Aerial photo of Cenovus’ Foster Creek oil sands project in Northern Alberta. Source: NEB.
Concerns remain that upcoming federal regulations will negate benefits of substantial provincial reforms
The Alberta government has responded to a persistent criticism from the oil and gas sector by rolling out a software tool for oil and gas development applications that will shorten review times and save producers hundreds of millions annually. This is a major success for the Alberta Energy Regulator.
The Canadian Association of Petroleum Producers has long lamented the red tape Alberta projects suffer, but the calls for change became louder and louder after the 2016 election of Donald Trump, who is pulling the United States out of the Paris Climate Accord, slashing corporate tax rates, and gutting environmental regulations on federal land.
“While the US is reducing the cost of environmental regulations and streamlining, Canada is moving in the opposite direction. There are between 40 and 50 policy and regulatory initiatives under way with the potential to adversely impact the upstream oil and gas industry. These are conservatively estimated at between $450 and $760 million annually which is over and above the annual base policy and regulatory cost of $3 billion,” industry’s largest trade group wrote in a 2017 competitiveness study.
Even though CAPP pointedly avoided commenting on the cost savings associated with the AER’s new Integrated Decision Approach, which will cut project approval times by up to 75 per cent, it applauded the regulator’s commitment to taking scissors to the red tape.
“CAPP believes the program has significant potential to move the needle on approval timelines in Alberta. This streamlined regulatory process shows great promise for eliminating redundancies and providing certainty while also growing jobs and protecting our environment,” Terry Abel, executive VP Canada operations and climate, said in a statement.
Energy Minister McCuaig-Boyd says government has heard industry concerns about competitiveness loud and clear.
“Top of mind for everyone was the need to maintain our competitiveness with a simple and straightforward process for reviewing energy projects,” she said during the media conference. “Competitiveness was the focus right from the get-go.”
The Integrated Decision Approach combines the many submissions previously required for development into a single application, review, and decision by the regulator.
The system uses “complex rules,” according to AER CEO Jim Ellis, to automate low-risk applications, leaving more time for technical experts to review more complex and high-risk applications.
“One-stop reduces timelines on applications, moving decisions from days to hours, and allowing staff to focus their attention to where it truly matters,” he said, noting that instead of shuffling paper, technical staff will spend more time actually supervising projects.
“Less time is spent on administration and more time making sure that the rules are followed. This makes us a more proactive and responsive regulator.”
For examples, land reclamation applications are now processed and approved 75% faster or more than under the old system: from 365 days to 90 days for high-risk certificates and from 180 days to 31 days for low-risk.
The new approach has been in pilot project stage since 2016 with a number of producers and will be fully rolled out by 2021.
The regulatory review of one of the pilot projects, Suncor Energy’s Meadow Creek East oil sands project, was reduced from five years to 15 months. A Canadian Natural Resources Limited smaller heavy oil development proposal saved almost $1 million and four months of review time under IDA.
“The future of this province is really in energy development for hydrocarbons is really unconventional fracking [in the Duvernay] and [oil sands] in situ, which is well-based,” said Ellis, noting that well applications will be fully automated by 2019.
The IDA has been used for reclamation certification applications, pipeline licenses and amendments, notifications and submissions for operations and submission of well drilling data. Public land applications and wells are coming over the next year.
Ellis claims Alberta is now ahead of other oil and gas producing jurisdictions, which by and large do not have automated, integrated systems.
“This IDA one-stop is truly jurisdiction-leading. This is trail blazing,” he said.
Marg McCuaig-Boyd says that concerns from landowners, municipalities and Indigenous communities can be addressed better because Albertans can access information – e.g. interactive maps, status reports – on developments within their communities and across the province.
“They wanted an opportunity to have their voices heard,” she said.
The Integrated Decision Approach will probably sound to many Albertans like a dry, uninteresting development of interest only to industry.
The global energy system is changing rapidly and Alberta oil and gas producers – especially oil sands companies – are busy re-engineering their businesses to compete in a low-carbon economy where enegy is abundant and prices are volatile.
Efficient and effective government regulation is a key component of preparing for the future, just as important in its way as improved market access, lower operating costs, and driving down the carbon-intensity of heavy crude oil.
The Alberta government is doing a good job. Not a perfect job, as sources say there are still implementation issues that need to be ironed out with new emissions regulations, but the work is well underway.
If there is a danger for Alberta, it is the federal government piling on additional costly and duplicative policy.
Ellis says federal officials recognize the value of integrated planning and decision-making.
“We work quite closely with those regulators. They’re not going to have to run a lot of pilots, take a lot of risk, because we’ve done it all,” he said.
Let’s hope so.
Federal fumbling of the pipeline file suggests Alberta should remain vigilant, doing whatever is necessary to ensure the senior government doesn’t muck up the significant progress being made by the provincial government and energy regulator.