The Importance of Certainty and Stability in Regulatory Processes

A good and responsive regulatory system must consider the needs of all of the stakeholders. In the case of energy regulation in Alberta, there are a host of stakeholders involved, including the private sector companies wishing to undertake energy development, landowners, neighbours, First Nations, special interest groups, governments at various levels (including those acting on behalf of the owners of the resource – the people of Alberta), and others. It should be easy to agree that keeping all of these parties happy is a difficult task. A former chairman of Alberta’s Energy Resources Conservation Board (ERCB) said, “We’ve probably done our job if we have everyone a little bit mad at us”, referring to the need to balance sometimes disparate interests when setting requirements and adjudicating on development applications.

For the moment, consider the needs that the companies being regulated have of a regulatory system. Perhaps future blogs can deal with the needs of other parties to the system. If there is one need that I have heard expressed by companies and their associations much more often than any other over more than 40 years, it is the need for the system to have certainty and stability. Although the companies have a long list of needs, the importance of the need for certainty and stability seems to be so important that I have heard companies say, “While we may not like a particular regulation or process, tell us clearly what the requirements are and we will meet them”. The companies’ need for certainty appears to stem largely from the desire to be able to plan and respond effectively.

Recent events make one wonder if the need for certainty and stability is achievable to any substantial degree. Some might argue that stability in regulation is misguided because it can be taken that a system can’t change, but that matter is also a subject for a future blog. Clearly there are a number of reasons for policies and requirements to change, not the least of which is for them to be relevant, responding to the drivers of, for example, changing societal demands and technological advancements.  I think that if the definition of certainty and stability in this context includes consistency in the way that policies and requirements are formulated and changed, that is, in an orderly and transparent way, that would go a long way to satisfying a greater number of people.

Even governments that have been in power for a long time can, with the best of intentions, create uncertainty by implementing major changes to the regulatory regime, in terms of how mandates of regulators are organized and even to the level of how the governance of these agencies is carried out.  The following are two examples of regime changes, ones that really matter to a broad range of stakeholders. This is not to say that other policy and regulatory changes do not matter, but not to the extent that these examples do.

One example is the creation of the Energy and Utilities Board (EUB) through joining the ERCB and the Public Utilities Board in June 1995. That agency existed until 2007 when the government decided that it would be better to separate the EUB into the ERCB (for the regulation of upstream energy development) and the Alberta Utilities Commission (for utilities regulation).

 The Alberta Energy Regulator (AER) is another case in point. It combines the mandates of the ERCB and energy-related ones of the Department of Environment and Sustainable Resource Development (now Environment and Parks). The process began in about 2009, although there have been several other examinations in the past of the feasibility and desirability of creating a “single”, or in its milder form, “one-window” regulator for energy. I won’t recount here the details of the process that ensued but I do wish to point out that there were extensive opportunities for all stakeholders to provide their input. The proclamation of the Responsible Energy Development Act in June 2013 created the AER. The significant and difficult process of establishing this single regulator continues today. Along with the AER, the government created the Policy Management Office and the Aboriginal Consultation Office. The concept for the AER is that it will be the single regulatory agency for energy development and that it will implement the regulatory policies that are set by the government.

What are the events that are currently creating uncertainty with respect to the AER? With new governments come changes to premiers, ministers, deputy ministers, chief deputy ministers, advisors, and other positions that have an impact on government policies and can impact regulatory agencies. Recently, members of the new Alberta government expressed concern about the AER’s mandate and said that it may need to be adjusted. There have also been comments from government members about people in senior leadership positions in the AER.

Further, the recent change in the federal level of government will bring into play a new prime minister, new ministers, deputy ministers, policies, and other matters. For example, since 1993, there has been an agreement between the governments of Alberta and Canada with respect to environmental assessment cooperation. The essence of the agreement is the recognition that both levels of governments have environmental assessment responsibilities for certain kinds of projects, and as such, there should be a cooperative effort, particularly where there is a need for public hearings as part of the assessment process. That is, there is provision for joint panel hearings so that the need for more than one hearing is avoided and greater efficiency is achieved. Considering that there has been some concerns about both the provincial and federal requirements for environmental assessment, it is not difficult to imagine that the new governments will want to revisit them and perhaps the agreement as well. Time will tell but in the meantime, uncertainty results.