Warning Letter to Canadian Natural Resources Limited (CNRL)

OF-Surv-EnfPrg-C298 0101
22 March 2019

President
Canadian Natural Resources Limited
Suite 2500
855 – 2 Street SW
Calgary, Alberta  T2P 4J8

Warning Letter to
Canadian Natural Resources Limited (CNRL)

Dear :

As part of the National Energy Board’s (the Board or NEB) 2018-2019 audit program, the NEB notified CNRL on 1 August 2018 of its intent to audit the company. In this letter, the Board indicated that the audit would focus on the establishment and implementation of an Integrity Management Program as part of CNRL’s management system pursuant to the National Energy Board Onshore Pipeline Regulations (OPR). 

At the 4 January 2019 audit close-out meeting, NEB auditors discussed, among other things, their finding of non-compliance to section 6.6 of the OPR, which states:

• 6.6 (1) A company shall complete an annual report for the previous calendar year, signed by the accountable officer, that describes
  • (a) the performance of the company’s management system in meeting its obligations under section 6 and the company’s achievement of its goals, objectives and targets during that year, as measured by the performance measures developed under paragraphs 6.5(1)(b) and (v); and
  • (b) the actions taken during that year to correct any deficiencies identified by the quality assurance program established under paragraph 6.5(1)(w).
• (2) No later than April 30 of each year, the company shall submit to the Board a statement, signed by the accountable officer, indicating that it has completed its annual report.

Specifically CNRL has not completed an annual report for 2017 which complies with the requirements of subsection 6.6(1) of the OPR.

Relevant Facts

As part of the audit activities of CNRL's Integrity Management Program, NEB auditors inquired about the company's annual management system review process and requested to see a copy of the company’s 2017 Annual Report (the “2017 Report”) prepared pursuant to subsection 6.6(1) of the OPR. In this regard, we note that CNRL had previously provided a statement on 24 April 2018, signed by its Accountable Officer (AO), indicating that the 2017 Report had been completed. In response, CNRL produced a copy of a report titled “2017 Stewardship Report to Stakeholders” (the “Stewardship Report”) to the Board on 18 October 2018 and indicated that this was the 2017 Report. 

As a starting point, the report, which is a publicly available document on CNRL’s website^{Footnote 1} and which appears to be a general filing relating to corporate responsibility, only provides general information regarding the company’s operations in Canada, the United Kingdom and offshore Africa. It is plain from the face of the document that it is not an annual report prepared for the purpose of satisfying section 6.6 of the OPR. Accordingly, unless CNRL has an alternate report, no annual report was completed.

Even if the Stewardship Report constitutes an annual report, it falls significantly short of the requirements set forth in subsections  6.6(1) and (2) of the OPR. To begin with, section 6.6(1) of the OPR requires that the AO sign the report. The Stewardship Report is unsigned. Moreover, from a substantive perspective, the Stewardship Report does not comply with the OPR’s broad requirements that the report must describe (i) the performance of CNRL’s management systems in meeting its obligations under section 6 and CNRL’s achievement of its goals, objectives and targets during 2017 (as measured by the performance measures developed under subsections  6.5(1)(b) and (v) of the OPR); and (ii) the actions taken by CNRL during 2017 to correct any deficiencies identified by the quality assurance program established under subsection 6.5(1)(w) of the OPR. 

The Stewardship Report, despite providing a summary of certain safety and environmentally related programs and activities:

• (a) fails to describe CNRL’s management systems in a manner that would permit an adequate assessment of its performance. Among other things the report:
  • (i) does not permit an assessment of CNRL’s performance under the OPR with respect to NEB-regulated assets since it aggregates data with respect to operations outside of Canada;
  • (ii) does not describe, with sufficient particularity, CNRL’s specific goals, objectives and targets during 2017 for its management systems to enable an assessment of the management system’s performance;
  • (iii) does not describe, with sufficient particularity, the performance measures developed under subsection 6.5(1)(b) and (v) of the OPR nor the specific outcomes with respect to such measures to enable an assessment of the performance of the management system;
  • (iv) does not describe or evaluate CNRL’s process for identifying and analyzing all hazards and potential hazards pursuant to subsection 6.5(1)(c) of the OPR;
  • does not describe or evaluate CNRL’s process for evaluating and managing risks associated with hazards that have been identified pursuant to subsection 6.5(1)(d) of the OPR;
  • (v) does not describe or evaluate CNRL’s process for establish or implementing a process for developing and implementing controls to prevent, manage and mitigate identified hazards and risks and for communicating said controls pursuant to subsection 6.5(1)(f); and
• (b) fails to describe any deficiencies identified by the quality assurance program established under subsection 6.5(1)(w) of the OPR nor any steps taken in 2017 to correct said deficiencies.

In short the Stewardship Report, even if it is the 2017 Report, does not comply with the requirements of an annual report in either form or substance. As a result the NEB, at the 4 January 2019 audit close-out meeting with CNRL, communicated its finding that CNRL was non-compliant with s. 6.6 of the OPR. The NEB Lead Auditor also advised CNRL during that meeting that CNRL’s failure to provide the 2017 Report constituted a violation of the OPR and that this matter has been referred for enforcement action.  

Conclusion

This warning indicates a non-compliance with section 6.6 of the OPR. It is intended to bring this matter to your attention in order for you to take the necessary preventive measures to ensure compliance with the National Energy Board Act and its associated Regulations. As part of the 2018 Integrity Management Program Audit, this finding has been included in the report to the Board. 

The company is expected to address its non-compliance in accordance in its forthcoming corrective and preventive action plan, and submit its 2018 Annual Report to the NEB for review and assessment to ensure that it meets all applicable regulatory requirements.

At this time, the NEB wishes to emphasize the key role of the AO in ensuring CNRL’s regulatory compliance. The position of AO is fundamental to the proper function of CNRL’s management systems in compliance with the requirements of the OPR and it is incumbent on this individual to rigorously fulfill his role in this respect. 

We refer you to the 24 April 2018 statement of the AO in this regard:

We require the AO’s adherence to the foregoing statement. 

Please be advised that this letter will form part of CNRL’s compliance history, and any future non-compliances may result in further enforcement action, including administrative monetary penalties, in accordance with the NEB's enforcement policy and procedures. More information on the Board's compliance and enforcement activities are available on our website.

If you have any questions regarding this review or any related topic, please contact , Technical Specialist – Investigations, by telephone toll-free at 1-800-899-1265 or directly at , or by email at .

Yours sincerely,

Director, Audit, Enforcement and Investigations
Systems Operations Business Unit

c.c. , CNRL Lead Regulatory Coordinator
, CNRL Vice-President, Legal
, NEB Lead Auditor

Date modified:

2021-07-20