For almost three years, managers and executives at Canadian pipeline companies have been under a microscope. Their industry watchdog has been examining whether they make it easy enough for employees to report and fix anything that might lead to spills, explosions or other serious incidents.
Depending on who's talking, the results of this examination have either shown that there is encouraging progress in cleaning up the industry, or, a frightening disaster in the making.
What's clear is that some people in the pipeline industry are making mistakes.
The watchdog, Canada's National Energy Board (NEB), has released hundreds of pages of evidence in audits showing that some pipeline companies are violating rules that require their managers and executives to promote a strong safety culture that encourages employees to do the right thing without fearing repercussions.
Some of these violations are "similar" to the types of mistakes that led to the Lac-Mégantic railway disaster, according to a senior NEB executive, writing in an internal memo.
And pipeline industry insiders have told National Observer that they wonder when a catastrophic event like the train explosion in Lac-Mégantic might happen to one of their own companies. Forty-seven people died in July 2013 when a runaway train carrying oil crashed and exploded in the middle of the small Quebec town. The explosion released six million litres of oil into the environment and caused hundreds of millions of dollars in property and environmental damage. It also prompted multiple investigations and charges against employees and executives at Montreal, Maine and Atlantic Canada Railway Ltd. and its affiliate, which operated the train.
The Transportation Safety Board of Canada (TSB), which investigated the disaster, found that Transport Canada, the government department responsible for overseeing railway safety, had missed some of the warning signs because of sloppy oversight.
The NEB's vice-president of operations, Christopher Loewen, told Board members in a memo about the similarities between what the two regulators were finding in both the pipeline and railway industries.
The memo, drafted to explain the different roles of the TSB and the NEB, highlighted how the TSB had identified issues regarding Transport Canada's oversight, related to the Lac-Mégantic disaster. Loewen then compared those issues to the NEB’s own record of inspections and audits of Canadian pipeline industry operations.
“Risk assessment, change management and internal auditing are critical elements within a company’s management system,” wrote Loewen in the memo, dated November 12, 2015 and released to National Observer through access to information legislation.
“Inadequate or absent processes and procedures prevent the effective management of safety. Board staff has identified similar weaknesses in these elements during recent management system audits and are conducting follow-up in accordance with our current procedures.”
Transport Canada told National Observer in a statement that it took railway safety seriously and implemented a series of measures to strengthen its oversight following the Lac-Mégantic disaster, including hiring new inspectors, toughening the rules and introducing new penalties for violations.
Loewen declined to comment on the memo, referring questions to a spokesman, Darin Barter, who put a positive spin on the document. Barter said that Loewen's intention was to highlight that the NEB was doing an "effective" job overseeing management systems at pipeline companies.
He also denied that the NEB believed there was a management problem at pipeline companies.
"It would be inaccurate to describe continuous improvement of company management systems as a problem," said Barter. "It’s important to realize that management system audits are in addition to front line inspections, ongoing audits, enforcement, and data analysis – all of which keep pipelines safe."
The office of Canada's auditor general has released several reports in recent years, warning that neither Transport Canada, nor the NEB, had done enough to oversee safe operations of industry.
NDP environment critic Nathan Cullen said that reports like these make it hard for Canadians to trust the NEB.
“It’s a fox watching the hen house situation and there’s huge risk in that approach because when something goes wrong, it really goes wrong,” said Cullen in an interview. “It just foretells a terrible situation.”
To build a regulator from scratch
Whistleblowers have also been skeptical about the NEB’s capacity to fix problems, noting that some of the issues are recurring within the industry. Since 2012, about two dozen pipeline whistleblowers have taken allegations to the NEB after being unable to resolve safety concerns within their respective companies.
Some of these industry insiders have argued that the Calgary-based regulator needs to be more transparent and distance itself from close relationships with industry in order to force companies to create workplaces where the staff have no fears about reporting alleged infractions of pipeline safety rules.
Members of the NEB are appointed by the government to approve and manage all decisions of the regulator. This gives these members extraordinary powers equivalent to judges on a federal court. They can use these powers to recommend the approval of new projects and also to investigate and penalize anyone who breaks pipeline safety rules.
Recent NEB audits in 2014 and 2015 of Canada’s two largest pipeline companies, Enbridge and TransCanada Corp, identified violations and weaknesses in management culture. But both companies, also based in Calgary, have said they addressed the safety violations flagged in those audits. Neither company was sanctioned by the NEB for these violations.
At the same time, members of the newly-elected Liberal government say they are eyeing reforms at the NEB itself. Natural Resources Minister Jim Carr said this week that the government wanted to conduct a comprehensive review that would examine what a 21st century energy regulator would look like if it were to be built from scratch.
Safer than trains
The government has said it needs to implement these reforms to help it deliver on its mandate to get new pipeline infrastructure approved that would allow the oil and gas industry to gain access to new markets.
The revelations from the NEB memo also coincide with efforts from industry to convince the public to accept major new pipeline projects by arguing that its infrastructure is statistically safer at transporting fossil fuels than trains.
The Canadian Energy Pipeline Association - a lobby group that represents pipeline companies - said it did not have a spokesperson available to comment on the memo and its comparison of the Lac-Mégantic disaster to the pipeline industry's safety culture.
The document also identified a potential weakness in oversight of the NEB, noting that its own watchdog, the Transportation Safety Board of Canada, only has one or two full time investigators that focus on pipeline industry incidents.
The TSB confirmed that it had two engineers that investigate pipeline incidents, but said it also had other experts from its engineering lab that could provide assistance, along with outside experts, when needed.
No direct answers
As part of an ongoing investigation of the National Energy Board, National Observer directed more than 100 questions in March to more than a dozen different staff at the NEB regarding various management problems and apparent blunders in its investigations of pipeline safety allegations. As we reported over the past month, the NEB’s mistakes - documented through more than a thousand pages of emails, text messages, employee surveys and other internal records - revealed factual errors in official reports, inappropriate discussions with industry representatives and an apparent failure to keep track of all evidence submitted by whistleblowers.
Most of the staff contacted sent our questions to the NEB's media relations department which declined to respond directly to questions about the organization's mistakes. Instead, the NEB sent National Observer general statements explaining that it had improved its practices and would soon release details of its reforms.
Questioned by a Conservative MP on Monday at a parliamentary committee, Natural Resources Minister Jim Carr said he had confidence in NEB chairman, Peter Watson, who was appointed by the former Conservative government. Carr also said that Canadians gave the federal Liberals a mandate in the 2015 election to “reform” the NEB.
Evan Vokes, a former engineer with TransCanada who raised a series of safety allegations in a formal complaint sent in 2012, said the problem is that the NEB and pipeline companies break engineering rules, without any consequences.
Some of Vokes’ allegations from 2012 were later confirmed by the NEB in an audit released in 2014, but without any sanctions or penalties.
He also said the NEB failed to address many of the systemic problems that were leading to incidents. In one case, the NEB took nearly four years to respond to a warning in the 2012 letter about substandard components in a natural gas pipeline. These substandard parts broke into pieces in October 2013, leading to a rupture a few hundreds metres away from a hunting cabin near Fort McMurray, Alberta.
“They (the NEB senior leadership and the pipeline industry) know they can get away with it. And that’s the crying shame of the whole thing,” said Vokes.
Adam Scott, the climate and energy program manager at Environmental Defence, said that the NEB seems to be acting like an oil company that is buying slick marketing ads to boost its image, instead of dedicating resources to improving its performance. He also said the apparent secrecy and failure to answer direct questions about its actions are doing little to improve public confidence in government oversight of industry.
“If they were honest and admitted there were a few basic mistakes and answered questions, it wouldn't be such a big deal,” Scott said in an interview. “If they continue denying issues they are only going to lose public trust in the future.”
Long term reforms
Meanwhile, Carr said the Liberal government started the process of reforming the NEB through new interim measures to toughen pipeline reviews, but that it also plans to do more. Carr said that the public has lost trust in the the government's oversight of industry because of decisions taken by federal Conservatives when in power, that allowed for projects to be approved without adequate reviews and consultations.
“In the long term, we have a mandate to reform the environmental assessment process in Canada,” Carr said in response to questions from Alberta Conservative MP Shannon Stubbs at the House of Commons natural resources committee on Monday.
“We will be working together. We will be consulting Canadians. And very importantly, we will be consulting members of this committee. We will be posing the question: ‘If you had to create a Canadian regulator from scratch, what would it look like? What would the principles be that would determine the structure? What would the legislation that we would ask Parliament to pass consist of? What would the values be? And what is the relationship ultimately between the government and the regulator?’ So that is the longer term reform of the NEB.”