August 1, 2005

Alberta EUB clarifies enforcement policy in new directive

A new directive from the Alberta Energy and Utilities Board (EUB) has updated and clarified the Board's policies regarding enforcement of its requirements. Directive 019, the final version of a draft document released earlier this year for public comment, includes new processes designed to protect public safety, minimize environmental impacts, preserve equity and ensure conservation of resources. It updates the EUB's 1999 series of Enforcement Ladders, which set out the rules for enforcement when a licensee was not complying with EUB requirements.

Directive 019 incorporates a number of revisions from the draft document, based on the feedback received. One of the most important of these makes it clear that EUB staff will impose enforcement actions in the event of noncompliance. These actions could include one or more of the following: noncompliance fees, self-audits or inspections, increased audits or inspections, third party audits or inspections, partial or full suspensions, or suspension and/or cancellation of permits, licenses or approvals.

The Board uses a risk assessment matrix to predetermine the level of risk associated with noncompliance with its requirements. Each requirement will be classified as low-risk or high-risk rating, based on environmental impact, conservation, health and safety, and stakeholder confidence in the regulatory process. These classifications will be posted on the EUB's Web site. Until the classification process is complete, requirements ranked as "minor" will be considered low-risk, those ranked as "major," high-risk.

Other key changes and highlights of Directive 019 are as follows.

* The updated policy applies to all operations subject to EUB requirements, including electric generating and utility transmission facilities.

* Enforcement actions will be escalated for persistent noncompliance. Directive 019 includes detailed tables of the steps and procedures involved in low-risk and high-risk enforcement.

* Automatic escalation to Refer status is removed. (Licensees who are unable or unwilling to comply with an EUB direction are assigned Refer status, and any pending and future licence applications are reviewed more rigorously; once compliance has been achieved, Refer status is removed.)

* The enforcement process is simplified to include two enforcement processes instead of three.

* Administrative matters are clearly included in the Low Risk enforcement process.

* There is improved access to compliance information.

The Board also encourages voluntary self-disclosure on non-compliance by its licensees. In addition to improving environmental protection, resources conservation and public safety, this contributes to a better relationship between the regulator and its licensees, who can avert enforcement action if corrective measures are taken within a time limit agreed upon by the Board and the licensee.

The directive details the rules for voluntary self-disclosure and clearly specifies events not considered to be self-disclosure, such as notification of non-compliance during a required performance presentation or once an audit, inspection or investigation has been launched. Situations where self-disclosure would result in competitive advantage are also ineligible.

The objectives of changing the enforcement process include:

* clarifying the Board's enforcement policy to both the industry and the public;

* providing a single enforcement process for the EUB, which in turn will enhance regulatory process certainty;

* allowing the EUB to work more closely with stakeholders for more effective, long-lasting compliance;

* simplifying the process so it is better understood;

* improving consistency of application;

* supporting industry's compliance initiatives by increasing the focus on voluntary self-disclosure; and

* developing the Board's capacity to provide timely and complete compliance summaries for licensees as feedback to sustain and improve compliance.

The EUB's Compliance Assurance Process sets out three ways of achieving compliance:

* prevention of noncompliance events by licensees working with the EUB to improve operations;

* continuous performance improvement by licensees working with the EUB to improve their operations; and

* enforcement actions by the EUB against licensees for noncompliance events.

The Board anticipates that its revised compliance assurance/enforcement process should lead to even higher rates of compliance with EUB requirements. Industry's compliance rate with major EUB regulations was a record 98% in 2004, up from 97% in 2003 and 96.5% in 2000. This improvement happened during record activity in the oil and gas industry, with the number of producing oil and gas wells increasing by 54% over the last five years.

The full text of Directive 019 may be viewed on the EUB Web site, www.eub.ca. More information is available from Davis Sheremata at the EUB, 403/297-2252, FAX 403/297-3757, Email davis.sheremata@gov.ab.ca.

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