Alberta Energy Regulator receives the Final Report in the Best-in-Class Initiative

Alberta Energy Regulator receives the Final Report in the Best-in-Class Initiative

The Final Report entitled Listening, Learning, and Leading: A Framework for Regulatory Excellence was released in late October. It was prepared pursuant to the Alberta Energy Regulator (AER)’s Best-in-Class Initiative conducted by the University of Pennsylvania through its Penn Program on Regulation to assist the AER in developing the tools and framework needed to become a best-in-class regulator.

Our October 20, 2015 post provided an overview of the executive summary of the report. Essentially the Final Report identifies three core attributes of regulatory excellence: utmost integrity, empathic engagement and stellar competence. It concludes that an excellent regulator must exhibit these core attributes in its traits as an organization, in its actions, and in the outcomes of its actions.

Now that the Final Report has been released, there needs to be consideration of how the framework outlined will be specifically applied in Alberta. In fact, the Final Report itself states that it is not intended to provide a specific action plan for the AER and additional work is needed to:

  • operationalize the attributes and tenets of excellence,
  • identify and develop concrete methods and practices for the collection of data needed for measuring its performance on the specific attributes the AER has selected for priority,
  • measure current level of performance against the attributes and determine the causes of gaps between current performance and desired performance,
  • implement management and operational steps designed to improved performance, and
  • continue appropriate engagement with experts and members of the public on all the above steps.

We agree that additional work is required. In particular, work is needed to address concerns that have been raised with the ability of AER (and its predecessors) to contribute to public dialogue around environmental concerns associated with oil and gas development. Many of these concerns are discussed in the ELC’s Roadmap for Reforming “The Public Interest” for the ERCB and NRCB.

The Final Report references the need for “commitment to the public interest” as one of the tenets of regulatory excellence. However, historically the “public interest” test is open-ended and undefined, and gives broad discretion to the decision-maker. There is a tendency to use public interest to justify decisions without clear discussion of the varying factors contributing to public interest and an inclination to allow economic interests to dominate.

Another concern is the existence of policy vacuums. That is, the absence of overarching energy and land-use policies which set out how social and environmental benefits can be achieved alongside economic development. The Final Report states that an excellent regulator needs to take steps to fill regulatory gaps (page 18):

The regulator may first look for at least partial solutions for which it does possess clear authority to implement. While still being respectful of the legislature that established it, the excellent regulator may also try to promote awareness within government—and perhaps also in the larger public—seeking to use persuasion and moral authority to affect change. In such an educative role, the regulator may try to bring along other parts of government, persuading them to clarify laws or close policy gaps. In exceptional or emergency situations, time may not allow for such persuasion and, after careful deliberation, the regulator may need to be prepared to take action on its own, accepting fully whatever legal risks might subsequently arise.

Too often, the absence or ambiguity of policy direction is used to justify a “business as usual” decision rather than encouraging public dialogue on broader social or environmental issues. We encourage the AER to seek to have identified policy gaps filled by provincial decision-makers or to take leadership by creating public dialogue on those policy gaps.

Additionally, the legislative mandate of the AER enables it to “fill” policy gaps with its own decision-making (on both a rule and policy level and on an application basis). Section 2 of the Responsible Energy Development Act clearly gives the AER a mandate to regulate the protection of the environment and to provide for efficient, safe, orderly and environmentally responsible development of energy resources. Increased transparency in policy direction and decision-making is a key to the AER achieving its goal of regulatory excellence.

The Final Report points out that most regulators underestimate the fundamentally social nature of regulation. Regulatory excellence demands stellar competence, confidence boosting integrity and empathic forms of engagement. However, most regulators focus on technical competence. As stated in the report, “[t]he excellent regulator, in the end, will be the one that listens, learns and leads” (page 72).

We would like to see the AER come to grips with the social nature of regulation by improving its transparency and communication with the public. This requires decision-making that clearly demonstrates consideration of social and environmental benefits alongside economic considerations. Decision-making – both on a broad policy basis and an individual application basis – must be transparent and fully engaging of the public.

One step in this direction is to move away from the historic approach limiting participation in regulatory proceedings to only those persons who are directly and adversely affected. Instead the AER should grant standing to participate to those parties representing a public interest (such as environmental and community groups). More information on public interest standing is available in the ELC’s brief on Standing in Environmental Matters.

Another step in this direction is the institution of mechanisms to ensure the AER is not developing its rules and policies without involvement of all stakeholders. This might include publication of stakeholder meetings with the AER to develop rules and policies, early involvement of all stakeholders (industry, environmental and First Nations) in development of rules and policies, and enhanced accessibility to information.

If you are interested in this initiative, more information (including a number of related research papers) can be found at The Penn Program on Regulation website. The AER also maintains a web page dedicated to this initiative at http://www.aer.ca/about-aer/spotlight-on/best-in-class-project.

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