Russian Stacking Dolls

We’ve all seen Matryoshka dolls, those wooden Russian stacking dolls that open up to reveal a smaller doll nestled inside.  You keep opening the dolls one by one until eventually you find the smallest innermost doll—a baby doll carved from a single piece of wood, its delicate features carefully outlined by the artisan who crafted her.

For weeks I’ve been digging deeper and deeper into the policy documents which set the stage for the creation of the Ron Liepert’s energy superboard.  I’ve been trying to understand why Mr Liepert is convinced that another superboard, this one focused on managing Alberta’s energy resources, is critical to Alberta’s future.

The Matryoshka doll that is the energy superboard has been superbly crafted, beautiful in its intricacy and sleight of hand.  Open the first wooden doll and you’ll find a Mar 2010 document entitled Energizing Investment:  A Framework to Improve Alberta’s Natural Gas and Conventional Oil Competitiveness.  This study focuses on the relative competitiveness of Alberta’s conventional natural gas, unconventional natural gas (coal bed methane, shale, and tight gas) and conventional oil.  It excluded the oil sands because that sector was performing very well.

The study concluded that Alberta’s competitiveness is enhanced by its stable democracy, a skilled workforce, extensive infrastructure and abundant resources.  However, it warned our competitiveness is now under pressure due to increased competition from BC, Sask and the US.  Apparently, those jurisdictions have stepped up their efforts to attract oil and gas investment by policy and regulatory changes. 

Anyone who reads the trade publications will tell you that changing regulations is not the first thing to hit the radar screen in a discussion about competitiveness.  In an effort to appear credible, the May 2010 report acknowledged the negative impact of the global recession and the fundamental shift in the market which resulted in gas prices sinking from $12/Mcf to $4/Mcf.  However, once the government locked on to the bogie of regulatory complexity, it laid the first stepping stone on the path to the energy superboard.  The report suggested a need for increased collaboration, consistency and alignment within the regulatory system—a small “fix” which could have been achieved without creating a superboard but simply enhancing the existing “one window” approach to funnel applications through the process.*  But that’s not what happened.

Open the second wooden doll.  There you’ll find a Dec 2010 policy paper entitled Enhancing Assurance:  Report and Recommendations of the Regulatory Enhancement Task Force to the Minister of Energy.  A task force led by the deputy ministers of Energy, Environment and Sustainable Resource Development reviewed every single piece of legislation governing energy and recommended a Policy Development and Policy Assurance System to regulateoil and natural gas.  At this point the oil sands were put back in the mix, notwithstanding fact that they had been excluded from the Mar 2010 study.  This leads to the conclusion that the recommendations relating to the oil sands are based on speculation and conjecture, since no data was reviewed.

So what is a Policy Development and Policy Assurance System?  It’s billed as a system to enhance Alberta’s competitiveness by “improving” the regulatory system for oil and gas development.  Implied in this statement is the assumption that improving the regulatory system will vault Alberta to the front of the line and somehow offset the global factors which impact our competitiveness.  Oh if only it were so simple.

But let’s suspend disbelief for one second and assume that overhauling Alberta’s regulatory system will catapult Alberta into the top tier of competitive jurisdictions.  These regulations apply to air, water, land, mining, facilities authorizations, conservation and safety in connection with coal, oil, natural gas and oil sands extraction, abandonment and reclamation.  How does Ron Liepert intend to accomplish the gargantuan task of integrating and aligning all of the energy statutes?

Mr Liepert’s team assures us that this will be a straightforward exercise.  The regulatory functions previously performed by the departments of Environment, Sustainable Resources and Energy will not be changed but simply transferred to the department of Energy.  And all of the applications they used to review will go through the superboard—a beefed up Energy Resources Conservation Board (ERCB).

Sounds easy, but open the next Matryoshka doll.  Inside this doll you will find a May 2011 document entitled Enhancing Assurance: Developing an integrated energy resource regulator.  It identifies at least 9 major pieces of legislation that will be impacted** and more importantly creates a “to be determined later” category of issues too contentious or difficult to address now.  These include determining the right level of oversight (aka interference) the government should have with the superboard and creating a better public engagement process.  This latter point is particularly troublesome given that under the existing system environmentalists and land owners have three opportunities to present their views to three different departments but under the new system they will have only one opportunity to present their views to the beefed up ERCB.  No wonder Mr Liepert thinks integration will be a breeze, he intends to address the most contentious issues behind closed doors and away from public scrutiny.

OK, we’re down to the last Matryoshka doll and the most important question of all—if this exercise will have little or no impact on Alberta’s competitiveness, why embark on it in the first place?

Ah, the answer to that question is buried deep within the Dec 2010 document.  It recommends the creation of a Policy Management Office (PMO)*** which will report to the deputy ministers of Energy, Environment and Sustainable Resources.  The PMO’s job is to “integrate” energy policies and “interface” between policy development and the superboard.   The reason Mr Liepert wants the PMO is that the 3 ministries persist in creating policy which reflects their mandates and as a result conflict with each other to some degree.

Personally I think this is a good thing.  The diverse perspectives of Environment, Sustainable Resources and Energy should be clearly presented to the regulator who will weigh them in search of the solution that best serves the public interest.  Apparently this process didn’t satisfy Mr Liepert who has gained ascendancy in policy development and created the PMO to hammer off the “rough edges” of the conflicting policies created by the other ministries before sending the watered down policy to the superboard and thus ensuring that energy projects are approved.

Even Mr Liepert must know that he can’t influence global markets, so he’s working with what he’s got and he’s done a very skilful job of ensuring that when you open up the last wooden doll what you’ll find is not an intricately painted baby doll, but a rubber stamp.

*See the ERCB Upstream Oil & Gas Authorization and Consultation Requirements Guide

**Alberta Land Stewardship Act, Coal Conservation Act, Energy Resources Conservation Act, Environmental Protection and Enhancement Act, Oil and Gas Conservation Act, Oil Sands Conservation Act, Pipeline Act, Public Lands Act, Water Act.

*** It is interesting to note that the PMO was not referred to in the later May 2011 document which outlines the legislative changes required to create the superboard and is not disclosed by the government to stakeholders in public forums like the PPX Symposium.

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