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Time to Reform Our ‘Captured’ National Energy Board, Says Expert

First up: move the scandal-ridden regulator back to Ottawa, argues Marc Eliesen.

By Andrew Nikiforuk 9 Feb 2017 | TheTyee.ca

Andrew Nikiforuk is an award-winning journalist who has been writing about the energy industry for two decades and is a contributing editor to The Tyee. Find his previous stories here.

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Economist Marc Eliesen addresses the Northern Gateway Joint Review Panel at hearings in Vancouver on Jan. 16, 2013. Photo: Metro Kate Webb.

Marc Eliesen, the former chair of Ontario and BC Hydro, says the scandal-ridden National Energy Board has lost touch with what it means to protect the public interest and requires dramatic reforms.

Speaking Wednesday before a five-member “modernization” panel struck by the Trudeau government to review the role and mandate of the federal pipeline regulator, Eliesen recommended that the NEB fire its current board of directors and relocate its headquarters from Calgary to Ottawa.

“Unless these measures are undertaken, no amount of tinkering will restore credibility and public trust in the NEB,” Eliesen said.

The board, which critics now describe as a classic “captured” regulator (see sidebar), was established in 1959 after bitter protests from rural Ontario landowners over the way pipelines had been forced on their lands by politicians.

In recent years, pipeline whistleblowers have questioned the NEB’s competence while First Nations have challenged its fairness and due diligence.

Investigative reporter Mike De Souza with the National Observer even caught the regulator withholding sensitive information about Enbridge’s operations in its final report on the company’s 2010 Michigan spill after pressure from the company.

Economists such as Robyn Allan have criticized the board for failing to conduct basic risk-benefit analysis on pipeline economics.

Mayors and environmentalists have challenged the board’s conduct during contentious public hearings on bitumen pipelines. The board, for example, did not address issues as basic as climate change impacts in recent decisions.

The NEB is governed by nine full-time board members, all appointed by the federal government, and an unlimited number of temporary board members. Most have been engineers and lawyers drawn from the oil patch.  

In his presentation, Eliesen, who has 40 years of experience in senior executive positions in Canada’s energy sector, pointed out that many new members appointed to the NEB by the Harper government had “close ties to the oil and gas sector” and argued that this put the board in a conflict of interest.

Steven Kelly, for example was appointed in 2015 while still working for Kinder Morgan as their consultant on the Trans Mountain Expansion Project.

Another Harper appointee, Murray Lytle, an engineering consultant, formerly worked for Imperial Oil.

Eliesen said that NEB chair and CEO Peter Watson should not have allowed these appointments to take place.

In 2014, Eliesen, who lives in Whistler, B.C., withdrew from the Trans Mountain process because of the way the NEB treated participants and undermined the hearing process by forbidding oral examination of the proponent as was normal practice.  

“Proper and professional public interest due diligence has been frustrated leading me to the conclusion that this board has a predetermined course of action to recommend approval of the project and a strong bias in favour of the proponent,” Eliesen wrote at the time.

Eliesen noted other issues at the agency, such as board members who have had their terms renewed multiple times.

“You have the strange situation of David Hamilton,” Eliesen said. “Mr. Hamilton has been a temporary board member for 14 years. Not only does this give new definition to the term ‘temporary,’ it violates the NEB governance manual.”

According to the NEB governance manual, “It has been the practice of the Governor in Council to appoint Temporary Members for a term of three years.”

In order to restore public trust, “a new board is required,” Eliesen said.

“The individuals on the new board must represent a diversity of professions, diversity of regions and diversity of interests — not individuals that disproportionately represent the energy interests of Alberta.”

The board made headlines last summer during hearings on TransCanada’s proposed Energy East pipeline when NEB panel members overseeing the proposal held a private meeting with Jean Charest, a TransCanada consultant and former premier of Quebec.

The meeting violated the arm’s-length relationship required by board members and proponents. The NEB first denied discussions about the project took place at the meeting, but later apologized and struck a new panel to review the controversial project.

Eliesen also recommended that the board be relocated to Ottawa where it might be able to maintain a greater degree of independence from the powerful energy industry in Calgary.

When the Mulroney government moved the board to Calgary in 1991, a majority of the staff quit and the agency was re-staffed with employees from the oil and gas industry in Alberta.

Since then most board members have come from industry and act like “an old boys club,” Eliesen said. Their backgrounds rarely reflect other regions, professions or social interests.  

As such, the NEB has become a “captured regulator” that not longer operated in the public interest, he concluded.

“The attitudinal bias that stems from a close interaction between NEB board members, NEB staff and the energy industry, means the goals and aspirations of the Alberta energy sector have become those of the board,” said Eliesen. “This bias has crowded out the broader public interest.”

During his presentation Eliesen noted that two former NEB chairs, Kenneth Vollman and Roland Priddle, had been inducted into the industry’s Canadian Petroleum Hall of Fame. “This is a strange place for a regulator to be honoured!”

Eliesen also criticized the Trudeau government for appointing Brenda Kenny, a former pipeline lobbyist and former NEB employee, to the panel reviewing the status of the NEB.

“Ms. Kenny’s signature is on a letter to the Harper government urging a gutting of environmental laws to further the interests of the oil and gas industry. This effort resulted in two subsequent omnibus budget bills passed in 2012, which further undermined the public’s confidence in the NEB and its pipeline review process,” Eliesen said.

“With respect Ms. Kenny, with your background at the National Energy Board and your pro-pipeline and energy industry stance, you are in a real conflict of interest.”

When panel co-chair Hélène Lauzon noted that Kenny had to abide by a code of ethics while serving on the panel, Eliesen replied that the issue wasn’t ethics, but bias.

Kenny was pro-industry and couldn’t be objective, argued Eliesen.

The modernization panel heard from nearly half a dozen presenters at the Pinnacle Marriott Hotel in Vancouver on Wednesday. Almost all called for dramatic reforms.  

When NEB CEO Peter Watson earlier testified before the panel, he requested more policy clarity from the government.

“This includes, for example, additional clarity on issues such as climate change, Indigenous issues and consultation outside of a specific project, marine shipping, transition to different forms of energy, areas of shared jurisdiction with the provinces, and the treatment of cumulative effects on a regional scale.”

Eliesen has had a distinguished career as CEO of Ontario Hydro, BC Hydro and Manitoba Energy Authority. He has also been on the board of Suncor, a large oil sands company.

He told The Tyee that if the Trudeau government had been serious about democratic reform it would have first stopped both the Kinder Morgan and Energy East pipelines and then struck the modernization panel.  [Tyee]

Read more: Energy

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