Alberta’s Pipeline Regulation a ‘Facade’: Experts

The Alberta Energy Regulator — responsible for regulating more than 430,000 kilometres of pipelines in the province — has finally started to try to clean up its image.

In the last two weeks of February, the agency launched a “pipeline performance report” that graphs recent pipeline incidents, it levelled a $172,500 fine against Murphy Oil for a 2015 spill that went undetected for 45 days and it shut down all operations by the notoriously uncooperative Lexin Resources, including 201 pipelines.*

But critics suggest there are major systemic flaws in the Alberta Energy Regulator (AER) that still need to be addressed if pipeline safety is to be taken seriously.

“It’s absolutely ridiculous,” says Mike Hudema, climate and energy campaigner for Greenpeace Canada. “You’re talking about a spill that went undetected for 45 days. And the company was fined an amount that they could likely make in less than an hour. That doesn’t send any message to the company. It definitely doesn’t send any message to the industry. And it doesn’t reform company behaviour.”

Ecojustice lawyer Fraser Thomson agrees there are major gaps in oversight.

“There are still significant, significant issues with transparency and accountability on what the AER calls ‘incidents’ within the oil and gas sector,” Thomson said.

AER Accused of Mixed Mandate, Industry-Friendly Structure

The AER was formed in late 2012 with the merging of the Energy Resources Conservation Board and some duties of the ministry of environment and sustainable development.

It’s been under fire from critics ever since.

For one, it’s often accused of having a mixed mandate. Only a month-and-a-half after forming government in 2015, Alberta Premier Rachel Notley suggested the AER can’t do the job of environmental protection and monitoring when its “overarching mandate is to promote energy development.”

Notley reported the government would review the AER’s mandate and potentially split it into two agencies: one for monitoring, another for approvals. But only six months later, the AER received a letter confirming the current organizational structure would be maintained.

“We haven’t really seen much sea change,” Hudema said. “Until that happens, unfortunately Alberta will be plagued with the pipeline problems that has plagued it for decades.”

It hasn’t helped matters that the AER’s chair Gerry Protti was a former Encana executive and founding member of the Canadian Association of Petroleum Producers, or that the AER is entirely funded by industry.

In 2013, Notley — then serving as the NDP’s environment critic — called on AER CEO Jim Ellis to resign due to his involvement in a scandal about the suppression of anti-oilsands dissent by government, describing the situation as “banana republic stuff.”

It’s a sentiment reflected by renowned ecologist Kevin Timoney, who recently reported that the AER has vastly underestimated spill volumes and recovery efforts between 1975 and 2013.

“There was some movement towards improving monitoring [in recent years] but those efforts have been undermined by senior management,” he writes in an e-mail. “Enforcement is still little more than a facade.”

Online Database An Improvement, But "Pretty Frail"

Duncan Kenyon, director of the Pembina Institute's responsible fossil fuels program, says the AER first made it a serious priority to deal with pipeline spills following the 2012 release of 461,000 litres of sour crude oil into the Red Deer River by Plains Midstream.

That same year, the provincial government ordered a pipeline safety review, which ended up being itself criticized by Notley and others for failure to consult or actually consider incidents (instead opting to simply compare regulations to other jurisdictions).

Recent spills haven’t exactly bolstered the regulator’s reputation.

The aforementioned Murphy Oil spill in 2015 resulted in 9,000 barrels of condensate spilling onto public land near Peace River. A spill at Nexen Energy’s Long Lake facility that same year released 31,000 barrels of emulsion between June 11 and July 15, despite being a brand new pipeline.

Around 1,500 barrels of oil emulsion was also spilled by Trilogy Energy near Fox Creek in October 2016.

Thomson notes that an incident first reported in 2013 involves a Canadian Natural Resources Limited in-situ project near Cold Lake in which bitumen started bubbling to the top over the period of months and years. The AER’s compliance dashboard lists the incident as “ongoing” with the “emergency phase over July 17, 2013.”

He says that he still can’t get an answer to whether the spill is happening or not.

“When it comes to the information that people want to know — what’s the risk here, is it safe, is there a safety risk to humans, wildlife environment and treaty rights — the compliance dashboard is a pretty frail tool to access it,” Thomson said.

In addition, he notes that language used by the AER often confuses things for the public: for instance, the regulator will use “produced water” in reference to “toxic water” with a high concentration of salts that are dangerous to local environments and often have oil residue in them.

Similarly, he says the AER will report “no recorded impacts” as opposed to “impacts unknown.”

“I think it would be reasonable for the public to read that and assume there weren’t impacts, when it’s really a turn of phrase,” Thomson says.

#Alberta’s Pipeline Oversight a ‘Facade’: Experts https://t.co/4942NmkdkM @james_m_wilt @HuffPostAlberta @ProgressAlberta #ableg #cdnpoli pic.twitter.com/nq8N7xd0CJ

— DeSmog Canada (@DeSmogCanada) March 23, 2017

Self-Reporting Only Works If Regulator Ensures Compliance

The AER claims that the length of pipelines in Alberta has grown by 11 per cent over the last decade, with “incidents” dropping by 44 per cent.

But Timoney’s recent report complicates the matter even further, suggesting that many spills weren’t recorded, and that many former oil spill sites that have reportedly been reclaimed are still contaminated from pipeline leaks.

“According to the data that I have received from the regulator, the number of spills has declined in recent years,” he explains in an e-mail. “However, it is important to remember that those data are based on industry self-reporting; they are not independently verified. Incidents occur that are not reported, but the frequency of unreported incidents is not known.”

Kenyon agrees: “If you don’t have a regulator who’s going out and actually seeing if people are complying — going out there and doing audits and seeing if what they said in their self-report is accurate — then none of that data is worth anything.”

Alberta’s Fines Well Below National Average

That’s why many point to the lack of enforcement as a key problem.

That starts with fine limits, which is established by the province. Alberta has fairly low caps on penalties compared to other provinces, Thomson says.

Data compiled by Ecojustice and shared with DeSmog Canada indicates a clear trend: the provisions that are most often used — Section 108(2) and 109(2) of the Environmental Protection and Enhancement Act, concerning the “release of substance causing adverse effect to environment” — has a cap of $500,000 in Alberta, compared to a cap of $1 million in B.C., Saskatchewan, New Brunswick, Nova Scotia and Newfoundland.

In Ontario and Quebec, the maximum limit for first conviction is $6 million. The only provinces that have an equal or lower cap are Manitoba ($500,000) and Prince Edward Island ($50,000).

Cheaper to Pay Fines Than Maintain Pipelines

But the “administrative penalties” issued by the AER often fall well below that $500,000 mark.

The largest fine issued yet by the regulator was $250,000 against Pengrowth Energy for the 48-day spill of 537,000 litres of oil emulsion in late 2013. The recent fine against Murphy Oil was also one of the highest penalties in the AER’s history; Thomson says it was calculated based on every day the company failed to report it, which is a “positive development.”

The strange reality is that many pipeline companies do have leak detection systems in place. It’s just that companies often don’t direct resources into maintaining them, following what Kenyon calls a standard compliance versus non-compliance cost comparison model; in other words, it’s cheaper to ignore and risk the fine than pay for annual maintenance.

In the case of the Murphy Oil spill, the company failed to check for internal corrosion and perform maintenance on the leak detection system for three straight years even though it was required to check annually.

“You can put a management system in and then have it down in paper, but not everything is operating the way it’s supposed to,” he says. “And then you can claim when there’s a foul up that it just wasn’t operating as it was supposed to. But you never turned it on the way it was supposed to.”

More Boots on the Ground Needed

An AER spokesperson emphasized in an e-mail that the agency is working on addressing data collection issues and improving reporting spill clean-up.

In addition, the spokesperson said the regulator requires operators to implement “comprehensive integrity management programs and safety and loss management systems,” conducts “pipeline inspections on a regular basis” and provides “education on pipeline integrity.”

However, changing the trajectory of the AER ultimately requires new “marching orders” from the provincial government via an expansion of mandate, pressures to prioritize compliance and an increased limit on fines. It’s something the NDP has appeared reluctant to do; Kenyon says there “might have been more pressure coming on pipelines under the previous government.”

The press secretary for energy minister Margaret McCuaig-Boyd says via e-mail there are no plans to revisit the government’s decision to keep the AER as is.

Thomson says he’s not convinced that splitting up the regulator would address some of the systemic problems, which ultimately require more boots on the ground: “Industry needs to know that if they submit data and monitoring to the AER, that there’s a good chance it will be checked.”

Meantime, the Alberta government continues to push for any and all new pipelines, from Kinder Morgan Trans Mountain to Trans Canada’s Keystone XL and Energy East.

“I really feel like the government should get its own pipeline problems in order before it’s pushing for new pipelines to new jurisdictions,” Hudema concludes.

“When you’re averaging over one spill a day, it’s not something that you should be bragging about or pushing into new communities.”

*Correction: The article originally stated that the AER had recently launched its compliance dashboard. The dashboard has in fact been available for a few years. The regulator recently launched a “pipeline performance report” that graphs recent pipeline incidents