The National Energy Board (NEB) is taking a page from the U.S. enforcement playbook by imposing monetary fines to enforce safety and environmental laws. On June 29, 2012, the Parliament of Canada passed the Budget Implementation Act amending the National Energy Board Act (the NEB Act) to give NEB authority to establish a system of Administrative Monetary Penalties. The new regulations are expected to be in place by July 2013.
NEB is an independent federal agency responsible for regulating pipelines, energy development and trade in Canada. NEB regulates approximately 71,000 kilometers of pipelines across Canada. In the United States, the Pipeline and Hazardous Materials Safety Administration has well-established procedures that impose financial penalties for violations of federal standards, and recent legislation increased the maximum penalties the agency can impose. NEB has not used monetary fines for enforcement to date.
The NEB Act established the maximum penalties at $25,000 per violation for individuals, and $100,000 for companies, municipalities and nongovernmental organizations. NEB is proposing that penalties be calculated in two parts: a baseline penalty for a violation and an adjustment based on aggravating or mitigating factors. Each day of continued noncompliance will be considered a separate violation for which a separate penalty can be issued. Penalties can be issued for violations related to the design, construction, operation, maintenance and abandonment of pipelines and power lines. In addition, separate penalties under the Canadian Environmental Assessment Act of up to $400,000 can be imposed for any company that fails to meet the special conditions established by regulators following an environmental assessment of a new project.
The use of administrative monetary penalties will be coupled with heightened inspection and enforcement activity fueled by NEB’s increased budget. The Canadian government announced in the March budget that NEB would receive $13.5 million over two years for increased oil and gas pipeline inspections and major audits. Despite its new enforcement teeth, NEB is stressing that its focus remains on voluntary compliance and proposes compliance agreements that would allow a penalty to be reduced or eliminated if the individual or company came into compliance within a set time.
NEB has posted a discussion paper on the development of the administrative penalties regulation for comment until September 28, 2012. The paper can be viewed here: http://www.neb-one.gc.ca/clf-nsi/rpblctn/ctsndrgltn/dmnstrtvmntrypnlts/dmnstrtvmntrypnlts-eng.html#s1.
Changes in the budget bill also imposed fixed beginning-to-end timelines of 18 months for most NEB applications, including Enbridge’s proposed multibillion-dollar Line 9 pipeline reversal project in central Canada.