An Alberta Energy Super Board: Effective regulatory streamlining or smoke and mirrors

In the discussion paper, Enhancing Assurance, Developing an Integrated Energy Resource Regulator, which the Alberta government released in May, it was proposed that regulatory responsibilities for oil and gas development and production be integrated as a new entity (Alberta Government,2011). According to the proposal, the regulatory responsibilities of the Energy Resources Conservation Board’s (ERCB), including assessment of applications for drilling, proposed schemes for recovering oil or gas resources (where potential recovery of resources in geological formations in close proximity could be negatively impacted), oil sands facilities, and related adjudication processes, would be transferred to a single regulator. Alberta Environment’s (AENV) responsibilities for energy activities such as issuing licenses and authorizations under the Water Act and the Environmental Protection and Enhancement Act, would also be transferred to the new regulator. AENV would, however, continue to provide such services with respect to non-energy activities such as forestry and mining. Similarly, Sustainable Resource Development’s (SRD) responsibilities regarding public land dispositions (including remediation and reclamation), geographical authorizations, and right of- entry permits for energy activities would be transferred.

In 1995, then Premier Ralph Klein sought to quell criticism of the efficiency of energy regulation in the province by integrating the ERCB’s oil, gas, and electricity regulatory responsibilities with the Public Utilities Board in the form of “Alberta Energy and Utilities Board” (AEUB). By 2008, faced with criticism over the time required for the AEUB to respond to project applications, former Premier Ed Stelmach and his government split the board into the ERCB, regulating the petroleum and coal mining industries, and the Alberta Utilities Commission, responsible for regulatory oversight of energy utilities. Having acknowledged in 2008 that the single board approach could not resolve the timeliness issues surrounding regulation of the energy industry, it is remarkable that the government is now flirting with the concept of an energy super board.1

The Alberta government argues that if proponents of new oil and natural gas exploration and production projects must only deal with a single regulator when filing applications and monitoring oil and gas operations, the Alberta economy will benefit as a result of “greater clarity, efficiency, and effectiveness” in the energy regulatory process (Alberta Government, 2011). Reducing delays for drilling and other energy project approvals is commendable, but instead of touting a super regulator as the remedy for Alberta’s pressing regulatory problems, the government should be focusing on the reasons why the present system is not functioning as efficiently as it could.

The government needs to simplify existing regulations and remove duplication and overlaps in ERCB, AENV, and SRD information requirements. Further, if the ERCB, the AENV, and/or SRD are understaffed (as suggested by the time that it reportedly takes to examine applications and reach decisions) the government must ensure that they have sufficient well-trained, experienced professionals to assess applications and proposals and to monitor and report on ongoing operations in a timely manner.

There is little doubt that Alberta needs to do something to break the regulatory log jam.  This is underscored by results from the Fraser Institute’s 2011 Global Petroleum Survey which suggest that administration of regulations pertaining to Alberta’s energy sector is a major source of frustration to present and would-be investors (Angevine and Cervantes, 2011).  In fact, the Regulatory Climate Index (constructed from responses to questions about regulatory uncertainty and compliance costs) shows that Alberta ranks as only the 68th best of 135 jurisdictions worldwide.  This is much less favorable than the situation in Texas and in many other petroleum rich democratic jurisdictions around the globe.  In Canada, Alberta’s Regulatory Climate ranking compares very poorly in comparison with Manitoba, which ranked 8th overall, and Saskatchewan, which ranked 16th (Angevine and Cervantes, 2011).

The detailed survey results also show that the cost of regulatory compliance is of increasing concern to Alberta investors.  Presumably, this is something that a super board would be expected to fix.  But, apart from reducing existing informational overlaps and duplication among the ERCB, AENV, and SRD, how could having a single agency with which to file project applications be expected to shorten approval times and reduce applicants’ costs given that applications will still need to be scrutinized according to the same detailed criteria (e.g. environmental and landowner impacts and operational aspects)? Reducing regulatory process congestion and compliance costs also requires simplification of the pertinent regulations to the extent possible so as to reduce the burden on the industrey and the administrative cost to the government.  Further, it requires ensuring that sufficient staff is availabel to respond to project applications.  These actions don’t require establishment of an energy super board.

NOTES

1 The Stelmach government appears to have decided to break the AEUB apart in response to industry criticism and concern than applications were taking too long to process.