ARCHIVED - Northern Pipeline Agency

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Commissioner's Message

It is my pleasure to present the 2008-09 Departmental Performance Report for the Northern Pipeline Agency (NPA).

The Northern Pipeline Agency was created by special legislation in 1978 to facilitate the efficient and expeditious planning and construction in Canada of the Alaska Natural Gas Transportation System by Foothills Pipe Lines Ltd.  The system was to carry natural gas discovered at Prudhoe Bay, Alaska, to Canada and the lower 48 states.  Foothills is now owned by TransCanada Pipelines.

The Agency's activity level peaked in 1981-82 during the construction of the “Prebuild” portion of the project in southern Alberta, British Columbia and Saskatchewan.  At that time, the Agency had over 100 employees involved in policy and planning, socio-economic and environmental assessment, scheduling and regulation, and engineering and design.  The Prebuild currently transports Alberta natural gas for export to the United States.

In 1982, low natural gas prices relative to the cost of completing the pipeline system led the project sponsors to put the Northern portion of the project on hold.  The Agency in turn shrank to a skeleton organization, which oversaw approvals of expansions to the existing pre-build facilities (the necessary technical review work was conducted by the National Energy Board).

In 2008, TransCanada Pipelines was selected by the State of Alaska under the Alaska Gasline Inducement Act (AGIA) to receive up to $500 million in State assistance to pursue an Alaska Highway natural gas pipeline.  The large-scale project would transport 4-5 billion cubic feet per day of natural gas in a 48-inch, high-pressure pipeline from Prudhoe Bay, Alaska, to markets in Canada and the lower 48 states. Project costs were previously estimated at $30 billion.

To meet the terms of AGIA, TransCanada is required to conduct an “open season” in the United States by mid-2010.  This is a solicitation process to determine the level of commercial interest in the project.  TransCanada is then required to file an application with the US Federal Energy Regulatory Commission for a transmission pipeline from Prudhoe Bay to the Canadian border.

TransCanada has communicated its project time-line to the Northern Pipeline Agency, including its intention to proceed with the Canadian portion of the project, and has asked the Agency to undertake various preparatory activities.

In December 2008, the NPA began a search for a full-time assistant commissioner to begin delivering on the responsibilities of the Government of Canada that are embodied in the Northern Pipeline Act by continuing to work with TransCanada Pipelines Limited and with federal agencies, provincial and territorial governments and with First Nations.  An Assistant Commissioner was hired in July 2009 and the agency is anticipating a need for additional human resources in 2009-10, as activity under the NPA increases.

Section I – Departmental Overview

1.1 Summary Information

Raison d'être

Responsibilities

Under the Northern Pipeline Act, the Northern Pipeline Agency can be called to undertake a number of activities:

• facilitate the efficient and expeditious planning and construction of the pipeline taking into account local and regional interests, the interests of the residents, particularly the native people, and recognizing the responsibilities of the Government of Canada and other governments, as appropriate, to ensure that any native claim related to the land on which the pipeline is to be situated is dealt with in a just and equitable manner;
• facilitate, in relation to the pipeline, consultation and coordination with the governments of the provinces, the Yukon Territory and the Northwest Territories;
• maximize the social and economic benefits from the construction and operation of the pipeline while at the same time minimizing any adverse effect on the social and environmental conditions of the areas most directly affected by the pipeline; and,
• advance national economic and energy interests and to maximize related industrial benefits.

Strategic Outcome and Program Activity Architecture (PAA)

The Northern Pipeline Agency has a single strategic outcome and a single program activity.  Both are aligned with the Government of Canada's Strong Economic Growth outcome as per the Whole-Of-Government-Framework.

NPA Strategic Outcome:

Facilitate the planning and construction of the Canadian portion of the Alaska Highway Natural Gas Pipeline Project while maximizing social and economic benefits and minimizing adverse social and environmental effects.

NPA Program Activity:

Regulate the planning and construction of the Canadian portion of the Alaska Highway Natural Gas Pipeline Project.

The challenge for the Northern Pipeline Agency is to respond quickly in the event the Northern segment of the pipeline project is reactivated.  Since the Northern Pipeline Act came into force, the external environment relevant to environmental, socio-economic and governance considerations, has changed.  Some of the changes in Yukon include new environmental legislation, devolution of some federal responsibilities, and settlement of most First Nations land claims along the pipeline route.

The NPA will need to review updated environmental and socio-economic regulatory processes while respecting the rights of First Nations. The NPA must also respect the rights granted to Foothills (TransCanada) under the Northern Pipeline Act, in particular the existing certificates of public convenience and necessity.

1.2 Summary of Performance

In 2008-2009, the Agency had spending authority of $265,000. The spending authority was established in anticipation of an increase in Agency workload to support a high level of planning activity for the pipeline.

2008-09 Financial Resources

Planned Spending*	Total Authorities	Actual Spending
265,000	257,211	139,718

* The NPA recovers its costs from Foothills through existing authorities pursuant to section 29 of the Act and determined in accordance with section 24.1 of the National Energy Board Act and the National Energy Board Cost Recovery Regulations.

 

Each year, the Agency's operating budget includes contingencies to mitigate any requirement to return to Parliament for increased funding in the event activity occurs related to either the existing portion of the pipeline, or construction of the balance of the pipeline. Agency operating expenditures are kept to a minimum unless Foothills, or some other party, initiates some action or formal request of the Agency, in which case operating expenditures may increase proportionately.

As reported in the 2008-2009 RPP, an allotment was obtained for the second half of 2008-2009 to retain additional staff in response to an anticipated increase in activity by Foothills. This increase in activity did not occur in the 2008-09 year and the funds were not fully released.

2008-09 Human Resources (FTEs)

Planned	Actual	Difference
2	2	0

 

Performance Summary

Strategic Outcome: Facilitate the planning and construction of the Canadian portion of the Alaska Highway Natural Gas Pipeline Project while maximizing social and economic benefits and minimizing adverse social and environmental effects.

Performance Indicators	2008-09 Performance
Regulate the planning and construction of the Canadian portion of the Alaska Highway Gas Pipeline Project. This program activity is aligned with the Government of Canada's Strong Economic Growth outcome.	Maintained regular dialog with Foothills, and other key stakeholders.  The NPA also continued to operate as a separate agency, ready to respond to increased levels of project planning activity.
The NPA will effectively respond to any regulatory filings by Foothills and make certain that the Act is properly administered.	Foothills did not file any regulatory filings.
To allow the NPA to prudently refine its plans and state of readiness to respond and to enhance its engagement with other participants that would be involved in the planning and the construction of this phase of pipeline development, an adequate level of staff will be hired.	NPA began its search for an Assistant Commissioner in fiscal 2008-09.  An Assistant Commissioner was hired in July 2009 to respond to increased requirements associated with TransCanada Pipelines' activities related to its Alaska Natural Gas Pipeline project.  Further staffing is underway.

 

($ thousands)

Program Activity	2007-08 Actual Spending	2008-09				Alignment to Government of Canada Outcomes
		Main Estimates	Planned Spending	Total Authorities	Actual Spending
Regulate the planning and construction of the Canadian portion of the Alaska Highway Natural Gas Pipeline Project.	137	265	265	257.2	139.7	Strong Economic Growth - Canada's natural resource sector enjoys on average between 20 and 25 percent of all capital investment; and accounts for over one-third of Canada's entire stock of foreign direct investment.
Total	137	265	265	257.2	139.7

 

Contribution of Priorities to Strategic Outcome

Operational Priorities	Type	Status	Links to Strategic Outcome
- In December 2008, Foothills requested that the NPA be restaffed to make the necessary preparations to complete a technical, environmental and socio-economic review of reports and plans that may be submitted related to an Alaska Highway natural gas pipeline - As per the RPP, responding to the reactivation of Phase II of the pipeline is a priority for the NPA.	- This is a newly-committed priority for the reporting year.	- As of July 2009, the NPA has a full-time assistant commissioner who is actively working on all of Foothills' requests. -NPA coordinated inter-departmental meetings and began First Nations engagement. - The priority has mostly met Foothills expectations.	The priority is linked to: Facilitating the planning and construction of the Canadian portion of the Alaska Highway Gas Pipeline Project As project activity increases, additional staff will be  required to carry out the regulatory and planning work.

 

Risk Analysis

TransCanada has communicated its project time-line to the Agency, including its intention to proceed with the Canadian portion of the project, and has asked the Agency to undertake various preparatory activities.  These activities include First Nations engagement and providing certainty on the process that will be used to review all of the technical, financial, environmental, socio-economic and other information that TransCanada will be required to file to proceed with the Foothills project.

Without an increase in staff levels and operating funds, the Northern Pipeline Agency will not be able to take the necessary policy decisions and make the necessary preparations to complete a technical, environmental and socio-economic review of reports and plans that will be submitted related to an Alaska Highway natural gas pipeline.

Failure to make timely preparations could jeopardize the Government of Canada's performance of its responsibilities under the 1977 Canada-US Agreement and the Northern Pipeline Act, and pursuant to TransCanada's rights related to its existing certificates of Public Convenience and Necessity, and its existing pipeline easement in the Yukon.

Expenditure Profile

 

Voted and Statutory Items
($ thousands)

Vote # or Statutory Item (S)	Truncated Vote or Statutory Wording	2006-07 Actual Spending	2007-08 Actual Spending	2008-09 Main Estimates	2008-09 Actual Spending
1	Operating expenditures	382	135	244	139
5	Grants and contributions	-	-	-	-
(S)	Contributions to employee benefit plans	9	2	21	1
(S)	Minister of Natural Resources Canada —Salary and motor car allowance	-	-	-	-
Total		391	137	265	140

There were no significant differences between the spending in 2007-08 and 2008-09.

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