Alberta placed fossil fuel insiders on board backing Danielle Smith’s renewables pause

Three out of seven members of a provincial board that backed Premier Danielle Smith’s 2023 decision to pause approvals of renewable energy projects were previously executives at fossil fuel giant, TC Energy.

It’s a coincidence that prompts some experts to question whether the provincial government stacked the board with oil and gas industry insiders to support its agenda — and whether ties to the oilpatch are preventing board members from acting independently.

The board governs the Alberta Electric System Operator — a provincial organization that manages and operates the province’s electric grid, ensuring the power generated by energy companies flows into households and other buildings that consume electricity.

While one of the seven board members was appointed by the NDP government of former premier Rachel Notley, the other six were appointed by the United Conservative Party governments of Premier Danielle Smith and her predecessor, Jason Kenney. Those six appointments include three who were previously vice-presidents at TC Energy.

“When a government uses its power of appointment to stack the ostensibly impartial members of a regulatory board in one particular direction then the public will inevitably draw the conclusion that the board’s independence is a sham,” Arthur Schafer, a philosophy professor who founded the Centre for Professional and Applied Ethics at the University of Manitoba, told The Narwhal in an email.

A spokesperson for the operator referred questions from The Narwhal about the board appointments to the provincial government. In response to questions about whether board members had declared potential conflicts, the spokesperson for the operator referred The Narwhal to its code of conduct, stating that board members must follow it, “including completing annual training and attestation of compliance.”

The office of Affordability and Utilities Minister Nathan Neudorf did not respond to a list of questions from The Narwhal about board appointments and his interactions with the board.

AESO board is ‘captured’ by an incumbent industry: lawyer

The operator, commonly known in Alberta as AESO, found itself at the centre of controversy in August 2023 after Smith’s government announced a suspension of provincial approvals of new renewable energy projects. Smith said the operator had asked for the pause, although internal correspondence released at that time indicated it was a “government directed” pause.

An investigation by The Narwhal later revealed how the operator’s then-chief executive officer, Mike Law, was critical of Neudorf’s planned suspension of approvals. Law warned the moratorium on new projects would deter investors and send the renewable energy industry into a “tailspin.”

Internal emails obtained by The Narwhal also revealed that the board’s chair, Karl Johannson, met with the minister before telling Law to “support the minister without reservation.” Johannson did this despite staff at the operator expressing concerns the government was asking them to “lie” about what was happening.

It is not clear whether the operator has retained all of the correspondence sent and received by Johannson and other board members. The emails released by the operator show the board members used personal email accounts for their jobs. 

Law has since left the organization. He did not respond to a request for comment.

The operator did not give any explanation for his departure and appointed board member Aaron Engen as Law’s successor. Engen has a background working in investment banking with a focus on energy infrastructure, including small modular reactors, hydrogen, carbon capture and storage and natural gas. The board did not publicly advertise for the position prior to appointing Engen and announced his appointment in July 2024, on the same day it announced Law’s departure.

Schafer, from the University of Manitoba, is among four experts who told The Narwhal the instructions from Johannson suggest the board could be favouring oil and gas companies, to the detriment of the renewable energy industry.

“This is a [board] captured by an incumbent industry,” Drew Yewchuk, a lawyer who works with the University of Calgary’s public interest law clinic, said. “Their board is stacked with people who are in favour of the gas industry and are very familiar with the gas industry, and it has a competing industry in renewables. That is a problem for the fairness of the [operator].”

Three out of seven AESO board members were vice-presidents at TC Energy

Johannson is one of the three former executives from TC Energy who now serve on the Alberta Electric System Operator’s board. He was appointed to the board in February 2020, one year after retiring as an executive vice-president at the energy company, where he oversaw gas pipelines and energy in Canada and Mexico. The other two former TC Energy executives on the board are Stephen Clark, a former senior vice-president responsible for Canadian and U.S. gas pipelines, and Alex Federucci, who was vice-president of people at TC Energy.

Clark’s biography on the system operator’s website also notes he is the principal at an energy transportation consulting firm called Energy Advisory.

While Johannson has been a board member at the operator since 2020, Federucci and Clark were both appointed by the Smith government and began their terms in April 2023, a few weeks before her United Conservative Party won a general election.

Johannson, Federucci and Clark did not respond to a list of questions sent by The Narwhal to their LinkedIn accounts.

Of the other four board members, one has experience working with sustainable technology companies, one served on the board of the provincial and federal energy regulators, one is an executive at a recruitment services firm and the other is a former executive at the Calgary airport.

Experts generally agree it is good to have industry experience on boards since it gives them more insight and background, but not necessarily when that experience is coming from a single corporation.

“It’s not unusual for there to be appointments from the relevant sectors. To have three people from the same company who have a direct interest in the matters dealt by the board, does start to look a little bit funny,” Mark Winfield, a professor of environmental and urban change at York University said in an interview. “The whole thing is just bizarre.”

According to a TC Energy corporate document, reviewed by The Narwhal, Johannson was required to own at least $1.77 million worth of company shares during his last year on the job, which ended in February 2019. He also received stock options as part of his pay, including options to buy TC Energy shares at a fixed price as late as February 2025.

In addition to his previous role at TC Energy, Johannson is also a director on the board of an energy and utilities service company called Flint. He was re-appointed to serve another term on the board of Flint in June, according to a second quarter update from Flint, which is a publicly traded company.

AESO facing ‘ethical crisis’ over Danielle Smith renewables pause, expert says

The Alberta Electric System Operator requires employees, executives and board members to avoid all conflicts of interest, whether real or apparent. More specifically, its policy states employees should avoid any situation in which a “reasonable person” might suspect they are in a conflict, and take steps to mitigate the conflict.

But it doesn’t publish information about which conflicts were declared and whether any steps were taken to avoid those conflicts.

The Narwhal was unable to confirm whether Johannson or other board members have declared having any investments or other potential sources of conflicts to the operator.

If any board member owned shares in TC Energy, experts consulted by The Narwhal agreed it was possible they might stand to benefit from supporting a policy that would harm the company’s competitors in the renewable energy sector. But they were divided on whether this might apply to Johannson.

Schafer at the University of Manitoba, cast doubt on whether Johannson could perform any of his duties without bias, due to him potentially owning shares in TC Energy and his role at Flint.

“His vested interest in the oil and gas industry puts him in a pervasive conflict of interest position when the interests of oil and gas conflict with those of the renewable energy industry,” Schafer said in an email to The Narwhal. “Almost every decision made by [the Alberta Electric System Operator] will impact, beneficially or harmfully, on the oil and gas industry. So, because of his actual [or] real conflicts of interest, he cannot perform his duties as chair of the board ‘with integrity and impartiality.’ ”

Schafer also questioned whether the public should trust the operator’s board is acting independently.

“When one member of an ‘independent’ board is in a serious conflict of interest situation, that’s a problem,” Arthur Schafer, a philosophy professor who founded the Centre for Professional and Applied Ethics at the University of Manitoba, wrote in an email. “When three members of a board — out of seven — are conflicted, that’s an ethical crisis.”

The Narwhal also asked Shoeb Mohammad, an assistant professor at Ontario Tech University who has expertise in corporate unethical conduct, for his analysis of the role played by the board and whether any members may have been in a conflict of interest.

Mohammad said he believes the government could be criticized for failing to ensure enough diversity on the board by appointing three people who recently worked at the same company. However, he said this doesn’t necessarily mean those board members are in a conflict of interest, since there isn’t a direct link between their actions and any changes in a stock price or their personal wealth.

“Some degree of conflict of interest may be possible in this situation, as pure independence and objectivity is a difficult bar when considering prominent former executives of an industry that is interdependent with the industry they now advise,” Mohammad said. “From a corporate governance standpoint, it is unlikely to raise alarm bells since the connection between the advice given and direct implications to TC energy’s stock price is not strong.”

TC Energy executive discussed placing people on boards in leaked recording

Yewchuk, from the University of Calgary’s public interest law clinic, suggested the operator could address any potential public concerns about its objectivity by updating its policies on conflicts of interest to address how it is regulating conflicting or competing energy sources.

While it is not clear what prompted the provincial government to recruit the three former TC Energy executives, the company has previously discussed a strategy of placing people on boards during an internal call.

Audio of the call was leaked to The Narwhal and National Post in June.

“We place our staff on boards of third parties — make certain they are involved in shaping bylaws, shaping messaging ensuring that our objectives are remaining aligned,” then-executive Liam Iliffe said on the call from March 2024.

Mohammad said it can be a common rationale for industry to want to use board seats to create a dialogue with government actors in order to influence them.

“That itself is not illegal or necessarily wrong,” he said. “But the government should take a close look at the actors they interface with. … Is it primarily firms or individuals from one sector? This might be a cause for issue.”

Iliffe resigned after The Narwhal sent him questions in June about the contents of the recordings. At the time, he said some of his comments were about events that did not actually happen, but did not specify which.

TC Energy said at the time Iliffe’s comments did not reflect how it did business and it publicly apologized to other stakeholders in communities and governments about what he had said on the call.

When asked to comment about the board appointments and whether it had any discussions with the board or with the Alberta government about its decision to pause approvals on renewable energy projects, TC Energy referred questions to the provincial operator.

“As a North American energy company, we regularly interact with our customers, local distribution companies and electric grid operators to deliver the energy the continent needs,” the Alberta-based company said in an email to The Narwhal.

TC Energy employs over 7,000 people, operating a range of energy infrastructure, including natural gas pipelines and nuclear, solar and wind generation. On Oct. 1, it spun off some liquid pipeline assets, including the Keystone pipeline system, into a new company called South Bow.