EUB Compliance Assurance Initiative

The Regulatory Craft in Nova Scotia November 20-21 2007Hal 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

Governmentsets policy

OtherGovernmentdepartments

PublicRegulators

administer policy

Industrydevelops projects

LEGISLATION

REGULATIONS

Facilities/scheme approvalsInformation collection and disseminationCompliance/inspectionsCorrelative rightsUtility rates

Primary Energy Industry Regulatory Interfaces

Surface RightsBoard

Alberta Sustainable Resource

Development

Alberta Environment

PublicAlberta Energy and Utilities Board

Alberta Energy

National Energy Board

Alberta Human Resources and

Employment

Energy policy Mineral rights RoyaltyPre-drilling exploration

Gas Export Federally-regulated pipelines

Occupational health and safety

Notice of applicationsInformationDirectly affectedPublic Hearings

Environmental impact assessmentPollution control

Environmental standards and approvals

Surface access and rights-of-way on privately-owned land

EnergyIndustry

Alberta Facts

· Area………... 661 190 km2

· Population... 3.4 million (Jan. 2007)

· GDP*……... $ 152.7 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…..159 546*

· Pipelines…………………………… 392 232 km

· Gas processing ................. 573 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 (75 500 m3 per day capacity)

· Licensees………………………………..1850

Note: * Producing wells – 8 469 bitumen, 35 218 conventional oil, 109 335 gas, 6 524 CBM

** Including sulphur recovery

Energy Facilities in Alberta – 2006 · Batteries* and Compressor Stations

21 616 oil 12 243 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

MWwind (10) and other 621 MWtotal production: 11 742 MW

* sweet and sour multi and single well, sweet and sour satellites, gas batteries, and compressor stations

Annual Alberta Energy Production - 2006

· Conventional oil………31.5 million m3

· Bitumen in situ…………………28.7 million m3

surface-mineable…….44.1 million m3

· Natural gas……………138.3 billion m3 *

· Natural gas liquids……38 million m3

· Coal……………………2.5 million tonnes

* Including 1.2 billion m3 CBM Note: billion = 109

2006 EUB Applications· Wells…………………… .25 399· Production facilities…… ..3 540· Pipelines………………. ..16 410· Oil sands

· In situ…………… 242· Mineable………… 3

· Coal…………………….. 11· Reservoir development.. 5 164· 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 InitiativeOutcomes• 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

Performance

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 .

nHigh Risk Enforcement nAction 3

Can lead to

Can lead to 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:www.eub.ca/industryzone/compliance

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

High Risk 3 4

High Risk 2 30

High Risk 1 629

Satisfactory 25120

Inspections/Audtis

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

PlanningPlanning

Implementation

Implementation

Problem Analysis and

Solving

Problem Analysis and

Solving

DevelopmentDevelopment

EngagementEngagement

Monitoring and Evaluation

Monitoring and Evaluation

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 - 019 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) 297-3710

EUB.ComplianceCoordination@gov.ab.ca

More information:www.eub.ca/industryzone/complianceandenforcement

Additional Information