- General Information on Pipelines
- Need for Pipelines
- Pipeline Safety and Environmental Protection
- Responsibility for Clean-up of Pipeline Accidents
- Regulation of Pipelines in Canada
- What is the difference between a pipeline that moves oil and a pipeline that moves natural gas?
- How long have pipelines been used to transport oil and gas in Canada?
- How extensive is Canada’s pipeline system?
- How do Canadians benefit from pipelines?
- Why do parts of Eastern Canada import oil when there is supply in Western Canada?
- Where does Eastern Canada import oil from?
- Why does Canada need more pipelines?
- Can the railway be used to transport crude oil?
- Why does Canada not keep all of its oil for Canadians to use?
- What are the economic benefits for Canadians from pipelines?
- How safe are pipelines?
- What is the accident and leak record of Canadian pipelines?
- What is the Government of Canada doing to improve pipeline safety?
- What is the NEB doing to improve pipeline safety?
- How is a crude oil pipeline leak cleaned up?
- How are pipeline leaks prevented or minimized?
- What causes pipeline failures to occur?
- Is oil sands crude (diluted bitumen) more corrosive than conventional crude oil?
- Who regulates pipelines in Canada?
- Who makes the decision to build a new pipeline?
- What are the regulatory requirements to build a pipeline?
- How are Aboriginal groups/communities involved in the process of pipeline construction?
- What are the implications of new pipelines for landowners?
- How does a company decide where the pipeline route should go?
- Will I be restricted in my use of the lands where the company has a pipeline right of way?
- What are a pipeline company’s obligations after construction?
- What happens when a pipeline is no longer needed and is abandoned?
1. General Information on Pipelines
Oil and natural gas pipelines are similar since they are both coated steel pipe buried underground. The key difference is that oil transmission pipelines typically transport liquids at pressure between 600 to 1000 pounds per square inch (psi), while natural gas transmission pipelines transport gas at higher pressures of 1000 psi or greater.
Natural gas pipelines have above-ground compressor stations at select intervals. These compressors are often land-based jet engines, and are typically fuelled by the natural gas within the pipeline itself. Crude oil or liquids pipelines have above-ground pump stations at select intervals. These are typically electric pumps.
Canadian pipelining began in 1853, with a 25-kilometre cast-iron pipe moving natural gas to Trois-Rivières, QC, to light the streets. Canada had one of the world’s first oil pipelines in 1862 when a pipeline connected the Petrolia oilfield to Sarnia, ON. By 1947, only three Canadian crude oil pipelines existed. One was located in Alberta and transported oil from Turner Valley to Calgary. A second moved imported crude from coastal Maine to Montreal, while the third brought American mid-continent oil into Ontario. Canada’s extensive pipeline grid began in the 1950s when major crude oil and natural gas finds in Western Canada led to the construction of large pipeline systems.
The National Energy Board (NEB) has been regulating inter-provincial or international pipelines since 1959, so that they are safe, secure and environmentally responsible. While much has changed since then, the safety and security of Canadians and environmental protection remains of paramount importance to the NEB.
There are an estimated 825,000 kilometres of transmission, gathering and distribution lines in Canada, with most provinces having significant pipeline infrastructure. This includes 105,000 kilometres of large diameter transmission lines. Of this amount approximately 71,000 kilometres are federally-regulated pipelines, which are primarily transmission lines. Pipelines operate in both remote and populated areas. Canada’s natural gas pipeline grid stretches from the coast of British Columbia and Vancouver Island to Quebec City, and its crude oil pipelines stretch from Vancouver to Montreal. There are also separate pipelines, not linked to the rest of the pipeline grid, in Newfoundland, New Brunswick, Nova Scotia, Prince Edward Island, and offshore Canada. There are major crude oil and natural gas pipelines servicing most major Canadian cities. Canadian pipeline systems are highly integrated with those in the US, allowing Canadian oil and natural gas to access and receive delivery from markets in the US.
The 71,000 kilometers of oil and natural gas pipelines regulated by NEB transport approximately 103 billion dollars of hydrocarbons each year. This includes approximately 20,000 kilometers of natural gas pipelines located in Alberta that were transferred into the Board’s jurisdiction in 2009.
For more information about the pipeline network in Canada, visit the NEB website at www.neb-one.gc.ca .
2. Need for Pipelines
Pipelines deliver crude oil, natural gas and petroleum products to domestic markets throughout Canada. Pipelines are necessary to deliver fuel to Canadians to heat their homes, drive their cars, or travel by bus, train, or by air. The majority of homes in Canada are heated with natural gas, all of which is delivered by pipelines. Cars, buses, trains, boats and airplanes are all fuelled by petroleum products such as gasoline, diesel, or aviation fuel. These products are produced at refineries across Canada, and pipelines are needed to transport crude oil to these refineries. Without pipelines, large volumes of crude oil (three million barrels per day in Canada) would have to be transported to refineries by other modes of transport, such as tanker trucks, tanker ships, or rail cars. Transporting three million barrels per day by truck would mean 15,000 additional long distance truck trips every day on Canada’s highways, which would have public safety, road maintenance, noise, and emissions implications. Studies continue to confirm that pipelines are safer than any other mode of transportation of hydrocarbons.
At present, refineries in Eastern Canada are not connected by pipeline to western Canadian crude oil production. As a result, these pipelines import most of their crude needs by tanker ship. Canada’s current crude oil pipeline infrastructure can deliver western Canadian crude oil as far east as Sarnia, Ontario. Canadian crude oil supplies all the needs of western Canadian refineries, and more than three-quarters of Ontario’s refinery capacity.
Given the higher cost of imported crude oil, and the demand from eastern refineries for Canadian crudes, industry has responded with new proposals to move western Canadian crude oil to refineries further east, in Ontario, Quebec, and Atlantic Canada.
Enbridge Pipelines Inc. (Enbridge) recently received approval for a partial reversal of its Line 9 line pipeline, which formerly was used to bring imported crude from Montreal to Sarnia. The reversal will allow transportation of 152,000 barrels per day of western Canadian crude oil to the Nanticoke refinery near Hamilton, starting in late 2013. Moving western Canadian crude oil to Eastern Canada was the original purpose of Line 9 when it was built in 1975.
TransCanada PipeLines Limited has indicated it is evaluating conversion of one of the pipelines associated with its natural gas Canadian Mainline pipeline to oil service. This would require an application to the NEB. Eastern Canadian refineries are also currently moving some western Canadian crude oil to Eastern Canada by rail tanker trains.
Some Eastern Canadian refineries obtain oil supplies from offshore Newfoundland. Canada’s East coast also imports oil from a variety of oil-producing countries. For example, in 2010, most of Eastern Canada’s oil imports came from the countries that are part of the Organization of the Petroleum Exporting Countries (OPEC), specifically from Algeria, Saudi Arabia, Nigeria, Angola, Iraq and Venezuela. Some of Eastern Canada’s oil was also imported from North Sea countries, including Norway and the United Kingdom. In addition, oil was imported from Russia, Mexico and the United States.
There is a need for new pipelines to expand existing markets and create new markets. Currently, due to a lack of pipelines, Canadian producers are mainly limited to the US market. Two million barrels per day of Canadian oil are currently sold to US customers, at prices that are well below global crude oil prices. The West Texas Intermediate (WTI) / Brent differential peaked on September 23, 2011 at US$29.59 per barrel. In 2012, the differential has ranged from US$10.42 per barrel in January to US$18.35 in September. Analyses from the Canadian Imperial Bank of Commerce and Bank of Montreal indicate that Canadians are losing at least $18 billion per year, or approximately $50 million a day, in revenues because of a lack of access to other markets. The Bank of Canada also viewed these losses as economically problematic, since they reduce revenues to Canadian companies, thereby limiting jobs and salaries for Canadians. These losses also reduce the tax and royalty base for governments that help to pay for everything from roads and bridges to health care and education.
More pipeline capacity is also needed to carry crude oil from Western Canada to Eastern Canada. Currently, refineries in Eastern Canada must import much of their crude oil at higher global crude prices than Canada receives for its exports.
Yes. Over 361,000 barrels per day of crude oil and petroleum products were transported by rail in Canada in 2011. In September, 2012, media reported that the large Irving Oil refinery in Saint John, New Brunswick will be able to receive about 70,000 barrels a day of crude oil, from the Bakken region and Western Canada, to the refinery by rail, once the train offloading site is fully operational. However, transporting oil by rail is significantly more expensive than by pipeline. Transporting oil by rail or truck is typically more economically viable for small volumes over shorter distances, especially if the rail infrastructure is already in place.
Canada has the third largest crude oil reserves in the world, after Saudi Arabia and Venezuela, and Canadian crude oil production is growing rapidly. Canadian oil production and resources far exceed Canadian needs for crude oil and petroleum products. Canadian exports of crude oil and petroleum products account for 25% of all Canada’s exports. These exports create jobs and substantial tax and royalty revenues for Canadians. Oil and gas exports are key to Canada’s current and future prosperity.
In addition to directly employing thousands of people during construction and operation, pipelines are a key piece of infrastructure that allows crude oil and natural gas production to reach markets. The oil and gas producing sector, which depends on pipelines to connect to customers, directly employs roughly 190,000 people, and even more are indirectly employed. The oil and gas sector has become a key part of the Canadian economy, contributing nearly 8% to the country's GDP and paid approximately $22 billion in taxes, royalties and fees to governments.
A July 2012 report from the Canadian Energy Research Institute also showed that the economic benefits from future oil sands production depends greatly on the building of new pipeline infrastructure. If this pipeline capacity is built, it is estimated that direct, indirect and induced employment supported by future oil sands development could grow to an average of 630,000 jobs in Canada by 2035, up from 275,000 jobs in 2011, and that cumulative GDP could exceed $2.8 trillion dollars by 20351.
3. Pipeline Safety and Environmental Protection
Pipelines are the safest and most environmentally friendly way of transporting oil over long distances.
Pipeline companies are subject to various regulations and are required to meet specific standards. The NEB’s regulations require a pipeline company to create a management system and protection programs that anticipate, prevent, manage and mitigate potentially dangerous conditions associated with their pipelines.
Pipeline companies are required to design safety, integrity and emergency response protection programs specific to their infrastructure that manage and mitigate risks posed to people and the environment. These programs are reviewed, inspected and audited by the NEB. If non-compliance is found, the NEB will take necessary steps to protect the environment and the public. The NEB has several compliance enforcement tools available to it and may revoke authorizations, impose safety orders that restrict operations, issue stop-work orders, and pursue criminal prosecution. Additionally, with the implementation of the 2012 Jobs, Growth and Long-term Prosperity Act (JGLTPA) the NEB has been authorized to create a system of administrative monetary penalties (AMPs) that allows penalties to be levied on companies that break Canada`s stringent environmental regime.
To ensure safety, companies are required to inspect their systems regularly using specialized tools that run inside the pipelines, and conduct right-of-way surveillance and inspection. Pipeline leaks and ruptures are detected in real time using sophisticated computer-based systems. Companies can often remotely shut down flows to minimize spill volumes.
In Canada, the NEB regulates nearly 71,000 kilometres of pipelines that move approximately 1 billion barrels of oil per year. In fact, between 2000 and 2011, 99.9996% of the crude oil and petroleum product transported on federally regulated pipelines was done so safely.
In December 2011, the NEB released its 9th annual report Focus on Safety and Environment: A Comparative Analysis of Pipeline Performance, 2000-2009. The report presents safety and environmental performance indicators of NEB-regulated pipelines and examines the number and frequency of various incidents that affect pipeline safety, integrity and the environment.
Through the Jobs, Growth and Long-term Prosperity Act (JGLTPA) the Government of Canada has enhanced the NEB’s abilities and responsibilities with respect to inspection and enforcement. The JGLTPA provided $13.5 million over two years to improve pipeline safety across Canada by enabling the NEB to increase the number of inspections for oil and gas pipelines by 50%, double the number of annual comprehensive audits in order to identify safety issues before they occur.
The amendments to the National Energy Board Act (NEB Act) authorize the NEB to create a system of AMPs through regulations. Under the new legislation, there are penalties for violations of up to $25,000 per day for an individual or up to $100,000 per day for any other party, such as a corporation, a utility or a municipality. The NEB Act stipulates that each day a violation continues is considered to be a separate violation.
The NEB continually strives to improve pipeline safety to ensure that Canadians and the environment are protected.
By way of example, the NEB now has authority to levy fines to encourage compliance with its regulations. The NEB has also developed new regulations related to damage prevention for implementation in 2013.
The NEB has improved access to information regarding the Board’s enforcement activities by posting this information on the NEB website. In addition, the NEB routinely posts updates and announcements on its safety and environment web pages on the NEB website at www.neb-one.gc.ca.
The NEB is also leading a Safety Forum in June, 2013, to discuss safety management issues that are emerging in the oil and gas industry.
Federal and provincial regulators must be notified of spills immediately by law. A company’s Emergency Response Plan, which must be pre-approved by the NEB, then guides initial response and containment of a spill with appropriate equipment, such as absorbent booms. Pipeline companies must have spill first-responders under contract. It is also an NEB requirement that companies continually educate all first responders on practices and procedures to be followed in the event of an emergency.
Once a spill is contained, oil is removed by vacuum truck for recycling. Contaminated soil and water is then removed for treatment. For NEB-regulated pipelines, a Remediation Process Guide requires companies to conduct the appropriate level of Environmental Site Assessment, and to submit a Remedial Action Plan for approval by the NEB. The Guide indicates that the most stringent criteria must be used for remediation of residual soil and groundwater contamination. The spill site is considered clean once the NEB approves a remediation closure report demonstrating all standards have been met. Reclamation of the site to restore the environment is also a part of the clean up.
Pipeline technology has improved over the past 50 years with much of the improvement occurring in the past 20 years. Due to these technological improvements and increased regulatory oversight, there has not been a single rupture on a federally-regulated pipeline built in the past 30 years, as per the table titled Canadian Regulated Pipelines – Pipeline Ruptures, which can be found at www.neb-one.gc.ca/sftnvrnmnt/sft/pplnrptr/pplnrptr-eng.xls (2.33 MB).
Today, pipeline companies use sophisticated highly automated leak detection systems with central control rooms that permit companies to monitor rates of flow, pipeline pressure and fluid characteristics in real time. Pipeline inspection technology has also improved with the use of magnetic flux and ultrasonic tools that examine the pipe wall from the inside. These tools, known as “smart pigs,” permit companies to detect potential problems and prevent leaks. In addition, improvements in pipeline coating technologies and use of cathodic protection have reduced corrosion of pipelines. Finally, the quality control at pipeline manufacturing facilities has also improved.
Pipeline management also has improved in the past 20 years with the creation of standards and regulations that require management systems for pipeline operation and pipeline integrity management programs (IMP) to systematically evaluate pipe condition and proactively repair the pipeline as it ages so that it can operate safely.
Pipeline companies have primary responsibility for ensuring pipeline safety and environmental protection. The NEB requires companies to anticipate, prevent, manage and mitigate potentially dangerous conditions associated with their pipelines. They design safety, emergency response, and integrity management programs, which are reviewed and audited by the NEB. The NEB evaluates regulated companies and their facilities to determine appropriate compliance verification activities. The NEB looks at potential consequences to people and the environment posed by a facility based on a number of criteria including its location, type, age, and operating history. The NEB also examines historical information on the company’s management of these consequences collected through previous compliance monitoring activities.
Companies inspect their systems regularly through a combination of external and internal inspection methods. Pipelines are run and monitored 24/7 from centralized control centers that gather pressure, volume and other information in real time. Systems may have manual or automatic shut-down capabilities.
Pipeline failures can occur for a variety of reasons, including corrosion, environmentally-assisted cracking, equipment failure, material defects, environmental incidents (such as landslides and washouts) and human interference (such as being hit by heavy machinery).
An important part of damage prevention for pipelines in Canada are the “one call” or “call before you dig” services that aim to build awareness and promote safe excavation practices in order to reduce damages to underground facilities, like pipelines. Since pipeline failures may occur through human interference, it is important to ‘call before you dig’ to ensure that work being performed near pipelines is being done safely, and legally. Making this call initiates a communications process that will identify the location of pipelines and other buried utilities and provide information on how to safely work around them.
The Canadian Common Ground Alliance has also been working with provincial and regional partners and industry associations on the “one call” issue across Canada.
Significant independent scientific research has been done on this subject, and the results show that bitumen-derived crude is no more corrosive in transmission pipelines than other crudes.
ASTM International – an internationally recognized agency that develops standards tests – recently published a guide (Guide G205) for measuring the corrosivity of crude oil under pipeline conditions, based on research conducted by several organizations, including the Canmet Laboratories of Natural Resources Canada. The guide describes test methods that enable a direct comparison of various crude oils, including bitumen.
Corrosivity in transmission pipelines comes from two sources – water content and erosive constituents, such as mud and sand. Those substances are removed before crude oil enters pipelines for transmission. Moreover, for transport in transmission pipelines, the sand and water content of oil is strictly controlled and the combined basic sediment and water content must be less than 0.5 per cent by volume.
In addition, crude oils, including bitumen-derived crudes, contain little or no carbon dioxide (CO2) or hydrogen sulphide (H2S).
Finally, pipelines carrying bitumen-derived crude oil operate at the same pressure levels as pipelines carrying other types of crude oil.
4. Responsibility for Clean-up of Pipeline Accidents
If the operator is at fault, the pipeline company is completely liable for all costs to clean up a pipeline spill. In Canada, there is no limit on the amount a company may be required to pay to clean up a spill. In addition to being financially responsible for clean up, the company may also be fined or be subjected to other enforcement actions such as Board Orders and Directives or prosecution.
The NEB’s regulatory oversight is also aimed at preventing incidents from happening. If an incident occurs, the NEB holds the company responsible and accountable for responding in a manner that protects the public, property and the environment, and for clean-up and site remediation. The NEB will take all available actions to protect the environment and the public, including revoking authorizations, imposing safety orders that restrict operations, issuing stop-work orders, pursuing criminal prosecution, and eventually through administrative monetary penalties (AMPs).
5. Regulation of Pipelines in Canada
Pipelines in Canada are regulated based on jurisdiction, according to Canada’s Constitution. The NEB, an independent federal agency created in 1959 by the Government of Canada, regulates pipelines that cross inter-provincial or international boundaries. This includes nearly 71,000 kilometres of inter-provincial and international pipelines within Canada. The NEB regulates approximately 100 pipeline companies in Canada.
Pipelines that are intra-provincial (i.e. are entirely within one province) are regulated by each individual province. This includes the smaller natural gas distribution lines which go to every house with a natural gas furnace or water heater. Alberta, for example, regulates close to 400,000 kilometres of pipelines.
This is a business decision made by commercial participants based on market demand for transportation capacity. Pipeline companies propose projects based on their predicted economic feasibility. Before any project for an international or inter-provincial pipeline can proceed it must be reviewed by the NEB to ensure that it is designed, constructed and operated in a manner that promotes safety and security, environmental protection and efficient energy infrastructure and is in the Canadian public interest.
Before any pipeline can be constructed in Canada, it requires permission from the appropriate federal or provincial regulator.
In making this determination, the NEB may consider information relating to:
- Environmental and socio-economic matters;
- Economics and financial matters;
- Land matters; and
- Any public interest that may be affected by granting or refusing the application.
The Government of Canada has a constitutional duty to consult Aboriginal groups whose Aboriginal and treaty rights may be adversely affected by any proposed project which requires a federal decision. The Government recognizes that Aboriginal groups and communities have the right to the opportunity to understand the impacts a project may have on their rights and interests; to express their views regarding the project; and to have their views considered and accommodated where appropriate.
For pipeline projects, the Government of Canada will rely on the NEB hearing processes, to the extent possible, to meet its duty to consult. The NEB’s filing requirements require applicants to consult with potentially-affected Aboriginal groups on all proposed projects and report to the NEB on the outcomes of their consultation.
Aboriginal groups are encouraged to bring forward their concerns about a proposed project to the regulatory process to ensure the NEB and the Government can consider their views. NEB staff members are available to explain the NEB’s processes and how to become involved in those processes.
The NEB encourages companies and Aboriginal groups to work together during the planning and design phases of a project to eliminate or mitigate impacts on Aboriginal interests. Aboriginal groups are encouraged to bring outstanding issues forward to the NEB for consideration in its decision-making or recommendation.
Where major projects may impact treaty or Aboriginal rights, the NEB implements its Enhanced Aboriginal Engagement procedures, which can include meeting to discuss Board process and opportunities to participate in processes related to specific applications. The NEB offers a Participant Funding Program to assist interested parties, including Aboriginal persons and groups, with participation in an oral facilities hearing.
If the NEB or Government of Canada approves a major pipeline, this approval will include a proposed general pipeline route or corridor. The NEB requires companies to communicate with and involve the public when they are developing projects. The level of public engagement should be appropriate for the setting, and the nature and magnitude of each project.
Pipeline companies are responsible for negotiating easements with landowners. These are land agreements that grant the company permission to place the pipeline in the ground within a certain location along the route. The landowner may be a farmer, municipality, province, or other individual. Landowners receive financial compensation for having the pipeline on their land. Farmers typically continue to farm the land over the pipeline after it has been buried, based on agreements with the company. These are private negotiations, where landowners and pipelines agree on compensation, exact pipeline location, and other details, including the activities that can occur on the pipeline right-of-way.
The NEB has an Appropriate Dispute Resolution (ADR) process which provides parties with an opportunity to resolve their issues through a Board staff member trained in mediation. ADR’s are not used in compensation disputes. If landowners and the pipeline company cannot agree on the exact terms of compensation for land use, either the landowner or the pipeline company can request binding arbitration from the Minister of Natural Resources (see the Pipeline Arbitration website at www.nrcan.gc.ca/energy/sources/natural-gas/pipeline-arbitration-secretariat/1601).
The NEB’s involvement in a project lasts for its complete lifecycle. The NEB strives to be responsive to Canadians and holds regulated companies accountable for compliance, including meeting project commitments.
Pipeline companies may study various routes and optimize the use of existing rights-of-way, such as public utility corridors, electrical transmission lines, other oil or natural gas pipelines, highways and railways. Companies will also gather input from affected landowners and land users and consider environmental and socio-economic impacts when proposing final pipeline routing for NEB approval.
Landowners may face some restrictions on use of the land on or near the pipeline in order to maintain public safety and environmental protection. For a farmer, this typically means the land can continue to be farmed, based on agreement with the company, including crossings by certain farm equipment. However, buildings or other structures cannot be installed immediately over the pipeline right-of-way, as this would cause safety hazards.
Pipeline companies are responsible for all aspects of a pipeline during its construction, operation and after the company stops using the pipeline. This means that companies are required to address all conditions that have the potential to harm people, property or the environment throughout the life-cycle of a pipeline.
The NEB regulates over the entire life-cycle of a project. The NEB strives to be responsive to Canadians and holds regulated companies accountable for compliance, including meeting regulatory requirements, project commitments and approval conditions. The NEB conducts compliance activities such as inspections and audits to verify that company actions are implemented appropriately.
Pipeline and facility owners and operators are responsible for the costs arising from an abandoned pipeline or facility. The costs include the abandonment work, which includes clean-up of the surrounding area until it is reclaimed to the acceptable environmental standards, and unforeseen events such as pipeline settlement or exposure that might occur after abandonment.
When the NEB reviews a pipeline abandonment application, the NEB will assess the environmental and socio-economic implications of abandonment. If the NEB approves the abandonment application, it will issue an Abandonment Order, with specific conditions that must be satisfied before the Order can take effect. These are designed to address any risks to public safety, property and the environment.
The Board currently has a public review process in place to examine pipeline abandonment issues such as the appropriate level of funds to be put aside by pipeline companies to cover the costs of abandonment. Pipeline companies will be required to begin collecting and setting aside funds for abandonment by 2015/2016.
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