EUB Compliance Assurance Initiative The Regulatory Craft in Nova Scotia November Hal Knox

Nothing is more destructive of respect for the government and the law of the land than passing laws which can not be enforced. Albert Einstein

Overview EUB Alberta Context EUB Compliance Assurance Initiative Compliance “Tools and Incentives” –Directive 019 Opportunities Summary

EUB Mission Mission –To ensure that the discovery, development and delivery of Alberta’s energy resources and utility services take place in a manner that is fair, responsible and in the public interest.

Regulatory Framework Government sets policy Other Government departments Public Regulators administer policy Industry develops projects LEGISLATION REGULATIONS

Facilities/scheme approvals Information collection and dissemination Compliance/inspections Correlative rights Utility rates Primary Energy Industry Regulatory Interfaces Surface Rights Board Alberta Sustainable Resource Development Alberta Environment Public Alberta Energy and Utilities Board Alberta Energy National Energy Board Alberta Human Resources and Employment Energy policy Mineral rights Royalty Pre-drilling exploration Gas Export Federally-regulated pipelines Occupational health and safety Notice of applications Information Directly affected Public Hearings Environmental impact assessment Pollution control Environmental standards and approvals Surface access and rights-of-way on privately-owned land Energy Industry

Alberta Facts · Area……… km 2 · Population million (Jan. 2007) · GDP*……...$ billion (2006) · Exports…….$ 90.1 billion (2006) · Major cities..Edmonton (capital) Calgary Note: Alberta total GDP $152.7 billion (2006), energy sector approx 28% Source – Highlights of the Alberta Economy, February 2007 Alberta Economic Development

Energy Facilities in Alberta – 2006 · Producing Oil and Gas Wells … * · Pipelines …………………………… km · Gas processing sweet gas plants 244 sour gas plants** · Oil sands ………………… 38 commercial plants (31 in situ, 7 surface mines) 113 primary recovery projects (in situ) 10 experimental projects · Oil refineries …………. 5 facilities ( m 3 per day capacity) · Licensees……………………………… Note: * Producing wells – bitumen, conventional oil, gas, CBM ** Including sulphur recovery

Energy Facilities in Alberta – 2006 · Batteries*and Compressor Stations oil gas · Coal mines 9 open/strip pits 2 small open pits 1 underground 1 not producing · Electric generating plants 7 coal fired 5840 MW 35 gas fired 4412 MW 14 hydro 869 MW wind (10) and other 621 MW total production: MW * sweet and sour multi and single well, sweet and sour satellites, gas batteries, and compressor stations

Annual Alberta Energy Production · Conventional oil………31.5 million m 3 · Bitumen in situ…………………28.7 million m 3 surface-mineable…….44.1 million m 3 · Natural gas……………138.3 billion m 3 * · Natural gas liquids……38 million m 3 · Coal……………………2.5 million tonnes * Including 1.2 billion m 3 CBM Note: billion = 10 9

2006 EUB Applications · Wells…………………… · Production facilities…… · Pipelines……………… · Oil sands · In situ…………… 242 · Mineable………… 3 · Coal…………………….. 11 · Reservoir development · Environmental review… 451 · Utilities………………… 779

EUB Compliance Vision  "Energy and utility industries that understand, respects and meet or exceed regulations and standards of fairness, most often on their own initiative."

Compliance Assurance Initiative (CAI) – What is it? CAI – 5 year initiative –A new approach to compliance assurance –Increase focus on prevention through information and education –Simplified enforcement

Compliance Achievement Enforcement Actions Prevention Implementation of Systems and Tools Risk Assessment Surveillance and Audits Performance Reporting Communications and Education Continuous Performance Improvement Implement Clear Process and Regulations Processes

Compliance Assurance Initiative Benefits Increased and improved EUB services for stakeholders Internal Stakeholders internalize CA principles, processes and tools, and achieve increasing regulatory effectiveness Stakeholders recognize the principles of Compliance Assurance and their respective responsibilities

Compliance Assurance Initiative Outcomes One enforcement directive – D 019 Preserve and/or improve industry compliance rates Noncompliances events are handled consistently and fairly Compliance Performance of Industry is measured and reported

EUB Enforcement Principles: Public safety and environmental protection will not be compromised. Enforcement will be timely, effective and appropriate. The licensee is responsible for compliance with EUB requirements and processes.

Directive 019 Outlines –What to do when a noncompliance event is identified –The enforcement process and consequences for noncompliance –Voluntary self-disclosure policy –Enforcement appeal process –Availability of information

Compliance Achievement Enforcement Actions Prevention Implementation of Systems and Tools Risk Assessment Surveillance and Audits Performance Reporting Communications and Education Continuous Performance Improvement Implement Clear Process and Regulations Processes

Risk Assessment Matrix to predetermine the level of risk inherent in any noncompliance. Consequences of each event are balanced against the likelihood of occurrence to determine a rating of high or low risk. Directive 019 – Risked based

Enforcement Based on Risk

Compliance Achievement Enforcement Actions Prevention Implementation of Systems and Tools Risk Assessment Surveillance and Audits Performan ce Reporting Communications and Education Continuous Performance Improvement Implement Clear Process and Regulations Processes

Enforcement Based on Risk Low Risk Non Compliance Event Low Risk Enforcement High Risk Non Compliance Event High Risk Enforcement Action 1. n High Risk Enforcement n Action 3 Can lead to

Persistence Process Definition of Persistent Non-compliance ( D 019): an unacceptable rate, ratio, percentage or number of non-compliances by a licensee in the same or in different compliance categories. Early Intervention - Outreach More detail on persistence is available on:

Compliance Achievement Enforcement Actions Prevention Implementation of Systems and Tools Risk Assessment Surveillance and Audits Performance Reporting Communications and Education Continuous Performance Improvement Implement Clear Process and Regulations Processes

Voluntary Self Disclosure Encourage licensees to proactively identify, report and correct non-compliance. Benefits No enforcement Improved relationship with regulator Improved public safety, protection of the environment, and regulatory confidence

Compliance Achievement Enforcement Actions Prevention Implementation of Systems and Tools Risk Assessment Surveillance and Audits Performance Reporting Communications and Education Continuous Performance Improvement Implement Clear Process and Regulations Processes

Compliance “Tools” Letters requiring remedial action - Preventative Action Plans Administrative Fees Terms and Conditions Self Audit or Inspections Third Party Audits or Inspections Focused REFER Global REFER

REFER Status Focused REFER: An enforcement status limited to a single compliance category that results in a rigorous review of a licensee’s applications. Global REFER: An enforcement status that results in all of the licensee’s applications being processed as non- routine and brought before the Board for approval.

Compliance “Tools” “Persistence” Designation – Root Cause Analysis based Action Plan Partial or Full Shut in Suspension of Permit, Licence or Approval Cancellation of Permit, Licence or Approval Public Reporting of Enforcement Actions

Compliance “Tools” Name Accountable Party Declaration Inquiry – Hearing Prosecution – Fines

Enforcement Appeals Fairness Licensees are encouraged to fully discuss enforcement actions with the EUB group first Appeals to the enforcement advisor must: –Be submitted within 60 days –Be in writing –Explain why the licensee disagrees with the enforcement decision

Compliance Achievement Enforcement Actions Prevention Implementation of Systems and Tools Risk Assessment Surveillance and Audits Performance Reporting Communications and Education Continuous Performance Improvement Implement Clear Process and Regulations Processes

Compliance Reporting ST – 99: Field Surveillance and Compliance Summary ST-108: EUB Monthly Enforcement Action Summary Licensee Compliance Summaries

2006 Enforcement Summary

Compliance “Incentives” OSI Surveillance – reduced inspection priority for superior performance Voluntary Self Disclosure – No Enforcement Streamlined Application Process for Routine Applications Compliance Summaries (comparison to industry average) Outreach

Internal Capacity Increased through the use of systems and tools: –Education –Fairness in Enforcement DVD –Risk Processes –Mapping Business Process

Moving Forward…. Improved Regulatory Clarity More Flexible Effective Authorities and Tools e.g. Administrative Penalties; Updated Fees and Fines Open Compliance Category Performance Reporting Joint EUB-Licensee Surveillance - No Enforcement Licensee Recognition Program

Moving Forward… Refine Surveillance Protocols Training and Certification Acceptance of “certified” licensee verification of compliance using common protocols with data verification Regulatory Performance Forum

Regulatory Clarity Regulatory Management Program under development Formalizing the continual improvement of EUB processes. Lifecycle approach to managing our regulatory processes

Regulatory Lifecycle Process Planning Development Engagement Implementation Monitoring and Evaluation Problem Analysis and Solving

Opportunities Expand Role of Public Advisory Committees – Synergy Groups Differentiated Regulatory Streams Rigorous Management Systems –Beyond Compliance Programs (BCP) –Sustainability Reporting Technology

Next Steps Continue CAI –Improve outreach and early intervention communications. –Develop a Recognition Program –Fees and Fines –Training and Certification Regulatory Management Program Improve Performance Reporting

Summary Alberta development mature with large diverse licensee population. Alberta requirements a mix of prescriptive and goal / performance based requirements D Compliance Assurance – Enforcement provides common framework for administrative based enforcement Enforcement is Risk Based with remedial focus Variety of Tools and Incentives employed

Contact: Corporate Compliance Group (403) More information: Additional Information