April 1, 2015 / 8:09 PM / 2 years ago

Canada pipeline regulator reports looming budget crunch

OTTAWA (Reuters) - Canada's national pipeline regulator is making plans to cut its annual spending by 24 percent and workforce by 15 percent over the next two years as a pool of temporary funding runs dry, according to a report released this week.

An annual report presented to Parliament said the regulator, the Calgary-based National Energy Board (NEB), would run out of temporary funding to improve safety and security on pipelines in 2017-2018. (bit.ly/1xzPbbM)

The government announced the temporary safety oversight funding in its 2012 budget, adding up to C$30.3 million ($24.02 million) over five years.

A NEB spokesman said it implemented a temporary staffing strategy for the duration of the funding and would seek an extension if required. Without new funding, its workforce would drop from about 471 to 398 full-time equivalent workers.

A spokesman for the federal natural resources minister, who is responsible for the NEB, said there were no cuts planned as the funding had not yet come up for renewal.

The board is an independent body with quasi-judicial powers set up in 1959 to ensure safety, security, environmental protection of Canada's pipeline system.

While the regulator recovers about 90 percent of its costs from the companies it regulates, it needs government approval to increase its budget, which was C$81.7 million in 2013-2014.

The board's chairman, Peter Watson, said in the report that the regulator was facing "resource constraints" due to an increasing number of complex pipeline projects that it has to review with tight 15-month deadlines.

Major projects include TransCanada Corp's Energy East pipeline and Kinder Morgan Inc's Trans Mountain expansion.

The projected cuts come at a time when the board said it continues to see an increased workload. It is also expected to take on new responsibilities under proposed legislation that would require it to ensure pipeline companies have adequate resources to pay for damages in case of a spill.

Canada's Conservative government is expected to release this year's federal budget later this month.

Four witnesses, including Jim Donihee, the chief operating officer of the Canadian Energy Pipeline Association, an industry lobby group, told parliamentary hearings this week that the regulator needed more money to do its job.

"As these additional responsibilities come to the NEB, clearly there is to be a requirement for additional funding," said Donihee, who is a former NEB executive.

($1 = 1.2612 Canadian dollars)

Editing by Jeffrey Hodgson and Lisa Shumaker

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