The National Energy Board (NEB) of Canada is an independent federal agency that regulates oil, gas and electric utility industries, including the pipeline industry. The Board promotes safety and security, environmental protection and efficient energy infrastructure and markets.

Here, NEBs Professional Leader – Engineering Dr Alan Murray outlines some of the issues currently facing the regulation of Canadian pipelines.

The role of the NEB

The NEB regulates pipelines that cross provincial or international boundaries, while pipelines located within a Canadian province are the jurisdiction of that province.

Both the provinces and the NEB adopt the same national pipeline standard, CSA Z662. The standard covers oil and gas pipeline systems and is a consensus document reflecting the viewpoints of operators, regulators, contractors and consultants.

Dr Murray says that the standard inevitably sets out minimum requirements in quite prescriptive terms, which in turn has meant that the original regulations developed were similarly prescriptive.

In 1999 the NEB decided that the onus for ensuring safety and protection of the environment should fall on the pipeline operators since they have a direct influence over the condition and operation of their pipelines.

“By adopting a goal-oriented approach to regulation, the NEB can be assured that the prescriptive elements of Z662 are being met, while enabling companies to make use of the latest technologies and knowledge of their own system, to develop best practice procedures,” Dr Murray says.

The audit process

Dr Murray says that the NEB “uses a life cycle approach to compliance in a goal-oriented world”.

Pipeline construction is subject to frequent inspections, while the assessment of a company’s ongoing operations is made as a result of regular integrity meetings with Board staff and in depth audits.

The NEB conducts two types of audit – a full audit or a focused audit.

“The determination to conduct an audit is made based upon our assessment of the risk a particular company poses using its operating history (what we know about them) and to some extent its geographic location,” Dr Murray continued.

“For example we regulate a pipeline company whose system delivers liquid products to three major Canadian cities and two of our largest airports. Leaving to one side the probability of failure, the consequence of a line break are such that the company will always be deemed a high risk and hence will have a full audit, usually on a five-year cycle.”

Dr Murray says that if a company experiences many incidents involving safety, or the environment, then it would be appropriate to conduct a focused audit of that function.

“Conversely, if a company exhibits exemplary behaviour throughout its activities, the level of scrutiny during the application stage of a new project could be less onerous, since it has been demonstrating programme adequacy and effectiveness.

“The challenge for the Board staff lies in conducting audits since the check list approach, in a prescriptive regime, has to give away in some areas to one of professional judgement and that takes a lot of experience,” he says.

Companies are advised that they have been selected for an audit via letter and are generally given several months to prepare. They are issued with a detailed set of audit protocols describing the conduct and focus of the audit.

An NEB audit follows the ISO management system process fairly closely and it audits against the Onshore Pipeline Regulations, which are for the most part written in goal-oriented language.

Dr Murray says that the company is expected to designate individuals at different levels, and at various locations, within the company as interviewees. The objective of the audit is to establish the adequacy and effectiveness of a company’s programmes.

“It has been our experience that management of change or internal communications is a common area of either ‘non conformance’ or ‘needs improvement’. Close out meetings are held at the end of each day of the audit and any findings shared with the company representatives, who may dispute them or provide clarification.”

The initial audit report is sent to the company for its comments and upon consideration of these, a final report is written and a date set for the filing of a corrective action plan.

“Conducting an audit is quite demanding of both NEB staff time and for a company in preparing for it, so a five to seven-year frequency seems about right for a full audit. Sometimes that would be pre-empted if, for example, the company were to undergo a change of ownership. Focused audits are less likely to be repetitive,” says Dr Murray.

Replacing the hydrotest

The NEB is currently addressing applications to eliminate the hydrotesting of pipelines on the basis that the quality of pipeline fabrication, construction and inspection techniques has improved to the point where the strength aspect of the hydrotest is redundant.

Dr Murray explains that in its place proponents have developed a fairly sophisticated quality management system referred to as ‘alternative integrity validation’ (AIV).

Several pilot projects have been successfully conducted under provincial jurisdiction and one under the NEB.

“It is important to note though, that in considering waiving the need to test two adjacent sections of pipe, to which the AIV methodology had been applied, the Board indicated that one of the sections had been hydrotested. Further it regarded the procedure as experimental with a comparatively low risk of failure as the hoop stress at the intended operating pressure was of the order of 56 per cent specified minimum yield strength (SMYS).”

A flame ionisation leak test was also conducted before placing the section into service.

“Unquestionably there are environmental and economic benefits associated with eliminating the hydrotest. Obtaining and disposing of large quantities of water can be a problem while, as a rule of thumb, for a large diameter pipe, hydrotesting costs could be as much as 5 per cent of the entire project cost,” Dr Murray points out.

Regulating US/Canada pipelines

Pipelines crossing the border of Canada and the US are regulated by separate regimes, with different requirements and philosophical approaches.

The NEB, regulating the Canadian sections of the international pipelines, has Memorandum of Understandings with the financial regulator responsible for approving interstates pipelines in the US – the Federal Energy Regulatory Commission – and with the Pipelines and Hazardous Materials and Safety Administration (PHMSA), who is responsible for the safety and integrity of those facilities.

Dr Murray says that the organisations meet regularly to share information.

“Since we are separate jurisdictions, companies that operate cross border pipelines have to comply with the requirements of both systems and that can’t be easy!” he says.

Differences in pipeline regulation include physical differences, such as valve spacings, burial depths and some welding procedures. For example, the US stipulates a 72 per cent SMYS for pipelines, whereas Canada specifies an 80 per cent SMYS. This means that the wall thickness of international pipelines increases upon entry into the US.

The two countries also have differing approaches concerning Integrity Management Programmes (IMPs).

“Whereas re-inspection or hydrotesting intervals are prescribed in the US, in Canada as part of the goal oriented philosophy, we come to an agreement with the company as to what constitutes a reasonable interval, supported of course by a sound rationale.

“I think it is fair to say that it is uneconomic for a company to maintain two separate IMPs so it may choose to use the one deemed more onerous,” says Dr Murray.

He notes that a company may also apply to PHMSA for a waiver, for example to operate at 80 per cent SMYS in Canada, with several companies having recently done so successfully.

“There is a will between Canadian and US regulators to push toward harmonisation and we have undertaken joint studies to see where this would be most effective,” Dr Murray concludes.