UCP orders review of energy regulator
Kenney says the organization ‘has not achieved its promise’ from its creation
CALGARY The Alberta Energy Regulator has so many issues to grapple with today that the organization must feel like a juggler at a circus, adding more balls to the act.
It’s dealing with growing industry liability concerns, reports about executives’ travel, an investigation into a non-profit centre it helped found, and a
UCP campaign promise to turf its board.
Now, it’s about to be put under the microscope of a government review.
In an interview, Premier Jason Kenney said he’s asked Energy Minister Sonya Savage and Environment Minister Jason Nixon to evaluate the organization.
“Our view is that it has not achieved its promise from when it was first created — that timelines for project approvals in Alberta are unacceptably long and also that the fees charged to Alberta energy producers are unacceptably high,” the premier said. “So that’s why I have mandated ministers Savage and Nixon with conducting a full review of the AER.”
Formed in 2013, the AER is one of the province’s most important organizations, in charge of regulating the development of Alberta’s energy industry, including more than 167,000 operating wells and 426,000 kilometres of pipelines.
The AER has been at the centre of a barrage of headlines over the past year, from reports it paid for flights for some executives who live outside Alberta, to questions about the growing number and financial liability of abandoned wells, to the resignation of former CEO Jim Ellis last November.
The International Centre of Regulatory Excellence (ICORE) — a separate not-for-profit organization the AER said it was a “founding member” of in June 2017 — is now under review by Alberta’s Public Interest Commissioner and the auditor general.
“The Public Interest Commissioner is investigating allegations of gross mismanagement relating to the use of public funds, public assets and AER human resources to establish and support the operation of (ICORE),” the commissioner’s office said in a statement Friday.
The regulator is also under financial pressure.
AER chief executive Gord Lambert sent an email to staff last month, saying the organization is reviewing its business model and taking steps to “increase oversight on spending.”
“It is anticipated the AER will be required to reduce costs,” another email states.
(The regulator, which has about 1,200 employees, is funded by a $253-million administrative levy collected from the industry.)
During the spring election, the organization found itself under fire from the United Conservative Party.
Kenney frequently blasted the previous NDP government for appointing Ed Whittingham, a former executive director of the environmental think-tank Pembina Institute, to the board.
The UCP’S campaign platform contains a critique of the independent regulator, while promising to appoint a new board of directors.
Whittingham resigned earlier this spring, while four other board members remain in place.
(Lambert and AER board chair Shelia O’brien declined interview requests on Friday.)
The energy minister said the government’s examination will be done swiftly.
“We are going to be doing a full review of the mandate, the governance, the timelines, how they review projects,” Savage said in an interview.
“I think we can get that done in the fall … We are looking at tweaks. We are not saying the AER is broken, but there is room for some improvements.”
As for firing the entire board, the minister said that would not happen immediately.
“There is no timeline on when that board is replaced,” Savage added.
For the industry, one of the biggest issues about the regulator is the length of time it takes to get major projects and wells through the approval process.
The UCP government has pledged to shorten it up, citing statistics from the Canadian Association of Petroleum Producers that it takes longer in Alberta to get wells approved than in B.C., Saskatchewan and U.S. jurisdictions.
“There are things the AER does exceptionally well. I think when you start to go to things that feel a little more non-routine, suddenly timelines extend,” said Enerplus Corp. CEO Ian Dundas.
Asked what are the problems in the organization, Savage rattled them off like someone reading an eye exam.
“They take too long. There’s too much red tape. There’s too much process. They’re not getting to decisions fast enough. So to understand why, you need to understand what their mandate is, what their governance is, what their internal processes are,” she said.
While a review by a new government isn’t unusual, it also wasn’t widely known by industry or environmental groups contacted last week — and it hasn’t yet included the AER itself.
“The AER has not been involved in any review of the
AER conducted by the government,” said a statement from the regulator.
Savage’s press secretary said the process hasn’t started yet, which is why the agency, industry and other organizations aren’t yet aware of the details.
But industry groups welcomed the government’s examination.
“I do think a more thoughtful and comprehensive review of the AER needs to be undertaken, which would include the role of the board, but also the role of the organization itself,” said CAPP vice-president Ben Brunnen.
Tristan Goodman, head of the Explorers and Producers Association of Canada, said the regulator “needs to improve its culture” and ensure each activity it does focuses on its core legislated mandate.
Given the array of issues surrounding the regulator, it’s wise the government look into any problems, as long as the process doesn’t become political, drag on or interfere with its independence.
But the AER is simply too important for any Alberta government to ignore, or to allow any problems to fester.
Six years after the organization was launched, it’s time for a thoughtful, measured study of the province’s energy regulator.