How a change of plans can jeopardize environmental goals: The trouble with results-based environmental management

11/10/2010

 
Published in Alberta Oil Magazine, November 2010 
By Jason Unger, Staff Counsel, Environmental Law Centre
 
An application has recently been made to Alberta Environment to divert water from the Clearwater River, a Canadian Heritage River in northeastern Alberta, for use in the Long Lake oil sands project south of Fort McMurray. This application has garnered considerable attention and publicity as the original project contemplated using groundwater (potable and non-potable) for underground bitumen production by steam-assisted gravity drainage (SAGD).
 
What, one might ask, does this have to do with “a result-based approach” to environmental management? The Alberta government proposed this method to deal with cumulative effects in the 2007 policy paper, Towards Environmental Sustainability: Proposed Regulatory Framework for Managing Environmental Cumulative Effects. This approach has been subsequently confirmed in more recent discussions of cumulative-effects management.
 
Results-based regulation focuses on setting regulatory outcomes and leaving it up to the proponent to take steps to reach the objective. The goals of results-based approaches are to provide proponents with flexibility and spur innovation. In the words of the 2007 policy paper: “The reformed management system starts with setting environmental objectives that reflect our understanding of environmental risks and our socio-economic values, and then managing within those objectives.”
 
This results-based approach stands in contrast to the existing regulatory system, which is primarily based on managing and mitigating the impacts of individual projects, often through legislation aimed at specific resources, such as timber or water.
 
But what happens when, despite diligence and best efforts, operations and plans change? The flexibility granted to proponents to meet an objective in no way guarantees success. The Clearwater application reflects a central difficulty with results-based regulation. Things change, and when they do it raises difficult governance issues for maintaining environmental outcomes. While no environmental outcomes are currently set for the Clearwater River or saline water use for in situ oil production, it stands as an illustration of potential issues that may arise where a comprehensive results-based regulatory system is adopted by government.
 
At its core it is an accountability question. Who will be responsible for outcomes and what happens when there are failures to reach objectives? The answer to this question is likely to be accompanied by a quagmire of compliance and regulatory challenges for the government. Where there is a change of operations that results in an environmental threshold being overshot, the government would be faced with two starkly contrasting paths.
 
First, the government could retroactively apply specific standards to parties to meet an environmental outcome. This would result in significant costs to the proponent to address failures in its approach. There are reasons to doubt this would occur, including an inadequate legislative framework to allow retroactive application of standards, the economic pressures against such compliance responses, and questions of how the costs of reaching environmental outcomes are spread equitably across all sectors.
 
In contrast, on the second potential path the government could be pressured to acquiesce to changing the environmental results or outcomes that are acceptable in given circumstances. This approach is similarly unpalatable, as it would undermine both the system itself and public confidence in the process.
 
The paper discusses other policy tools such as incentives, education and voluntary action. However, if we are to focus on meeting environmental outcomes, these tools should be relegated to times when environmental thresholds are being approached and not overshot. Even disincentives such as fines do not assist in ensuring objectives are reached unless the amount of the penalty significantly outweighs any potential benefit of not meeting an objective.
 
In this way, a simple change in plans becomes a question of accountability for environmental outcomes. Results-based regulation works fine if all the results are attained. When they are not, the question becomes whether the mechanisms for compliance will be effective.
 
We must contrast such a regulatory system against more traditional forms of regulation whereby technical standards and objectives are prescribed throughout the life of the project. Technical standards provide certainty to all parties involved: the regulator, the proponent and the general public.
 
So while the application to divert water from the Clearwater River reflects a simple change of plans for in situ production, it stands as an illustration of how a simple curve ball in operations may muddy the waters of a results-based system of regulation. While the discussion is somewhat hypothetical, the potential for such circumstances arising is probable. This in turn leads to a need for clarity around how regulatory systems will assure a level of accountability for environmental outcomes.
 
 

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