Three suggestions on how to improve a toothless regulator
One of my favourite songs from The Sound of Music is “How do you solve a problem like Maria?” I have had this song running through my head lately, only it comes out, “How do you solve a problem like the Alberta Energy Regulator?”
The Alberta Energy Regulator (AER) is Alberta’s one-stop regulatory body for the oil and gas industry. When it was created in 2013 by the merging of the former Energy Resources Conservation Board and parts of Alberta Environment and Parks, the AER made bold claims about transparency, enforcement and becoming a “world-class” regulator.
Unfortunately, the AER has failed to live up to its promises. The AER has shown over and over again that it is either unable or unwilling to enforce its own laws, directives and orders. The AER has become a toothless regulator.
As a public interest lawyer I see first-hand how the AER’s failures affect every day Albertans. Take for example two of Ecojustice’s clients. Tony and Lorraine Bruder operate a cattle ranch near Pincher Creek. A preliminary environmental site assessment conducted at an abandoned sour gas well site on their property showed that the site was potentially contaminated with drilling waste, salts, metals, and hydrocarbons, including polycyclic aromatic hydrocarbons — all nasty things that you do not want on your property.
In September 2015, as a first step towards cleaning up this mess, the AER ordered Nomad Exploration Ltd., the licensee of the well site, to complete a more detailed environmental study by the end of November 2015. Nomad ignored that order. Over the next few months, we repeatedly asked the AER what it was going to do about Nomad’s failure, but the AER took no action.
Finally, in May 2016, the AER ordered Nomad to prepare a plan by the end of June 2016 to complete the more detailed environmental study – that is, to prepare a plan to do the very thing the AER had already ordered Nomad to do six months earlier. Most competent regulators escalate enforcement when an operator does not follow its orders — when you do not follow the rules, the consequences get more severe. In this case, the AER de-escalated enforcement. The penalty for not completing the detailed environmental study was just an order to “try again”.
This time, the AER said that Nomad must include in the plan a schedule to complete the detailed environmental study by the end of August 2016. After an extension of time and a couple of failed attempts, Nomad never did provide the AER with a schedule to complete the study. The AER then ordered Nomad to complete the study regardless by January 3, 2017, but then at Nomad’s request extended that date to February 15, 2017. And guess what — Nomad again failed to meet that deadline.
When we recently asked the AER what they were going to do about this continued non-compliance by Nomad, the AER’s response was “the AER is continuing to gather and assess the relevant facts and information in order to determine the most appropriate response moving forward.” In other words, 18 months after ordering Nomad to complete the detailed environmental study, the AER still does not have a plan on how to enforce that order.
The Bruders’ case is only one example of a much broader and systemic problem of lack of enforcement by the AER. In July 2014, the AER announced that approximately 37,000 wells out of 80,000 inactive wells were not in compliance with the requirements for inactive wells. How does a regulator, that bills itself as “world class”, allow almost half of all inactive wells in the province to be out of compliance?
More recently, we have seen situations where the AER issued numerous warnings and orders to companies with no effect, with the end result that the only option was to transfer hundreds of wells to the Orphan Well Association, leaving financial responsibility for these sites to be borne by other industry members, the Canadian taxpayer, and eventually the Alberta public. The AER has numerous enforcement tools at its disposal but it simply refuses to use these tools to ensure compliance.
Which leads me to my response to the question, “How do you solve a problem like the AER?” In a recent letter to Shannon Phillips, the Alberta Minister of the Environment and Parks, and Margaret McCuaig-Boyd, the Minister of Energy, we made three recommendations.
First, before drilling a well, the operator should have to deposit sufficient funds with the AER to pay for the clean-up. Then, when an operator refuses to carry out the clean-up work, or goes bankrupt, the AER would hold the necessary funds to complete the work.
Second, in 2014, the Responsible Energy Development Act stripped the Minister of Environment and Parks of her power to enforce environmental orders against energy companies and gave those powers to the AER. Given that the AER appears unwilling to use those tools, we think that those powers should be given back to the Minister.
Third, we think that it is time to consider whether the AER should continue to exist. If the AER is unwilling to enforce Alberta’s laws and its own directives and orders, perhaps the AER’s role should be transferred to the Departments of Energy and Environment and Parks.
In a recent publication, Jim Ellis, the President and CEO of the AER, said that regulators like the AER “hold a moral and ethical obligation to initiate bold and courageous action to improve the human condition.” Perhaps before the AER embarks on the lofty goal of changing the world, they should get the simple stuff right — like enforcing the law.