Purpose

1. Canadian Energy Emergency Response››APEC Energy Working Group Vancouver, Canada 9–13 May 2011

2. 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

3. 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 Under Canada’s Constitution Act

4. 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

5. 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

6. 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

7. 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 Emergency Management at NRCan

8. 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)

9. 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

10. 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

11. 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

12. 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

13. EMORS 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 EMORs vs. ESAB 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

14. 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)

15. 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