Danielle In The House, October 31: Responsible Energy Development Act

Ms Smith: Thank you, Madam Speaker. I am pleased to rise today to address the issue of Bill 2, the Responsible Energy Development Act. Let me say that the Wildrose Official Opposition wants to support this bill. We hope that we will be able to support this bill because we welcome its intentions. We do think that a one-stop shop for approving resource development is a good idea. We do, of course, believe in streamlining and finding efficiencies, and we think that all of the stakeholders in development can be brought together for the benefit of all Albertans, and I really do mean all Albertans, those Albertans who put the economy first as well as those Albertans who put the environment first.

Now, the Wildrose has gone out of our way to learn from and understand the needs and concerns of our energy and resource industries, and we have heard loud and clear their complaints about slow, cumbersome, and often contradictory regulatory hurdles. Because of those reasons, we were excited to see the introduction of the Responsible Energy Development Act.

That being said, before I get to some of the concerns I have, let me go through some of the complaints that we heard. When I began running for the leadership of the Wildrose Party, it was shortly after the implementation of the disastrous new royalty framework. There was a survey that was done on an annual basis called the Global Petroleum Survey, done by the Fraser Institute.

What it does is ask investment advisers to rank the top jurisdictions in the world in which to do oil and gas investment. In the past Alberta had always enjoyed being in the top 10 of about 150 jurisdictions. In the 2010 survey Alberta had declined to number 92 out of about 150 jurisdictions, sandwiched somewhere between Poland and Hungary in the assessment of our business climate.

I’m pleased to acknowledge that having repealed some of the worst aspects of the new royalty framework and made some strides in addressing industry concerns, we’re beginning the steady climb back to restoring industry confidence. In 2011 we were 51st on that ranking. In 2012 we were 21st on that ranking. So we’re not back to where we were before the bad decisions were made back in 2008, but we’re getting there. Looking at the most recent, 2012 report from the Global Petroleum Survey, let me tell you what some investment advisers say about the jurisdictions in which they’re investing. They say of this one jurisdiction that it has “stable and attractive fiscal terms.”

They say that it has “less red tape in conducting business than in other jurisdictions.” They say that “the investment climate is bright.” And the jurisdiction they’re talking about is Saskatchewan. Let me tell you what they say about another jurisdiction: “constantly shifting regulatory and approval framework,” “high degree of government bureaucracy,” “inefficient oil well site inspection procedures.” And the jurisdiction they’re talking about is Alberta.

Now, I commend the sustainable resource development minister for reaching out to industry and going through an examination of all of the steps that industry has to go through from the moment they conceive that they want to develop a well to the moment when it’s abandoned and the land is reclaimed. I have to tell you that industry refers to what they developed as the 100-foot-long tapeworm, because when you put all of these tiny process steps on eight and a half by 11 sheets of paper, you end up with a stack of paper that is five feet high and 20 feet long. That is the 100-foot tapeworm that this government in its 41 years of creating regulation for the oil and gas industry has developed.

Let me tell you what that means in practice for a couple of the companies that I’ve spoken to over the last number of years, comparing our investment climate here in Alberta versus neighbouring Saskatchewan. One example was the company PetroBakken. They were trying to get approval for a pilot project for their fire-flood technique. In Saskatchewan the approval took 54 days. In Alberta the approval took more than two years. I don’t know that they ever even got it before they ended up moving on from that.

Another story. This one is one of my favourites. Crescent Point was a company that switched from being an income trust back into a corporation after the federal government changed its income trust rules. They had thousands of wells in Saskatchewan and in Alberta, and they had to make a simple change in the description of each well site. They had to remove the word “trust” in the legal description of the well site.

So they called the regulators in Saskatchewan and said, “How do we do this?” The Saskatchewan regulator said, “Well, send over your list.” Within two hours they’d solved the problem. In Alberta the same issue took nine months to remedy and for a couple of reasons. First of all, it sat on someone’s desk, didn’t get pushed along. Finally, when it did get pushed along, they found out that part of the process they had used for transferring was to move all these wells into the abandoned well process. As a result, it ended up creating delays. While it was stuck in that limbo land, there were no completions that they could do, there was no additional development they could do, it was earning no revenue, and they were not able to do any work on it.

The second stage of the process. After they’d transferred over a portion of the wells, they were still stuck transferring over several hundred wells, and the excuse the government gave was that part of the problem was the way they tracked the percentage ownership. Crescent Point tracked its ownership share to three decimal points. The government only tracked ownership shares to two decimal points. Because the two systems couldn’t talk to each other, they weren’t able to transfer over several hundred wells.

When they finally fixed that problem, the last hurdle that Crescent Point faced was that the government regulators determined that the only way they would be able to execute the change of the name on the well sites was for them to put several hundred thousand more dollars into a liability fund in the event that those wells became abandoned. So a process in Saskatchewan that took two hours took nine months here, and I think that encapsulates part of the problem of what our industry is facing.

When I look at what we have in the bill, I was hoping that what I would see would be practical suggestions and practical steps for how we would address all of these different delays in the process. The unfortunate thing, from what I have seen in the bill so far, is that it kind of reminds me of the regulatory streamlining effort that the PCs went through a number of years ago, when they tried to convince the public that they were streamlining regulations because they took five or six different rules, put them under the same title, and they squashed them all in together under one act.

This is kind of what this feels like to me. It feels a bit like a Franken-bill. It’s bringing in all of the different elements of a variety of different pieces of legislation, squashing them together, and hoping that by naming it under a single regulatory agency, somehow it’s going to solve the many problems, only a few of which I just identified here. In reading through the bill, I’m worried that the government is walking down exactly the same path that they did with four flawed pieces of legislation. I’ll talk about three of them: Bill 36, Bill 19, Bill 50. Bill 36 was the Land Stewardship Act, and one of the problems the government found with this bill is that when you look at the provisions of it, it centralized decision-making into the hands of cabinet, it restricted or removed compensation, and it eliminated the appeals processes for landowners. This is why landowners across the entire province stood up and told the government to change it. The government did change certain provisions because it was so poorly written in its first phase that it would have allowed the government to extinguish – that was the wording in the act – all sorts of statutory instruments, including things like land titles, drivers’ licences, marriage certificates.

Having recognized that they’d made an error, the government went back, and they attempted to remedy a small portion of it. They didn’t get rid of the central planning elements of it, which is why we’re still hoping for some changes, but I think we have to acknowledge that they made a major error in the original drafting of this bill.

Bill 19 was the Land Assembly Project Area Act, once again a piece of legislation designed to freeze land into green zones and have an entirely different compensation process that operated outside the Expropriation Act. The Expropriation Act identified 19 different headings of compensation to compensate landowners. Bill 19 was specifically designed to limit the amount of compensation to a very narrow range of market value only. Once again landowners across the province stood up, went to town hall meetings, and forced this government to look at this legislation, and once again they did address the major flaws in this legislation to restore the full rights of landowners that are equivalent to what they would enjoy under the Expropriation Act, but again a bill was pushed through giving central planning powers to the cabinet, no appropriate provisions for protection of compensation, no appropriate provisions for legal recourse. Mistakes were made, and it had to be amended.

Which brings me to Bill 50, the Electric Statutes Amendment Act, 2009. This is the third in a set of three bad pieces of legislation that followed along the exact same path: central planning authority, taking away the independent needs assessment, putting the power into the hands of cabinet to make complicated technical decisions on the basis of need for transmission lines across the province. As we’ve seen, we’re debating that in another session. They are now repealing that provision, returning and restoring the independent needs assessment to this independent commission rather than keeping the power centralized in the hands of cabinet.

When I look at the pattern that I’ve seen over the last few years of the government making the same mistake over and over and over and having to do amendments over and over and over, I am hoping that with this piece of legislation we can slow it down, we can identify the areas where we’ve got problems, and we can work together in a bipartisan way or a multipartisan way, perhaps, to be able to address those concerns so that we’re not here again, one or two years from now, having to make amendments that we should be making to ensure that this legislation preserves that balance of respecting and streamlining the regulatory environment for our energy companies as well as respecting the landowners who are impacted by it.

Let me go through and talk about a few of the concerns that I would see in the legislation. The first concern that I have, having spoken with many members of our First Nations and aboriginal communities, is section 21, which indicates, under Crown Consultation with Aboriginal Peoples, that “The Regulator has no jurisdiction with respect to assessing the adequacy of Crown consultation associated with the rights of aboriginal peoples as recognized and affirmed under Part II of the Constitution Act, 1982.”

When I’ve spoken with leaders in First Nations communities – and I’ve travelled to many, many First Nations communities and met with many chiefs over the last couple of years – I was surprised to hear that their biggest problems are not with the federal government, as I expected. Their biggest problems are with the provincial government, a provincial government that doesn’t consult, a provincial government that didn’t consult on the Land Stewardship Act. So when I read this section of the act and hear that the regulator does not have any authority to consider whether or not the Crown consultation process was adequate, I think that’s an inadequate provision. What we’re trying to do for industry is to create certainty. It doesn’t create certainty for industry if we go through this process and then at the end of the day end up tied up in the courts in a legal process because the Crown consultation process with our First Nations communities was inadequate.

I would like for us to revisit this issue so that if we do end up having a process that is truly one window, it will acknowledge that First Nations consultation is an integral part of that, that the province does have a role, a key role, in making sure it’s doing proper consultation, and it has a duty not only to the First Nations communities but to our energy companies to make sure it’s doing that consultation appropriately so we don’t end up getting bottlenecked in continued litigation and a legal process.

From what I’ve heard from our First Nations communities, they welcome the opportunity to have that conversation, that dialogue, that discussion. They welcome the opportunity to be able to have development in their communities not only because there’s the opportunity potentially to share in the revenues developed from those resources but also so that their people can be employed in those projects.

The First Nations leaders that I have met in Alberta are progressive. They are looking forward. They are excited about the opportunities for their people. They just want the province to look at them as a partner in that development rather than as a barrier, rather than as an extra step in a process. I think the language of this bill in section 21 does not recognize that they are reaching out a hand to us. I think the government needs to reach out a hand across the aisle as well.

The second thing that concerns me – and I believe that we’ll be having to have a further conversation about this and, hopefully, some amendments – is this issue of time frames. As I’ve been travelling around and as I mentioned in my opening and in the stories that I told, the issue that we’re seeing is not necessarily the fact that there are these different bodies. The problem is that none of these bodies have time frames that are legislated in statute that they have to follow to be able to make their decisions – to give  their permits, to give their approvals, to give their licences, to have the appeal hearings – and I don’t believe that this legislation addresses that. There are a couple of places where, I’ll tell you, I have some concerns.

Section 61 of the legislation talks about all of these time frames, all of these parameters being at the discretion of the regulator.

Section 61 says:

The Regulator may make rules . . .

(f) prescribing the time within which the Regulator shall make a written decision on an application after the completion of a hearing.

It’s in the hands of the regulator to determine what a reasonable time frame is.

(l) prescribing the time within which the Regulator shall make a written decision on a regulatory review.

Once again, the time frame is within the parameter of the regulator.

(p) prescribing the time within which the Regulator shall make a written decision on a reconsideration.

Again, it seems to me, in reading this legislation, that we’re giving a lot of purview to the regulator to make decisions which, I believe, we should be more clear about in statute.

The reason you put something in statute rather than in regulation is because you want it to be tough to change. You want your regulators to realize how seriously as legislators we take their obligation to make decisions in a timely way. We shouldn’t be leaving it to their discretion to push out decisions in six months, one year, two years, or longer because it’s not convenient for them to increase their level of staffing or increase their processes so that they can deal with these things in a timely way.

I would like to see time frames prescribed in law. I find it very interesting that there are two time frames in here that are prescribed in law, so it’s not as if the statute would not consider that. There is a time frame. If the regulator does make a rule, it’s prescribed that they have to give 120 days’ notice to the minister.

That’s very specific. The minister thinks it’s so important that he knows of a rule change that he wants to prescribe in the legislation that the regulator has to give him 120 days’ notice. I would also note that there is another prescription for a time frame. If an energy company happens to have an administrative penalty against it, it has to be paid within 30 days. So the government, clearly, finds that it’s important to put on industry a time frame for when they would have to pay fines related to administrative penalties. I think the quid pro quo is that industry deserves to have something written in statute about the time frames that the government is prepared to commit to and the time frames that the regulator is obligated to follow so that we can actually truly meet some of the recommendations and some of the objectives of the bill, which is to streamline the process.

The third thing I would say is that I have heard from one of the stakeholders who has examined this bill some concern that we appear to be losing one of our appeal processes, the appeal that you would normally have to the Environmental Appeals Board.

This stakeholder had told me that there are in the current situation 12 per year that do take place. It’s very important to be able to have an appeal. He gave the example that just this year this appeal board had heard a decision regarding a rancher who had some damage done to their dugout or their water well as a result of some coal development activity. So these are very serious issues. If a decision has been made by a regulator and there does need to be an additional appeal process, you don’t want to take away that additional avenue for appeal.

Now, I do recognize that the Court of Appeal remains the ultimate court of adjudication, but part of what we’re trying to do here is to create a bunch of quasi-judicial mechanisms so that we can avoid the costly process of going through the judicial courts, so that we can avoid the costly process of forcing our landowners to go through that as well. Let’s just make sure that we preserve all of the protections for these kinds of appeals in the event that there is a dispute. Once again, with this appeal board only hearing about 12 cases per year, it does not strike me that this is the area that our energy companies are complaining about. If we can restore and preserve this appeal process, I can tell you that it will go an awfully long way to making sure that our landowner stakeholders have a level of comfort with this legislation.

The other concerns that I have involve the makeup and the selection of the board. The board as it’s prescribed in the legislation is going to be at least a three-member board. It could be more, but that does appear to be at the discretion of the minister.

All three members of this board will be appointed by the minister. I think that we can go beyond what we have done in the past. I think part of the issue that we’re seeing here is this concern: do we have the right people representing all of the interests when we’re bringing together a board like this to examine a variety of different stakeholder concerns and to be able to balance them? I think the government is setting itself up for major push-back from certain stakeholders unless we look at a different model for how we select this board.

One of the things I would put out there as something that we could consider looking at is the way in which we, for instance, put together an airport authority board. On an airport authority board you often will have a couple of nominees represented by the city council, a couple of others who are represented by a county council, a couple of others who are represented by industry. I  would say that that kind of process could potentially work here to alleviate some of the concerns of some of the stakeholders about having all of the cards stacked in the minister’s office. It could well be that we decide to go for a seven member board. Two of them could be former ERCB employees, as is suggested by the regulation. Two of them could be nominees by industry. Ultimately, the minister could make the appointment decision. But

if you’re asking CAPP, and you’re asking SEPAC, and you’re asking PSAC and others who they may think would be representative of their interests, maybe we have a nominee process so they can put forward two names. Maybe you also then have a nomine process for two landowner representatives on the board, so you can ask the Alberta Beef Producers, you can ask the Western Stock Growers’ Association, you can ask those who are involved in the various surface rights organizations. And since we need an odd number, maybe you also get one from the environmental community. Maybe you ask CPAWS or you ask others who are involved in the Sierra Club for a nominee to represent that environmental interest.

Again, the decisions would ultimately be made by cabinet, but at least you would be reaching out to the various stakeholders and they would have some sense that this process has some credibility among all and is giving due consideration to all of the various stakeholders who are impacted by this legislation. I think the makeup and selection of the board in this legislation as it’s written is not going to pass muster with our stakeholders in the landowner community and the environmental community.

I think that we’ve got to be working toward something that will be embraced by all of the stakeholders who are impacted because we also have another problem in that all of the hearing commissioners are also appointed by the minister. Again, there doesn’t seem to be any consideration for how we might be able to balance between those competing interests, between those stakeholders who have different perspectives and different concerns. Of course, we want people on there who understand the energy sector, but we also want those who understand the impact on the environment, and we also want those who understand the landowners face when development takes place on their property.

The main concern that we do have, though, is that the intense centralization tendency that we saw in Bill 36, that we saw in Bill 19, and that we saw in Bill 50 appears very much to be paralleled in this legislation. As I was reading along, I was becoming more and more concerned about all of the ways in which cabinet may do this, and cabinet may do that, and cabinet may do the other.

But I think the real kicker comes when you get to section 68. In section 68(1) it says: “The Lieutenant Governor in Council may make rules in respect of any matter for which the Regulator may make rules under this Act or any other enactment.” That seems pretty broad to me. If you look at subsection (2): “A rule made under this section prevails over any rule that is made or amended by the Regulator with which it conflicts or is inconsistent to the extent of the conflict or inconsistency.”

So we get back to the same kind of problem that we had before, that if the cabinet, the minister doesn’t like what the regulator does, they can interfere and start meddling and, basically, throw out anything that the regulator has said. So what’s the point of having a statute to be able to give certainly to industry if you continue to have cabinet have these wide-ranging powers in which they can override a regulator’s decision? This is not idle because when you look at how this happened in the past with transmission lines in the early 2000s, when the regulator came back and said, “If you’re going to build a bunch of transmission lines, you need to split the cost between the generators of power and the consumers of power 50-50,” that was overridden by the minister saying: “To heck with that. We’re going to put all of the cost on the ratepayer.” And we’ve had nothing but problems ever since.

That is the reason why you want to preserve the integrity of the regulator. It’s the reason why if you’re going to have a bill that purports to create an environment of regulatory certainty, you can’t have clauses like that in the legislation.

I’ll just say one more that sort of left me scratching my head because, again, it just seems so incredibly broad that I have to wonder what the minister has in mind with it. It’s section 78 where it says:

The Lieutenant Governor in Council may make regulations . . .

(k) respecting any other matter or thing that the Lieutenant Governor in Council considers necessary to carry out the purposes of this Act.

Now, I don’t know what the legal definition of “thing” is, but I have to say that when I see that kind of language, it does strike me as a catch-all to say: let’s give the minister carte blanche to do anything at any time regardless of what is said in the statute.

That’s what we’re trying to get away from here. We’re trying to get a process in place where stakeholders can have confidence, not just the stakeholders who are going to be impacted by having development on their land but also the stakeholders who are impacted by these decisions.

We recognize that an arbitrary decision by cabinet could be just as damaging to landowners as it can be to energy companies. We need look no further than the sustainable resources minister’s lower Athabasca regional plan where, with the stroke of a pen, the government is able to wipe out 18 oil sands leases. Who knows what the compensation is going to be for that? Who knows whether they’re going to get full compensation for all of their investment and all of their projected investment? This is why having that kind of arbitrary power in the hands of cabinet does nothing to create an environment of certainty, not for landowners, not for environmental activists, and certainly not for the energy industry which this bill purports to be responding to.

With that, Madam Speaker, as I said when I began, we are hopeful that we will be able to support this legislation. As you can see, we have some significant concerns with key elements of this bill, but we think it’s fixable. We think if we go through a process and we do it properly and we do it with good faith and we recognize that all of us in this Chamber are actually trying to get the very best legislation so that the government doesn’t face the kind of landowner activism that they’ve faced over the previous two and a half years or the kind of backlash that they got from the industry over the previous two and a half years – we’ve got to take the time to do this right.

Having legislation that is this many pages long dumped on the opposition benches, forced through its various readings within a matter of weeks, without giving us time to go through, talk with our stakeholders, talk with those who are giving us legal advice to be able to make appropriate amendments and recommendations, I think will lead us down the same path that we went before with Bill 19, Bill 36, Bill 50. I would implore the minister to be open minded about slowing this down so that we can do the proper consultation, so that we can get it right, so that we can go forward with the government and the Official Opposition saying: “Yeah.

This is a good piece of legislation. This is a piece of legislation that we can support, and this is legislation that we think all stakeholders can support.”

As it is written right now, I would not be able to go out and say that. But we have a number of hours ahead of us. We have a number of speakers ahead of us. I do hope that the government members listen to the debate of my fellow opposition members here. I know everybody has an awful lot to say on this bill. I know that our caucus is generally wanting to support the intention of the bill. We do think that it is salvageable, but we do think as well that significant improvements are needed to take this bill to the end where it is intended. And I do hope that the government will work with us to get there for the benefit of all Albertans.

Thank you, Madam Speaker.