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Maritimes and Northeast Pipeline Management Ltd. - Audit Report OF-Surv-OpAud-M124 01 [PDF 1995 KB]

File OF-Surv-OpAud-M124 0101
25 May 2012

Mr. William Penney
President
Maritimes & Northeast Pipeline Management Ltd.
Suite 1600 - 1801 Hollis Street
Halifax, NS  B3J 3N4
Facsimile: 902-425-4592

Dear Mr. Penney:

Maritimes & Northeast Pipeline Management Ltd. (M&NP)
Final Audit Report

The National Energy Board conducted an audit of M&NP’s management and protection programs as they relate to safety, integrity, crossings, public awareness and the environment.

The Board issued its Draft Audit Report on 31 August 2011 for M&NP’s review and comment. M&NP filed its response to the Draft Audit Report on 14 October 2011. In its response, M&NP was of the view that the conclusions in the Draft Audit Report related to its Management Review were based on an incomplete record and/or understanding of M&NP’s management and reporting structures and protocols. M&NP submitted that its Management Review process is better documented and more expansive than what was reflected in the Draft Audit Report. M&NP requested that the Board take its comments into consideration when developing the final audit report.

The Board remains of the view that M&NP’s Management Committee oversight does not meet the level of oversight described in the Board’s audit protocols which outline the expectations for the Management Review Element. The audit expectations for the Management Review Element provide that senior management should formally review the management and protection programs for continuing suitability, adequacy and effectiveness.

The Board has reviewed the supplementary material that M&NP provided to support its comments regarding management oversight. The Board is of the view that this information demonstrates that the Management Committee was receiving regular operational reports. However, the information does not demonstrate that M&NP’s senior management was reviewing management and protection programs (e.g. IMP, EHS MS and EPR Program) to meet the expectations for this element.

The Board notes M&NP’s comments to the effect that the NEB did not interview key representatives of M&NP’s senior management who are directly responsible for management of the certificate holder and who also report to the Management Committee. The Board’s audit notification letter dated 12 March 2010 was addressed to the President of M&NP. The Board’s audit protocols and procedures indicate that it is the company’s responsibility to identify which of its representatives should be interviewed. M&NP provided organizational charts and identified all parties to be interviewed for each program, including staff to answer on behalf of senior management. The Board maintains that M&NP was given adequate information and notice for establishing the interview list.

The Board also notes that M&NP had several opportunities to respond to this finding throughout the audit process. For example, in a closing meeting held with M&NP in Fredericton in October 2010, the Board’s Lead Auditor described the Management Review Finding as follows:

Since M&NP could not demonstrate an adequate process for formally reviewing its Crossing Program or Public Awareness Program and, as there is no reporting, auditing or analysis done of the crossing or awareness related duties by management, this element has been given the evaluation of non-compliant. Overall, M&NP was not able to demonstrate that, as certificate holder, it was formally reviewing its Operator to ensure it is meeting expectations and all regulatory obligations, and that systems continue to be suitable. (OPR-99 Section 55 and CSA Z662-07 Clause 10.2.2(h)(iii)).

The Board has incorporated many of the changes and corrections suggested by M&NP into the Final Audit Report with none of these changes impacting the original findings. Although M&NP submitted additional information regarding the finding of non-compliance for Management Review, the Board did not find the submission persuasive and will uphold its finding of non-compliance.

The Board has approved the attached Final Audit Report, Audit No. File OF-Surv-OpAud-M124 0101 dated 24 May 2012.

The Findings are based upon an assessment of whether M&NP was fulfilling the requirements of the:

• National Energy Board Act;
• Onshore Pipeline Regulations, 1999; 
• National Energy Board Pipeline Crossing Regulations, Part I and Part II;
• Canada Labour Code (CLC), Part II;
• Canadian Occupational Health and Safety Regulations made under Part II of the CLC;
• Safety and Health Committees and Representatives Regulations made under Part II of the CLC; and
• Company policies, practices and procedures developed and implemented to meet the intent of the regulations and National Energy Board Act.

Findings of “Non-Compliant” must be addressed by M&NP through the development and implementation of an appropriate Corrective Action Plan (CAP). The CAP must be filed for Board approval by 25 July 2012.

As the certificate holder, M&NP is accountable for overseeing and verifying that the policies and safety culture of the company continues to meet established targets for safety performance. A strong safety culture requires a clear line of sight between the certificate holder and the personnel operating those facilities. Through its review of the CAP, the Board expects M&NP to demonstrate a continual improvement of the organization’s safety culture.

The Board notes the cooperation it received from M&NP during the audit. If you require any further information or clarification, please contact Tim Sullivan - Team Leader, Operations Business Unit 403-299-3665 or toll-free at 1-800-899-1265.

Yours truly,

Sheri Young
Secretary of the Board

Attachment - Final Audit Report, Maritimes and Northeast Pipeline Management Ltd.

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Audit Report
OF-Surv-OpAud-M124 01

Maritimes and Northeast Pipeline Management Ltd.
Suite 1600 - 1801 Hollis Street
Halifax, Nova Scotia, B3J 3N4

25 May 2012

Table of Contents

• 1.0 Introduction: NEB Purpose and Framework
• 2.0 Audit Terminology and Definitions
• 3.0 Audit Objectives
• 4.0 Audit Scope
• 5.0 Audit Process
• 6.0 Audit Results
  • 6.1 Integrity Management Program
  • 6.2 Safety Program
  • 6.3 Environmental Protection Program
  • 6.4 Emergency Preparedness and Response Program
  • 6.5 Crossing Program
  • 6.6 Public Awareness Program
  • 6.7 Management Review
• 7.0 Conclusions
• 8.0 Abbreviations

Appendices

• Appendix I: Integrity Management Program Audit Evaluation Table
• Appendix II: Safety Program Audit Evaluation Table
• Appendix III: Environmental Protection Program Audit Evaluation Table
• Appendix IV: Emergency Preparedness and Response Program Audit Evaluation Table
• Appendix V: Crossing Program Audit Evaluation Table
• Appendix VI: Public Awareness Program Audit Evaluation Table
• Appendix VII: Management Review Audit Evaluation Table
• Appendix VIII: Company Representatives Interviewed
• Appendix IX: Documents Reviewed

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1.0 Introduction: NEB Purpose and Framework

The National Energy Board’s (the Board or the NEB) purpose is to promote safety and security, environmental protection, and efficient energy infrastructure and markets in the Canadian public interest within the mandate set by Parliament in the regulation of pipelines, energy development and trade.

The Onshore Pipeline Regulations, 1999 (OPR-99) came into force 1 August 1999 reflecting the NEB’s intent to progress from prescriptive regulation to management system (MS) based regulation. To evaluate compliance with the regulations, the NEB undertakes program audits of its regulated companies. Following the audits, companies are required to submit and implement a Corrective Action Plan (CAP) to address and mitigate any findings of non-compliance. The results of the NEB audits are used in the NEB risk-based life cycle approach to compliance planning.

The NEB requires that each company be able to demonstrate the adequacy and implementation of the methods they have selected and employed to achieve compliance.

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2.0 Audit Terminology and Definitions

• Audit: A systematic, independent and documented process for obtaining evidence and evaluating it objectively to determine the extent to which audit criteria are fulfilled.
• Corrective Action Plan (CAP): Addresses the non-compliances identified in the Audit Report and explains the methods and actions which will be used to “correct” them.
• Operator: Westcoast Energy Inc., a wholly owned subsidiary of Spectra Energy Corp (Spectra).^[1]
• Program: A documented set of processes and procedures to regularly accomplish a result. The program outlines how plans and procedures are linked and how each one contributes towards the result.
• Process: A systematic series of actions or changes taking place in a definite order and/or manner (i.e., procedure), and directed towards a result.
• Procedure: A documented series of steps of a process followed in a regular and defined order and/or manner allowing individual activities to be completed in an effective and safe manner. The procedure will also outline roles, responsibilities and authority required for completing each step.
• Finding: The evaluation or determination of the adequacy of programs or elements in meeting the requirements of the National Energy Board Act (NEB Act), Regulations and Part II of the Canada Labour Code (CLC).
• Compliant: A program element meets legal requirements. The company has demonstrated that it has developed and implemented its programs, processes and procedures to meet legal requirements.
• Non-Compliant: A program element does not meet legal requirements. The company has not demonstrated that it has developed and implemented its programs, processes and procedures to meet the legal requirements. A CAP is required.
• Compliant with recommendation: An opportunity to improve practices or to change practices that are currently in compliance but have the potential, based on professional judgment, to lead to non-compliance. A CAP is not required.

[1] For the purposes of this audit report Spectra will refer to Spectra Energy Corp. and any company related to or controlled by it.

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3.0 Audit Objectives

The objectives of the audit were to determine Maritimes & Northeast Pipeline Management Ltd.’s (M&NP) level of compliance with: the NEB Act, the OPR-99, the National Energy Board Pipeline Crossing Regulations, Part I and the National Energy Board Pipeline Crossing Regulations, Part II (either or both are hereinafter referred to as “PCR”), and regulations made under Part II of the CLC, in relation to the M&NP System.

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4.0 Audit Scope

The scope of this audit included M&NP’s integrity, safety, environment, emergency preparedness and response, crossings and public awareness programs which have been developed and implemented for the M&NP System to meet the requirements of the NEB Act, OPR-99, PCR and Part II of the CLC.

The NEB-regulated M&NP System includes a total of 874 kilometers of transmission pipeline built to transport natural gas from developments offshore Nova Scotia to markets in Atlantic Canada and the northeastern United States (U.S.). The pipeline system consists of a 30 inch diameter underground mainline running from Goldboro, Nova Scotia through Nova Scotia and New Brunswick to the Canadian - U.S. border. The system consists of:

• Mainline - 567 km (30 inch);
• Point Tupper Lateral - 60 km (8 inch/6 inch);
• Halifax Lateral - 124 km (12 inch);
• Saint John Lateral - 103 km (16 inch);
• Moncton Lateral - 12 km (8 inch); and
• Utopia Spur - 8 km (4 inch).

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5.0 Audit Process

The Board decided to audit M&NP by using a risk-based approach that included a review of documented performance indicators. Additionally, the Board also considered the time period since the Board last audited M&NP. The last audit took place in 2001-2002.

The NEB notified M&NP in a letter dated 18 March 2010 of its intent to conduct an audit on the NEB-regulated M&NP System. On 29 April 2010, an opening meeting was conducted with representatives from M&NP in Saint John, New Brunswick to discuss the audit objectives, scope and process; and to initiate the development of a schedule for conducting the site visits and staff interviews. For a list of M&NP staff interviewed, refer to Appendix VIII. For a list of documents and records reviewed for each program audited, refer to Appendix IX.

M&NP is headquartered in Halifax, Nova Scotia and operates an additional business office in Waltham, Massachusetts. M&NP is the certificate holder for this pipeline system. M&NP entered into an Operating and Maintenance (O&M) Agreement with St. Clair Pipelines (1996) Ltd. With the dissolution of St. Clair Pipelines (1996) Ltd., this agreement was transferred to Westcoast Energy Inc.

The Operator developed and implemented the programs that were evaluated during this audit. Auditors interviewed Spectra’s employees because they were designated to carry out the responsibilities on behalf of M&NP pursuant to the O&M Agreement. To accurately reflect the operation, the audit evaluated the implementation of the programs by the Operator in each of the audit evaluation tables appended to this Audit Report, and determined compliance status accordingly. As such, findings of “non-compliant” by this audit constitute an assessment of the Operator’s implementation of the programs. The Board holds M&NP, as the certificate holder, accountable for the provision of oversight, and confirming the development and implementation of corrective actions to address all findings of “non-compliant.”

M&NP, as the certificate holder, is ultimately accountable for verifying that the programs meet regulatory requirements. The Board holds M&NP accountable to provide oversight to confirm that the programs implemented are effective in meeting its regulatory requirements. To accurately capture the role of the certificate holder, M&NP is evaluated against the expectations outlined in Element 5.1 - Management Review.

 

Audit Activities, Locations and Dates

Audit Activities, Locations and Dates

Audit Notification Letter - 18 March 2010 Audit Opening Meeting (Saint John, NB) – 29 April 2010 Document and Records Review (Calgary, AB) – 1 June to 5 July 2010 Head Office Interviews (Waltham, MA) – 6 to 7 July 2010 Field Verification of All Programs: Halifax, NS – 8 July 2010 New Glasgow, NS – 8 to 9 July 2010 Fredericton, NB – 13 to 14 July 2010 Audit Close-Out Meeting (Fredericton, NB) – 28 October 2010

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6.0 Audit Results

For evaluation purposes, the NEB management requirements have been organized in a table format and include 5 elements and 16 sub-elements:

Table shows 5 elements and 16 sub-elements

1) Policy and Commitment

1.1 Policy and Commitment Statements

2) Planning

2.1 Hazard Identification, Risk Assessment and Control 2.2 Legal Requirements 2.3 Goals, Targets and Objectives

3) Implementation

3.1 Organizational Structure, Roles and Responsibilities 3.2 Management of Change 3.3 Training, Competence and Evaluation 3.4 Communication 3.5 Documentation and Document Control 3.6 Operational Control - Normal Operations 3.7 Operational Control - Upset or Abnormal Operating Conditions

4) Checking and Corrective Action

4.1 Inspection, Measurement and Monitoring 4.2 Corrective and Preventive Actions 4.3 Records Management 4.4 Internal Audit

5) Management Review

5.1 Management Review

 

M&NP Audit Findings Table

M&NP Audit Findings Table
I-Integrity	II-Safety	III-Environment	IV-Emergency Management	V-Crossings	VI-Public Awareness
1.0 POLICY AND COMMITMENT
1.1 Policy & Commitment Statement
Compliant	Compliant	Compliant	Compliant	Compliant	Compliant
2.0 PLANNING
2.1 Hazard Identification, Risk Assessment and Control
Compliant	Compliant	Compliant (rec)	Non-Compliant	Compliant	Compliant (rec)
2.2 Legal Requirements
Compliant	Non-Compliant	Non-Compliant	Compliant	Non-Compliant	Non-Compliant
2.3 Goals, Objectives and Targets
Compliant	Compliant (rec)	Compliant (rec)	Compliant	Compliant	Compliant
3.0 IMPLEMENTATION
3.1 Organizational Structure, Roles and Responsibilities
Compliant	Compliant	Non-Compliant	Compliant	Compliant (rec)	Compliant (rec)
3.2 Management of Change
Compliant	Non-Compliant	Non-Compliant	Non-Compliant	Non-Compliant	Non-Compliant
3.3 Training, Competence and Evaluation
Compliant	Compliant	Non-Compliant	Compliant	Compliant (rec)	Non-Compliant
3.4 Communication
Compliant (rec)	Non-Compliant	Non-Compliant	Compliant (rec)	Compliant (rec)	Compliant (rec)
3.5 Documentation and Document Control
Non-Compliant	Compliant (rec)	Non-Compliant	Compliant	Compliant	Compliant
3.6 Operational Control - Normal Operations
Compliant	Compliant	Non-Compliant	Compliant	Compliant	Compliant
3.7 Operational Control - Upset or Abnormal Operating Conditions
Compliant	Compliant	N/A	Compliant	N/A	N/A
4.0 CHECKING AND CORRECTIVE ACTION
4.1 Inspection, Measurement and Monitoring
Compliant	Compliant	Compliant (rec)	N/A	Non-Compliant	Non-Compliant
4.2 Corrective and Preventive Actions
Compliant	Compliant	Compliant	Non-Compliant	Non-Compliant	Compliant
4.3 Records Management
Compliant	Compliant	Compliant	Compliant	Compliant	Compliant (rec)
4.4 Internal Audit
Compliant	Compliant (rec)	Non-Compliant	Compliant	Non-Compliant	Non-Compliant
5.0 MANAGEMENT REVIEW
5.1 Management Review
Non-Compliant
Compliant (rec.): Compliant with Recommendation

These elements correspond to legal requirements and are arranged to match standard management system elements to aid in the evaluation of the requirements. Each discipline was audited against each of these elements. The results of these assessments are provided in the audit evaluation tables appended to this Audit Report. Element 5.1 Management Review was assessed for M&NP independent of the disciplines and is presented in a separate table also appended to this Audit Report (Appendix VII). A summary of the results is presented below.

6.1 Integrity Management Program

Although review of the Integrity Management Program (IMP) activities indicates that it has benefited from the formal adoption of Annex N of CSA Z662-07, the Operator could not demonstrate that it has a process to identify and revise changes to documentation where failure to make immediate changes may result in negative consequences. Also, the Operator should modify its internal audit process to reflect the recommendations made in the evaluation of Element 4.4 Internal Audit to remain in compliance in the long term.

For the details associated with the deficiency identified and an assessment of the overall IMP refer to Appendix I: M&NP Integrity Management Program Audit Evaluation Table.

6.2 Safety Program

The audit determined that M&NP’s Operator is implementing a Safety Program. The findings and recommendations relate to formal planning and management requirements such as adequate and formal processes for identification of legal requirements, assurance of professional resources, development of management of change (MOC) processes, communication, development of compliant audit processes and formal oversight of the program by the certificate holder.

For the details associated with these deficiencies and an assessment of the system as a whole, refer to Appendix II: M&NP Safety Program Audit Evaluation Table.

6.3 Environmental Protection Program

M&NP and its Operator have developed an integrated Environment, Health and Safety (EHS) MS. Its commitment to environmental protection was evident during interviews in Head Office and in the field locations. Staff was very knowledgeable and intend on meeting this commitment.

In addition to the deficiencies noted above in Section 6.2 Safety Program, the following deficiencies were identified for the Environmental Protection Program (EPP):

• a lack of formalized environmental responsibilities and training requirements for the EHS Support Specialist and regional technical staff that implement the EPP;
• no formal document adopted to describe the environmental procedures for the operations and maintenance of the pipeline;
• inability to demonstrate that all controls had been developed to assure protection of the environment; and
• inability to demonstrate that the internal audits assesed the EPP for adequacy and that they were inclusive of all M&NP regulatory requirements.

Formalization of the EPP would help ensure M&NP develops all the appropriate operational controls and would assist M&NP in defining the appropriate roles and responsibilities for professional and technical staff.

For specific details related to these deficiencies and an assessment of the system as a whole refer to Appendix III: M&NP Environmental Protection Program Audit Evaluation Table.

6.4 Emergency Preparedness and Response Program

The audit verified that M&NP’s management demonstrated commitment to and support of the Emergency Preparedness and Response (EPR) Program through a well-documented program, active means of internal and external communication, and regular exercises to confirm continuing suitability of the program.

The deficiencies included:

• not having appropriately implemented its process for identifying hazards and determining appropriate control measures for emergency response planning;
• not having a fully-developed and implemented MOC program; and
• lack of a process for tracking, assigning actions and verifying completion of actions from the lessons learned in its table top and full-scale emergency response exercises.

For specific details related to these deficiencies and an assessment of the EPR program refer to Appendix IV: M&NP EPR Program Audit Evaluation Table.

6.5 Crossing Program

The Crossing Program is considered part of the operational and maintenance activities and is documented in the Operator’s O&M Manual and EHS MS. It was verified that crossing activities have been included in the hazards identified and procedures implemented within the O&M Manual and EHS MS. Because the program is not a stand-alone program, but is integrated as part of the IMP and EHS MS, it is important that each element developed for these disciplines (integrity, safety and environment) has adequately integrated the PCR. It was noted in the assessment of the IMP and EHS MS that the PCR were not being appropriately addressed.

The deficiencies included:

• lack of a process to identify and integrate PCR requirements into its Crossing Program;
• lack of a formal MOC process;
• inability to demonstrate that it has inspected all facilities that were permitted on the Right-of-Way;
• inability to demonstrate that it has implemented its process for reporting unauthorized activity;
• no audit to confirm compliance with the PCR; and
• lack of a process to assess the Crossing Program for continuing suitability, adequacy and effectiveness.

For specific details related to these deficiencies and an assessment of the system as a whole refer to Appendix V: M&NP Crossing Program Audit Evaluation Table.

6.6 Public Awareness Program

The Operator’s Public Awareness (PA) Program is documented in its PA Plan and is developed and executed within each of the regions (New Brunswick and Nova Scotia) by the regional Public Awareness, Emergency Preparedness and Lands Coordinators. Because knowledgeable staff manage the program, the appropriate hazards have been identified and are managed appropriately within each region. However, various elements of the PA Program were not fully and formally developed because there is no over-arching system that has incorporated the PCR.

The deficiencies included:

• lack of a process to identify and integrate PCR requirements into its Public Awareness Program;
• lack of a formal MOC process;
• inability to demonstrate that it has included training for PA activities in its Training Program to confirm its ongoing effectiveness;
• no audit to confirm compliance with the PCR; and
• lack of a process to assess the PA Program for continuing suitability, adequacy and effectiveness.

For specific details related to these deficiencies and an assessment of the system as a whole refer to Appendix VI: M&NP Public Awareness Program Audit Evaluation Table.

6.7 Management Review

M&NP is the certificate holder and therefore it was held to the expectations described in the Management Review. It is expected that the certificate holder demonstrate that it is providing informed direction based on its knowledge of the hazards, operational performance and requirements. In the case of the M&NP System, although it was noted that the Operator was conducting formal reviews for the IMP, EHS MS and EPR Programs, it could not be demonstrated that the Management Committee provided direction based on the results of these reviews. In addition, it could not be verified that there were any formal reviews being conducting of the Crossing or PA Programs. These two programs were being managed autonomously in each of the regions (NB and NS) by the Coordinators; there was no formal reporting or reviews being completed by senior management of these programs.

The audit also identified that the Management Committee is undertaking some of the required oversight expected by the Board, in that the Management Committee reviews and monitors operational activities including performance goals at annual meetings. However, it could not be demonstrated that the Management Committee is actively and formally confirming that the programs are suitable, adequate and effective in meeting its regulatory obligations as outlined in the scope of this audit.

For the details of the non-compliance indentified refer to Appendix VII: M&NP Management Review Audit Evaluation Table.

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7.0 Conclusions

Except where noted, the operational programs of the M&NP system were functioning in compliance with regulatory expectations. While all Non-Compliant findings described in the appendices require corrective action plans and resolution, of particular note is the Non-Compliant findings described in Appendix VII, Management Review. It is the Board’s view that formally-documented and active oversight and direction by the certificate holder is essential to the ongoing safe operation of the pipeline for which it is accountable. Adequate Management Review should lead M&NP to resolve other Non-Compliant findings noted in this report.

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8.0 Abbreviations

ATV: All-terrain Vehicle
CAP: Corrective Action Plan
CLC: Canada Labour Code
COSHR: Canada Occupational Health and Safety Regulations
CP: Cathodic Protection
CSA: Canadian Standards Association
EHS: Environment Health and Safety
EHSC: Environment Health and Safety Committee
EM: Emergency Management
EMO: Emergency Measures Organization
EPASS: Environment Performance and Safety System
EPR: Emergency Preparedness and Response
EPZ: Emergency Planning Zone
ERP: Emergency Response Plan
ILI: In-Line Inspection
IMP: Integrity Management Program
IWOL: Incident Without Loss
JHA: Job Hazard Assessment
JSA: Job Safety Analysis
LMS: Learning Management System
M&NP: Maritimes and Northeast Pipeline Management Ltd.
MA: Maine
MOC: Management of Change
MS: Management System
NB: New Brunswick
NEB: National Energy Board
NS: Nova Scotia
O&M: Operation and Maintenance
O&MSM: Operations and Maintenance Specifications Manual
OHS: Occupational Health and Safety
OPR-99: Onshore Pipeline Regulations, 1999
PA: Public Awareness
PCR: National Energy Board Pipeline Crossing Regulations Part I and Part II
PIOC: Pipeline Integrity Oversight Committee
PRS: Pressure Reducing Station
RoW: Right-of-Way
SAIL: System and Integrity Logging
SCC: Stress Corrosion Cracking
SET: Spectra Energy Transmission
SOP: Standard Operating Procedure
U.S.: United States of America

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