Energy regulator faces staff, budget cuts
A $500,000 review of the Alberta Energy Regulator by the provincial government isn’t finished yet, but the embattled agency will see its staffing levels drop sharply, as well as a big cut to its operating budget.
The AER will chop its administrative levy on the oil and gas sector by eight per cent this year, and the sector will see total savings of $147 million over the next four years as the cuts deepen, according to the provincial budget released Thursday.
The document also indicates the number of full-time equivalent employees at the AER will fall from 1,240 positions to 970 this year, with more than one in five jobs disappearing, although the regulator pegs its current workforce at about 1,160.
Energy Minister Sonya Savage said lower fees charged by the AER will give a break to energy firms.
“Those savings will actually accrue to the benefit of industry by means of reduced levies,” she said.
The AER is responsible for overseeing the safe, orderly and environmentally responsible development of Alberta’s massive oil, gas and coal resources, but has been hit by a series of problems in the past year.
Funded by an annual industry charge, the regulator is set to collect about $233 million from companies this year, a drop of $19 million from last year’s levels, according to Alberta Energy.
The industry will then see the levy decline to $211 million next year and remain flat the following year.
Finally, the amount collected from the sector will dip to $206 million in the 2022-23 fiscal year, representing an 18.3-per-cent cut, or a $46-million reduction, from last year’s levels.
The job losses haven’t occurred yet and the board of directors is working with senior management to determine how staffing reductions will be achieved, AER spokesman Bob Curran said Friday.
The opposition NDP warned last week that expected cuts of 18 per cent, as detailed in an AER email to staff last month, would backfire.
“We are currently seeing the lowest level of drilling activity on record, down 35 per cent from last year,” NDP MLA Irfan Sabir said at the time.
“Slowing down the approval process through more cuts will only make a bad situation worse.”
Tristan Goodman, president of the Explorers and Producers Association of Canada, pointed out industry activity levels have changed significantly since the AER was formed six years ago, and the regulator needs to adjust with the times.
“For some members, this (levy) is a substantive figure and can represent as much as 10 per cent of their total costs,” he said Friday.
Industry groups said the government should ensure the regulator is focused on its core mandate and on becoming more efficient.
“Ideally, we would see some streamlining, which is very helpful in terms of (the) competitiveness for our sector,” said Ben Brunnen, a vice-president with the Canadian Association of Petroleum Producers.
“When we see the AER fees decrease, that is more money back in investors’ pockets and the ability to reinvest in the economy.”
The changes announced in Thursday’s budget come in the wake of a string of problems and an ongoing review of the AER’S mandate and governance structure, initiated in September by the Kenney government.
At the time, the regulator’s board of directors was turfed and replaced by an interim board, chaired by Beverly Yee, the province’s deputy environment minister.
It follows on a pledge by the United Conservative Party during the spring election campaign to reduce approval times for energy projects within the AER.
Other issues have dogged the organization.
A series of damning reports were released earlier this month by Alberta’s public interest commissioner, auditor general and the ethics commissioner, criticizing the organization and former CEO Jim Ellis for establishing the International Centre of Regulatory Excellence, which was designed to train international regulators.
The public interest commissioner found Ellis “grossly mismanaged public funds” in establishing and supporting ICORE’S operations, while the ethics commissioner said the former executive was in a conflict of interest under the regulator’s policies.
Ellis left the organization last year.
The AER was formed in 2013, a period marked by significant industry activity, but the sector has changed amid lower commodity prices, reduced drilling levels and a rising number of orphan wells.
The budget noted problems have occurred within the regulator, highlighting “significant governance and management shortcomings” at the AER.
“We expect to achieve a leaner regulator that more efficiently manages industry investments,” the budget states.
Interim AER chief executive Gordon Lambert was not made available to talk Friday and has not spoken to the media about the fallout of the ICORE problems.
However, he told a legislative committee this month the purpose of ICORE became “something unintended and undesired” and the regulator is now looking at recommendations from the investigative reports.
“The interim board has been directed to ensure the followup to those recommendations, so that this never happens again,” he said.
As for the budget cuts, a lawyer who represents landowners with oil and gas wells and other energy infrastructure on their property said he doesn’t think the spending reductions within AER will make much of a difference.
“The AER needs to up its game,” Keith Wilson said Friday. “The frustration level with the AER is so high with landowners and farmers and ranchers, that if they get their budget cut, well, so be it.”