Canada: Alberta Proposes New Integrated Energy Regulator

Last Updated: November 6 2012

Article by Dufferin Harper, Lars Olthafer, Katie Slipp and Melissa Jakobfi (Student-at-Law)

In recognition of the importance of attracting and retaining investment in Alberta's natural resources, the Alberta government tabled Bill 2, the Responsible Energy Development Act (REDA), on October 24, 2012. The REDA contemplates the formation of a single energy regulator (the Regulator) that will be responsible for oil, gas, oil sands and coal projects in the province, from application through to reclamation. This complements the trend towards increased regulatory efficiency that began this year with the federal government's Jobs, Growth and Long-term Prosperity Act, which is intended to streamline the regulatory and environmental regimes at the federal level.

BACKGROUND

Beginning in 2010, the province identified regulatory complexity as a key factor challenging Alberta's competitiveness in the growing international natural resources market. On this basis, the province recommended the introduction of an enhanced provincial regulatory system that would include the establishment of a single regulator that, in the immediate term, would assume the combined functions of the Energy Resources Conservation Board (ERCB), Alberta Environment and Sustainable Resource Development (AESRD) regarding natural resource development and the Department of Energy in respect of mineral exploration permits.

Ultimately, the Alberta government determined that it would retain a policy mandate over energy development but transfer regulatory oversight and decision-making in respect of oil, gas, oil sands and coal development to a single, arm's-length energy regulator.

RESPONSIBLE ENERGY DEVELOPMENT ACT

Once passed, the REDA will establish an integrated regime for the development of oil, gas, oil sands and coal, which will result in significant changes to the regulatory processes that currently exist.

The REDA gives the Regulator many of the same powers that are held by the ERCB. The Regulator also adopts the powers, duties and functions of AESRD under environmentally oriented specified enactments, so far as they relate to energy resource activities, unless otherwise restricted by regulation.

The following provides a detailed overview of the structure and authority of the Regulator.

Structure

The REDA board of directors is to be appointed by provincial cabinet and will be made up of at least three members (including one chair) responsible for the general management of the Regulator. With the approval of the Minister, the board is to appoint a chief executive officer who will be responsible for day-to-day operations. Similar to the ERCB, the directors and officers will owe a duty of care to the Regulator although, unlike the ERCB, will not be required to act "in the public interest." While the structure of the Regulator is not intended to be a reincarnation of the ERCB, whether or not this will be the reality is up for debate and is discussed below.

The quasi-judicial function of the Regulator is separate from its corporate structure. Cabinet is to establish a roster of "hearing commissioners," headed by a "chief hearing commissioner," who must establish a panel of hearing commissioners in the event of a hearing or inquiry.

Mandate

The Regulator's mandate is to provide for the efficient, safe, orderly and environmentally responsible development of energy resources in Alberta that can be used as a source of energy (excluding hydro energy) and to regulate the associated disposition and management of public lands, the protection of the environment and the conservation and management of water, including the wise allocation and use of water. Additional factors that will be considered by the Regulator in the execution of its mandate may be the subject of future regulation.

The Regulator will be responsible for "energy resource activities" that require approval under an energy resources enactment or that are directly linked or incidental to such activities, as described by regulation. In this regard, the Regulator has powers to act under "energy resource enactments," which include, among others, the Coal Conservation Act, the Gas Resources Preservation Act, the Oil and Gas Conservation Act, the Oil Sands Conservation Act, the Pipeline Act and "specified enactments." Specified enactments include the Environmental Protection and Enhancement Act (EPEA), the Public Lands Act, the Water Act, Part 8 of the Mines and Minerals Act and any legislation added by regulation.

While the Regulator will have a broad energy mandate, cabinet may make regulations that restrict the powers, duties and functions of the Regulator under other enactments and the Minister can request "any report, record or other information, including personal information" from the Regulator notwithstanding the confidentiality of such information. The REDA also allows the Minister to give directions to the Regulator that set priorities and guidelines for the Regulator to follow in carrying out its powers and to ensure that the work of the Regulator is consistent with government policies around energy resource development and the management of public land, environment and water.

Enforcement

Under the REDA, the Regulator has the power of inspection and enforcement under energy resource enactments unless otherwise restricted by regulation.

The Regulator also has the power to levy administrative penalties, the amounts of which are subject to discretion, for non-compliance with a regional plan under the Alberta Land Stewardship Act, the REDA, an energy resource enactment that is prescribed by regulation or any decision of the Regulator.

The REDAincreases fines for offences under the energy resource enactments from what is currently in place in the Energy Resources Conservation Act (ERCA). Fines of up to a maximum of C$500,000 for corporations and C$50,000 for individuals can be levied for violations under the REDA.

APPLICATION, REVIEW AND APPEAL PROCEDURES UNDER THE REDA

The consideration, hearing, review and appeal of decisions of the Regulator must be undertaken in accordance with the REDA unless otherwise provided for in the regulations.

Applications

The test for standing before the Regulator is unchanged from the ERCA and the EPEA. Only those persons who are "directly and adversely affected" by an application will be permitted to file a statement of concern, which may or may not result in a hearing.

Under the REDA, the Regulator is only required to hold a hearing if it is required to do so under an energy resource enactment, the rules of the REDA or another energy resource enactment or as required by regulation. While this may not have a significant impact on applications that would currently be brought under the ERCA, applications to the AESRD are not generally decided by way of hearing under the current regime. Whether or not the regulations will reflect this practice remains to be seen.

Where appropriate, the REDA allows applications under different energy resource enactments in respect of an energy resource activity to be combined and heard jointly by the Regulator. This suggests that where both energy and environmental approvals are required for a single project, those applications may be heard in one proceeding. It is currently unclear how the Regulator will address a situation where a hearing may be triggered under one application but not another.

Upon the completion of a hearing, the Regulator must issue a written decision that includes reasons. Like the regime that was introduced in the federal Jobs, Growth and Long-term Prosperity Act, the REDA contemplates set time limits for decision-making that will be prescribed in the rules.

Regulatory Review

Regulatory review is only available to "eligible persons" for prescribed "reviewable decisions," being:

  • a decision of the Regulator that was made without a hearing that a party would otherwise be entitled to appeal under the EPEA, the Water Act or the Public Lands Act
  • a decision of the Regulator that was made without a hearing under an energy resources enactment when review is sought by a person who is directly and adversely affected by the underlying decision, or
  • any other decision prescribed by regulation where the review is brought by a prescribed class of persons.

On the request of a party to a regulatory review, the Regulator has the discretion to stay the whole or part of the underlying decision on terms and conditions established by the Regulator.

Like the decision on the underlying application, a decision on a regulatory review must be in writing, with reasons and within the time period prescribed by the rules. In its decision, the Regulator may confirm, vary, suspend or revoke the underlying decision.

Reconsideration

Reconsideration is distinct from regulatory review as it may be undertaken by the Regulator at its sole discretion. A decision by the Regulator on reconsideration may confirm, vary, suspend or revoke the underlying decision and must be issued in writing, with reasons and within the time period prescribed by the rules.

Appeals

Like decisions of the ERCB, leave to appeal a decision of the Regulator may be sought from the Alberta Court of Appeal on questions of law or jurisdiction. The time for seeking leave to appeal will be prescribed by the regulations. The REDA provides that a decision of the Regulator is not automatically suspended by an appeal unless ordered by the Regulator. The REDA expressly allows the Regulator to be heard on an appeal, although it is silent on the Regulator's participation at the leave to appeal stage.

Although not express, it appears that any ability to appeal a decision to the Environmental Appeals Board (EAB) or the Public Lands Appeals Board (PLAB) has been superseded by the REDA and that all appeals are now to the Alberta Court of Appeal. However, the REDA is silent as to whether the EAB and/or the PLAB will be dissolved.

Judicial Review

Judicial review of a decision of the Regulator is prohibited except in relation to a request for regulatory review, reconsideration or appeal.

REGULATIONS AND RULES

Under the REDA, the provincial cabinet may make regulations that prescribe the circumstances under which a hearing will be required, the classes of persons that may seek and the types of decisions that are eligible for regulatory review, the time limits for filing an application for leave to appeal to the Court of Appeal, the time limits in which such leave application is to be returnable, and disposition of fees, penalties and fines.

The Regulator may make rules that relate to, among other things, notices of application, statements of concern, the conduct of a hearing, time limits for decision-making, regulatory review, reconsideration, the disclosure and sharing of information, costs and alternative dispute resolution.

Although the content of the regulations and rules is not yet public, there are a number of powers contemplated in the REDA that suggest that there will be at least some differences from the regime currently in place at the ERCB. For example, the imposition of prescribed as opposed to merely aspirational time limits on decision-making is a departure from the current regime.

ISSUES OF INTEREST

Enforcement of Private Surface Agreements

Although the Surface Rights Act is not an "energy resource enactment" and the jurisdiction of the Surface Rights Board (SRB) is not rolled into the jurisdiction of the Regulator, the REDA does allow the Regulator to enforce private surface agreements, the nature of which will be defined in the rules, against operators in certain circumstances when that agreement is registered by the owner or occupant with the Regulator. The REDA does not contemplate reciprocal enforcement ability for operators that are party to private surface agreements.

To the extent that terms of a private surface agreement conflict with the provisions of the REDA, those provisions will take priority and override the agreement. In those circumstances, the conflicting agreement term, including a term that requires confidentiality, will not be enforceable or give rise to any cause of action.

The Regulator may make rules regarding the enforcement of private surface agreements. Whether or not those rules will contemplate disclosure of confidential agreements only to the Regulator or more widely to the public is unknown. The Regulator's direction in this regard could have business and economic consequences for operators who enter into private surface agreements on the understanding that terms will be kept confidential.

First Nations Consultation

The REDA provides that the Regulator has no jurisdiction to assess the adequacy of Crown consultation in respect of aboriginal rights alleged to be impacted by an energy resource activity. This provision codifies what has been uncertain under the existing energy regulatory regime and reflects the position that the ERCB has taken regarding its own jurisdiction in prior decisions.

Although the REDA does not suggest who, if not the Regulator, has authority to assess Crown consultation, the First Nations Consultation Discussion Paper recently released by the Alberta government proposes a centralized consultation office that would be responsible to oversee and determine the adequacy of Crown consultation. When such an office would be put into place, and whether it will serve any quasi-judicial function, has not been announced. Given the uncertainty in the current state of the law regarding First Nations consultation, it is unfortunate that the government has not yet released a formal consultation policy.

Cumulative Effects Management

The transition to a single energy regulator reflects the government's prioritization of cumulative effects management in the province. Combining the functions of ERCB with the AESRD is the province's attempt to manage cumulative effects of energy development on air, water, land and biodiversity more efficiently and effectively.

The REDA is only the latest in a line of recent cumulative effects management tools implemented or proposed in the province that includes the Lower Athabasca Regional Plan and the recently announced arm's-length environmental monitoring agency.

Similarities to the ERCB

Although the Regulator is intended to encompass the functions of the ERCB and AESRD, and despite the fact that the government has stated that knowledge and experience must be part of the transfer of responsibilities, a plain reading of the REDA suggests that the Regulator could instead be another version of the ERCB. In this regard, it will be interesting to see if the appointed Minister will be the Minister of Energy, which would suggest an energy focus, the Minister of Environment and Sustainable Resource Development, which would suggest an environmental focus, or another minister. Moreover, the proposed legislation speaks only to retaining employees of the ERCB and is silent in respect of AESRD employees. This raises the question not only of how existing ERCB employees will handle the combined workload of what is presently handled by the ERCB and AESRD but also whether those same employees are qualified to address environmental issues, unless and until environmentally experienced personnel are hired, that must be considered under the specified enactments.

The REDA is an attempt to address both the energy issues and the environmental issues associated with a natural resource project by means of a single, integrated corporate body. However, the similarities between the Regulator and the ERCB could prompt criticism that this change is nothing more than a move towards supplanting the mandate of the AESRD and thereby minimizing the importance of environmental impacts related to energy resource activities.

Agencies Not Included Under the REDA

The Regulator will not include the functions of either the Alberta Utilities Commission (AUC) or the SRB despite the fact that decisions of these regulators are often linked to the ERCB and/or AESRD authority. The exclusion of these agencies seems to represent a lost opportunity to further enhance and streamline the energy regulatory process in the province. It remains to be seen how projects that require AUC and/or SRB approvals will ultimately be dealt with under the REDA.

Although it is expected that jurisdiction over mineral regulation in the province will eventually be brought under the scope of the Regulator's authority, responsibility for mineral tenure will remain with the Department of Energy. How the Regulator's authority will be expanded to include the minerals sector is still the subject of debate and decision-making.

TRANSITION

The Regulator is expected to be operational by June 2013. Under the REDA, the ERCB will be dissolved and the Regulator will essentially take the place of the ERCB with no disruption to any approvals, actions or proceedings. The REDA does not contemplate the dissolution of AESRD despite the fact that the Regulator is to take on a significant aspect of that department's responsibilities.

The REDA does not address whether applications that have been filed, but not decided, prior to the passing of the REDA will proceed under the current regime or will be brought under the REDA regime. The answer to this question will be key for parties who have brought or are intending to bring applications before the ERCB or AESRD. This may be addressed in future readings of the REDA.

GOING FORWARD

While the single energy Regulator appears to be a positive step towards streamlining the regulatory and environmental approvals processes in the province, there are issues of potential concern associated with the change. Key aspects of the REDA are left to yet-to-be released regulation, including the types of activities that will trigger a hearing. There could also be issues of employee allocation and transfer of expertise if the change results in the overall reduction of staff currently employed by the ERCB and AESRD. Finally, whether and how applications that are before the ERCB or the AESRD at the time that the REDA is passed will be incorporated into the new process are live issues that could become complex if not clarified.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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