The Energy Regulation and Markets Review - Stikeman Elliott

Canada
west coast. This will require the development significant infrastructure to transmit the
natural gas to the west coast, liquefy it and ultimately ship the LNG to foreign markets.
Oil
As is the case with natural gas, the majority of Canadian oil production is in the Canadian
sedimentary basin. In particular, Alberta’s oil sands contain some of the world’s largest oil
reserves. These reserves have been attracting significant investment and, as a result, the
forecast is for a steep increase in Canadian oil production. The vast majority of Canadian
oil production is exported via international pipelines to the midwestern United States;
however, there is currently a significant price differential between the price paid for oil
delivered to the Midwest (West Texas Intermediate) and the world oil price (Brent).
In order to access the world price for Canadian oil, pipelines are being proposed that
will connect Canadian production with hubs that provide for export outside of North
America and thereby attract world oil prices. One such proposal is TransCanada Corp’s
Keystone XL pipeline. Keystone XL was recently denied a Presidential permit by the
United States, which has stalled its development. TransCanada is working on reviving
the project, but in the meantime a second pipeline, Enbridge Inc’s proposed Northern
Gateway oil pipeline, is being proposed to connect Alberta production with Canada’s
west coast for export to the Asia-Pacific markets. Such access to Asia-Pacific markets
would fundamentally change the balance of future oil trade between Canada and the
United States.
II
REGULATION
i The regulators
The National Energy Board (‘the NEB’) establishes regulatory policies for energy matters
under federal jurisdiction. The primary area of NEB’s activity is the regulation of Canada’s
interprovincial oil and gas pipelines owned by TransCanada Pipelines Limited and
Enbridge Pipelines Inc. The NEB also has regulatory responsibility for the construction
and operation of international transmission lines and the export of natural gas, oil and
electricity.
Provinces have authority over the exploration and development of energy
resources. This function may be assigned to an independent regulatory tribunal (e.g.,
Alberta’s Energy Resources Conservation Board) or may be under the direct control
of a government ministry. Oil and gas exploration in frontier and offshore areas are
regulated either by bodies created by federal or provincial management agreements (e.g.,
the Canada–Newfoundland and Labrador Offshore Petroleum Board) or by the NEB.
Canada’s energy sector is also regulated by provincial utility regulators that are
responsible for facilities that lie completely within the borders of any single province.
This jurisdiction can include diverse matters such as facility siting, rate setting, utility
divestitures, retail issues and consumer complaints. In some provinces, energy regulators’
authority is limited to responsibility for energy resources and energy utility regulation
(e.g., the Ontario Energy Board); in other provinces, utility regulators also have
jurisdiction over other sectors such as automobile insurance, railways and water utilities
(e.g., Nova Scotia Utility and Review Board).
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