The National Energy Board

The Rt. Hon. John Diefenbaker opened the 1959 Parliamentary Session with a promise to his MPs: "...at the earliest opportunity you will be invited to authorize the establishment of a national energy board to ensure, so far as it lies within the jurisdiction of Parliament, Canada's energy resources are used effectively and prudently, to the best advantage of Canadians."

Today the National Energy Board (NEB) is an independent federal regulatory agency that regulates the Canadian energy industry. It reports through the Minister of Natural Resources to the Parliament of Canada. Its primary responsibilities include:

• ·      Inter-provincial and international oil and gas pipelines and power lines,
• ·      Export and import of natural gas under long-term licenses and short-term orders,
• ·      Oil exports under long-term licenses and short-term orders      

The first NEB appointees were lead by the chairman of the Alberta Oil and Gas Conservation Board, Ian MacKinnon, a personal friend of then Alberta Premier Earnest Manning.

The first order of business was to create the National Energy Board Act.

The very busy NEB grew from five to eleven members by 1984. In it’s early years the NEB was supportive and protective of Canadian economic and environmental interests; it rejected several applications.

The Supreme Court had to deal with some shenanigans in 1976 when NEB Chair Marshall Crowe, at one time a member of the Arctic Gas management committee, the very company applying to build a gas pipeline to the Mackenzie Delta, got himself on the Arctic Gas Project review panel. A new panel was created and after a two year delay the application was reviewed and then rejected for environmental reasons with the added recommendation that construction in the Mackenzie Valley should be put on hold for at least ten years to allow for native land claims to be settled.

1981 - The National Energy Board Act is amended to include provisions for appropriating land for a pipeline right-of-way.

1982 - The Canada Oil and Gas Act is proclaimed. It includes subsidies for exploration on federally owned oil and gas properties in the North and offshore.

1991 - Finance Minister Michael Wilson announced the move of the National Energy Board from Ottawa to Calgary in his budget speech.

The NEB and various Federal Governments have often come to different conclusions. Prime Minister Pierre Trudeau created the National Energy program without NEB input. Today, we have a Federal Government that is interfering with the NEB as it processes the Enbridge Northern Gateway Pipeline application. Industry complains bitterly that the regulatory process is hurting Canadians: “The biggest single impediment is the regulatory process” says former TransCanada Corp CEO Hal Kvisle. Also, First Nations groups are not convinced that the NEB will take their concerns seriously.

I don’t envy the task that is before the NEB. Canada is the only country in the 27-member International Energy Agency without strategic petroleum reserves and the only one with no plan to deal with a sudden international oil crisis, "even though one is almost certain to hit soon," says University of Alberta political economist Gordon Laxer.

Having a plan in place would surely help the NEB make decisions that are truly in Canada’s best interest.

The biggest challenge of the Northern Gateway Pipeline lies with Alberta.Their resource is landlocked and they cannot behave like a lone ranger. Premier Redford appears to understand this very well and has called for a discussion on Canada’s energy policy.

Ultimately, the NEB, has to stick to its mandate.

The purpose of the NEB is to regulate pipelines, energy development and trade in the Canadian public interest. The NEB is accountable to Parliament through the Minister of Natural Resources Canada.

Parliament is accountable to Canadians first; not industry, not the PMO, not just one province.

The Business Piece for Pipelines

 Two of Canada’s most powerful energy companies, Kinder Morgan (KMP-N85.50-0.20-0.23%) and Enbridge (ENB-T37.84-0.16-0.42%) are laying competing plans to pipe and ship massive volumes of crude to Asia. Their projects could, for the first time, free the Canadian energy industry from its dependence on the U.S. market while at the same time fattening profit margins.

Enbridge like any other corporation has a vision: we want to be the leading energy delivery company in North America. We deliver energy and we deliver value to shareholders.This is reflected in our growing portfolio of oils sands pipeline projects…to diversify and sustain growth in the longer term in order to maintain Enbridge’s historical growth rate.

And they continue to grow. For the last 10 years Enbridge shareholders have enjoyed increased dividends year after year. Same for Kinder Morgan. If you own this stock, you have received an increase in dividend value year after year. This is the twelfth consecutive year the Board of Directors has raised the dividend. Pretty amazing considering the economic turmoil we've been experiencing.How do they do it? A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases.I guess that means more and more pipelines.

Who buys the crude in the pipelines flowing out of Alberta now? Some makes its way to a few Canadian refineries, less gets to the Port of Vancouver and is shipped to Asia but most goes to the US for refining for their use or onto the world market (via the Gulf).

There is a short term glut of oil heading toward Cushing, Oklahoma which is a hub for oil activities. The glut has occurred because the market is being flooded with Bakken shale oil, rapid expansion of the oil sands, and the shut down of some pipelines and refineries. At the same time North American demand for oil is dropping, while Asian demand is rising even faster.  Asia demand will be there for a long, long time.

How could they anticipate the 2008 meltdown,the end of the Iraq war, or refinery shutdowns?  Any good business has 5, 10, even 15 year strategic plans. Oil companies have planned badly and created the sudden need to get their product to Asia.

Well, it is the job of business to anticipate all kinds of scenarios. If they don't they soon find themselves out of business.This has played out in the solar industry, as prices for panels, cells, etc. have plummeted more than 50% in the past five years due to a number of unplanned for scenarios. Solar companies are going belly up faster than the fish in the Kalamazoo River did after the recent spill there. But that doesn't happen to oil companies. Business continues unabated, shareholder value increases, the subsidies roll on, executives receive their bonuses, lobbyist continue to lobby, and governments defend them.

Why continue to flood the market with oil sands products when there is a glut? Instead of doing the logical thing and slowing things down they cast there eyes to oil hungry Asia and come up with what any average person would consider a crazy scheme to disregard history (First Nations rights to their lands), disregard the fragile BC rainforest,the commercial fisheries, disregard a moritorium on tanker traffic, and disregard the possibility of shipping oil to Eastern Canada to deal with a short term problem. Apparently our reliance on the oil economy means that any slow down will have serious consequences.

How many pipelines is too many pipelines?

A few years ago the names TransCanada, Kinder Morgan and Enbridge would not have meant much to most North Americans. Where Middle Eastern Wars, high oil prices, economic collapse, devastating oil spills (Exxon Valdez, Gulf of Mexico) failed to stir more than water cooler conversation with your average citizen, recently proposed pipelines have ignited a fuse that will not be stomped out.

Pipelines are not at all like the "canary in a coal mine". Afterall, most of us don't have close relations with canaries and we have never set foot in a coal mine. But pipes, we are all very familiar with. If your're living under a roof, you eventually become intimately acquainted with pipes, usually pipes that have burst, leaked, frozen, or cracked and left you with a mess. So when there is talk about pipelines, we intuitively know that things go wrong.Telling us anything different just won't cut it.

Pipeline companies appear to have not taken this natural defensiveness seriously enough, because ultimately this is where the battle about bitumen will happen.

After the Keystone XL rejection?/delay, pipeline companies are battling back. They have a big task ahead of them. The fact that pipelines have been around for a very long time, means there is lots of evidence regarding the behaviour of pipeline companies. Take a look at their websites and witness the worst kind of soothing, father knows best, drivel about how much they care. Then go to YouTube and search pipelines. Actions speak louder than words and there is no industry that suffers from a more complete disconnect here than the oil industry.

Enbridge's Values

We operate with integrity, honesty and transparency in all of our dealings with stakeholders. We operate to the highest ethical standards with our customers, shareholders, employees, partners, landowners, regulators and others. We communicate openly and honestly.

The Big Oil Picture - One Puzzle Piece at a Time

When I was an undergrad one of my favourite ways to decompress was to do a jigsaw puzzle. I bought a new one each term and there it would sit until I needed the distraction. (ok, sometimes it was a major way to procrastinate too!) It has recently dawned on me that the entire oil market is one huge puzzle with most of us focused on just a few pieces: the price we pay at the pump, easy access and maybe, the pollution we cause when we burn it. Depending on your outlook, you may also be concerned about various foreign wars/interventions in oil producing areas.

With each passing decade more of the world increasingly functions on the use of gasoline and diesel. The amount of conventional oil in the Middle East far outstrips what is available anywhere else on the Earth.We don’t know exactly how much oil there is in the Middle East because they are not transparent about anything. Conventional oil flows through a well without stimulation and through a pipeline without processing or dilution. It’s a relatively cheap process.

Global oil production appears to have leveled off. Our economies are based on continued access to cheap oil. There is not enough cheap conventional oil to go around these days.

World demand for oil continues to grow. China is experiencing a large-scale transition away from bicycles and mass transit toward private automobiles.So desperate has our need for oil become, and so willing are we to pay the necessary high price, we are now producing more and more oil from the difficult spots like the deep waters in the Gulf of Mexico, Alberta’s oil sands and shale oil deposits. The oil sands are a thick, viscous mixture of bitumen hydrocarbons combined with water, sand, heavy metals and clay. Not only is this a very expensive way to fill our tanks, it has opened a Pandora’s Box of associated hazards to our natural world and populations that depend on the largess of that natural world. We have a problem.

 China also needs to provide lots of jobs to its citizens. Not interested in just importing ready to use oil and gas China wants to do the upgrading and refining within its’ borders. This means the bulk of the jobs, and the profits from oil production will go to the Chinese. The international corporations who are gaming the oil and gas sector have no particular loyalty to any nation, other than the nation of shareholders and executives they represent.

The Keystone XL and Northern Gateway Pipeline applications are providing an opportunity for Canadians to decide how best to deal with the land locked resource we have.

Regardless of how the Harper government tries to dominate and (re?)direct the oil conversation Canadians will collaborate like no other time in history to have a say in this new oil dilemma. We all want to build the puzzle together. What remains to be seen is how responsive our business and political leaders will be to this new era of engagement.