year to discuss pipeline safety and environmental initiatives.

Transportation Safety Board of Canada (TSB)

While the NEB has exclusive responsibility for regulating the safety of oil and gas pipelines under federal jurisdiction, it shares the responsibility for investigating pipeline incidents with the TSB. The roles and responsibilities of each body with regard to pipeline accident investigations are outlined in a MOU between the two boards.

Yukon Territory Department of Economic Development (YDED)

The NEB continues to work with Yukon officials to facilitate the transfer of oil and gas regulatory responsibilities in accordance with the Yukon Accord Implementation Agreement. The Board provides expert technical advice to the YDED.

Cooperation with Other Countries

The Board regularly meets with policy advisors and regulatory authorities from a wide range of countries who are seeking advice on good regulatory practices. In the past few years, the Board has met with representatives from Argentina, Australia, Brazil, China, Columbia, France, India, Japan, Peru, Russia, the Ukraine and the United Kingdom. In addition, the Board has met with the International Energy Agency and has participated in World Bank seminars on good regulatory practices.

Comisión Reguladora de Energía (CRE) of Mexico and
U.S. Federal Energy Regulatory Commission (FERC)

In September 2003, a trilateral agreement was signed between the NEB, CRE and FERC in which the three agencies agreed to regularly share perspectives on regulatory approaches and to work on eliminating inconsistencies in regulation to the extent possible. The NEB, CRE and FERC have been meeting three times a year to pursue these objectives.

It was at the last trilateral meeting, in May 2004, that the NEB and FERC signed a Memorandum of Understanding to enhance interagency coordination. This agreement reinforces the existing cooperative relationship and further commits each agency to work together to the extent possible within our respective legal mandates to harmonize our regulatory approaches to cross-border projects.

Our History and Responsibilities

What Is the National Energy Board?