Canadian Energy Emergency Response

›› APEC Energy Working Group Vancouver, Canada 9–13 May 2011

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Purpose

To describe Canadian government responses to domestic and international oil supply disruptions

To indicate the authorities available to the Minister of Natural Resources Canada (NRCan)

Outline of current activities

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Under Canada’s Constitution Act Federal government

Policies of national interest (economic development; security; and S&T)

Frontier lands resource management

Corporate taxation policies Management of uranium and

nuclear power International and inter-provincial

trade, commerce and environmental impacts

National Energy Board (NEB) as Federal Regulator

Duty to consult First Nations

Provincial governments Resource ownership within

provincial land borders Manage pace and extent of

resource development Manage and regulate intra-

provincial energy infrastructure Intra-provincial electricity and

natural gas utility regulation Manage intra-provincial trade,

commerce, and environmental impacts

Taxation and royalty powers

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Shared powers … Federal and Provincial governments

Work together to get overall policy and fiscal framework consistent and stable

Share responsibility for environmental assessments of major projects where federal ‘triggers’ are impacted

However, provinces can, amongst other things, Regulate commodity prices within their borders Control the rate of resource extraction - surge production -

and regulate use

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On-Going Security Activities NRCan works with:

The private sector, provincial and territorial governments, energy regulators, and industry to take the steps necessary to assure the integrity of critical energy facilities

The U.S. and Mexico on international initiatives for North American critical energy infrastructure protection and emergency management

Public Safety Canada to implement the National Strategy and Action Plan for Critical Infrastructure

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Emergency Management in Canada The Emergency Management Act requires each Minister to identify

risks to their responsibilities and develop plans to mitigate those risks

Public Safety Canada’s Federal Emergency Response Plan (FERP) coordinates a whole-of-government response during an emergency for all-hazards

A FERP annex; Emergency Support Function 4 - Energy Production and Distribution (ESF 4): Identifies NRCan as the lead federal department on energy emergencies Highlights roles and responsibilities of key stakeholders during an energy

emergency

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Emergency Management at NRCan Emergency Management Planning

Directive (EMPD) Provides the governance structure

and roles within NRCan during an emergency

Emergency Management Plan 8: Energy Supply Disruption (EMP 8) Identifies stakeholders, jurisdictions,

responsibilities, activation and response capabilities specific to an energy emergency

Standard Operating Procedures Contact lists Support specific situations e.g.

International Energy Agency

OperationalNRCan Emergency Management Plans(Sector-level)

TacticalStandard Operating Procedures

(Branch/Division-level)

StrategicNRCan EMPD

(Department-level)

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Canada is a Dual Market … Canada is a major net oil exporter – not required by

International Energy Agency (IEA) to hold a Strategic Petroleum Reserve

But… 43% of domestic refinery receipts are imported - these are declining as east coast production ramps up, and Ontario refineries process more oil sands derived crude 52% of oil imports come from OPEC countries (such as

Algeria, Saudi Arabia, Iraq); and, 21% of oil imports come from the North Sea

Adequate commercial stocks available (next slide)

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Domestic Supply Disruption … At local or regional level … Industry has primary responsibility and works market

mechanisms and transactions to meet needs Price response Product swaps Imports

Industry has commercial stocks to draw on: About 10 days of crude oil stocks for refineries About 40 days of finished petroleum product stocks

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If Industry Cannot Manage Domestic Outage…

Provinces are required to take all reasonable steps to minimize energy consumption and secure alternative energy supplies

To do this, the province would likely have needed to declare a state of emergency, and exercise its own emergency powers

If necessary, Federal emergency powers can be used but require broad provincial consultation to ensure situation is a “market failure” This situation has never occurred

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International Oil Supply Disruption

IEA would choose the level of response Canada would:

At a minimum maintain export flows at pre-crisis levels as part of our supply contribution

To do this: For global shortages up to 2 MM bpd, Canada will decrease

domestic use through policy driven demand restraint and other measures

For global shortages in excess of 2 MM bpd, Canada will contribute additional supplies to the extent possible – via a surge or increased production and other measures

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In Cases Of Severe Shortage, A State Of Emergency Could Be Declared… If international (or domestic) shortage is severe and poses

national economic concerns, Canada can declare: A National Emergency under the Energy Supplies Emergency Act

and use the Energy Supplies Allocation Board (ESAB) ESAB has broad-ranging powers to control all aspects of crude oil and

petroleum product movements, including: Redirecting crude oil to ensure that all refiners experience similar shortages Directing companies to draw down inventories to meet a short-term shortage

A Public Welfare Emergency under the Emergencies Act and use Emergency Orders and Regulations (EMORS)

The government could order the requisition, use or disposal of property including energy commodities

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EMORs vs. ESABEMORS The preferred response tool for an

oil disruption in a declared state of emergency

Only response option for natural gas Offers the flexibility of tailoring the

response to the circumstances Can be implemented quickly in

response to a higher probability short-term disruption.

ESAB Commonly referred to as the federal

government’s emergency response mechanism

Designed to respond to the kind of major long-term disruption of world oil markets of the 1970s

Regulations are quite elaborate, and cumbersome

Depending on the circumstances and the required action, the Minister of NRCan would suggest the most

appropriate instrument to use – the Energy Supplies Emergency Act or the Emergencies

Act

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Decision Process

Minister of NRCan would Provide advice to Cabinet and Prime Minister on the need

to declare an energy-related national emergency

Given circumstances, decide which instrument should be used –The Energy Supplies Emergency Act or The Emergencies Act

Recommend appropriate regulation(s)

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Summary Canada has a diverse mixture of energy products to rely upon

(uranium, coal, hydro, natural gas, oil) Canada is a significant supplier and consumer of energy

Canada’s federal government holds significant emergency powers to address energy supply disruptions

But first, we work with and encourage voluntary solutions by Industry and the Provinces to address energy supply disruptions