In this presentation, FMC’s Bernard Roth outlines the current trends in energy regulatory law. The presentation includes the following topics: - Trends in Facilities Regulation - Alberta Non-Utility Oil and Gas Facilities - AER Structure - Responsible Energy Development - Federal Budget Legislative Changes - Federal Fisheries Act - Navigable Waters Protection Act - Canadian Environmental Assessment Act - Trends in Utilities Regulation - Performance Based Regulation for Alberta Utilities

1. TRENDS IN ENERGY REGULATORY LAW
Presentation to CBA Nat Resources, South Section
Calgary, Alberta
March 13, 2013
Presented by: Bernard J. Roth
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2. Trends in Facilities Regulation
• New Alberta Energy Regulator
• The Federal Budget Legislation
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3. Alberta Non‐Utility Oil and Gas Facilities
• 2010 – government appoints Regulatory Enhancement Task
Force to examine how Alberta’s regulatory system for energy
could be improved
• December 2010 Task Force report recommended creation of
single regulator
• Resulted in Bill 2 – Responsible Energy Development Act
• Enacted on December 10, 2012 and comes into force on
proclamation – Summer of 2013 (pending regulations)
• Creates new regulatory body ‐ the Alberta Energy Regulator
(AER)
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4. AER Structure
• Board of Directors with a chair and at least two other
members
• CEO of the AER cannot be Board member
• Hearing Commissioners appointed from roster of
Commissioners (including a Chief Commissioner) to sit on
hearing panels
– Commissioners cannot be the CEO or Board member
• Hearing Commissioners are independent of Board and CEO but
supported by AER staff
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5. Responsible Energy Development Act
• Alberta Energy Regulator will regulate “energy resource
activities” being upstream oil and gas, oilsands and coal
• Mandates of ERCB and AlbertaEnvironment and Sustainable
Resources Development will be rolled into the Regulator and
ERCB will be dissolved
• ESRD will continue to regulate environmental matters
associated with non‐energy resource activities but all matters
under EPEA, Water Act and Public Lands Act relating to energy
resource activities will be handled by the Regulator
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6. RDEA, cont.
• Single regulator for project proponents for all permits,
dispositions, approvals, licences etc. and environmental
assessments, with exception of:
– acquisition of mineral rights; which will still be administered by
Alberta Energy (with exception of Part 8);
– surface rights which will still be administered by the Alberta Surface
Rights Board; and
– facilities of regulated utilities still regulated by the AUC under the Gas
Utilities Act, the Electric Utilities Act, Hydro and Electric Energy Act and
the Public Utilities Act.
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7. REDA – Review and Reconsideration
• Persons who filed SOCs and are directly affected by EPEA,
Public Lands Act and Water Act approvals and licences no
longer have right of appeal to the Environmental Appeal Board
or the Public Lands Appeal Board – nor do project proponents
whose applications are denied or who are unhappy with terms
and conditions of approvals and licences
• May apply for review of decision by the Regulator without a
hearing
– Regulator reviews its own decision – internal process – decision may
be made with or without hearing
• May apply for reconsideration of any decisions regardless of
whether there was a hearing which is again internal
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8. REDA ‐ Appeals
• Appeal from Regulator’s review decision only to Alberta Court
of Appeal, with leave, on questions of jurisdiction or law (i.e.
not on questions of fact or mixed fact and law)
• Appeals of all decisions including those made on a review or
reconsideration and even though no hearing
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9. Federal Budget Legislative Changes
• Attempt to keep federal regulation closer to scope of core
federal jurisdiction under the constitution
• Environment not addressed in constitution and limits of
federal jurisdiction never clear
• Budget legislation amendments appear to be directed at
Trojan Horse concern
• Environmental regulatory powers limited to area of core
federal competency and environmental assessments powers
designed to focus on major projects and to avoid duplication
of provincial assessments
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10. Federal Fisheries Act
• New provision for equivalency agreements with provinces and
suspension of provisions of federal act where provincial
legislation is agreed to be equivalent
• Proclamation pending on further amendment to
s.35(1)prohibitions against HADDs (harmful alteration,
disruption or destruction of fish habitat) to cover “serious
harm to fish that are part of a commercial, recreational or
Aboriginal fishery”
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11. Navigable Waters Protection Act
• Again, pending proclamation will only apply to scheduled
water bodies, not all navigable waters
• Will be major rivers like North and South Saskatchewan as will
as Athabasca
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12. Canadian Environmental Assessment Act
• Triggers are no longer federal approvals, but “designated
projects” specified in regulations
• Designated projects are major projects (i.e., those on the old
Comprehensive Study List)
• Environmental effects to be considered are generally limited
to areas of federal jurisdiction:
– Fish and fish habitat
– Aquatic species at risk
– Migratory birds
– Federal lands
– Transboudary effects
– Effects on aboriginal peoples
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13. CEAA, cont.
• Projects screened to determine whether any environmental
assessment will be required
• Now only two types of assessment – standard assessments
and review panels
• Environmental assessments performed by NEB, CNSC or CEAA
Agency
• Time limits imposed, 45 days to determine if assessment
required, 60 days to determine if it is a standard review or a
review panel 12 months for a standard review, 24 months for a
review panel and 15 months for an assessment by the NEB.
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14. CEAA, cont.
• NEB and Review Panel hearing right of participation is now
limited to “interested parties” determine by a “directly
affected” test same as Alberta test for participation which
ensures natural justice
• Ability to substitute provincial process where there is a
standard review such that federal government will rely on
results of provincial assessment in making determinations
under CEAA
• There is also the ability to exempt a project from the CEAA in
deference to a provincial assessment and significance
determination
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15. Trends in Utilities Regulation
• Performance based rate making for provincial utilities
• Complaints based regulation for provincial oil pipelines
• Beyond the regulatory compact for federal oil and gas
pipelines
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16. Performance Based Regulation for Alberta
Utilities (Rate Regulation Initiative)
• Intended to depart for COS regulation
• Rates set for 5 years using past COS historic bench mark
• Rates adjusted annually for various factors to create incentive
for efficiency over 5 year term
• Subject to ROE caps and floors during 5 year term of 5 % in any
one year or 3% over two years
• After 5 years open to bench mark again on COS
• Replicates what some settlements were doing without
precondition of having a settlement
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17. Beyond the Regulatory Compact for NEB
Pipelines
• What to do with gas pipelines that are out of the money?
• How to handle oil pipelines that are in the money?
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18. Gas Pipelines
• The TransCanada restructuring application
• Extending the NGTL System in BC
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19. Oil Pipelines
• History of migration to negotiated tolls
• The role of cost of service in the context of contract pipelines
• What happens when there is disagreement on contract rates
on new or existing capacity being offered by contract
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20. Questions?
Bernard Roth
1 403 268 6888
bernard.roth@fmc‐law.com
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21. The preceding presentation contains examples
of the kinds of issues people dealing with
energy regulation could face. If you are faced
with one of these issues, please retain
professional assistance as each situation is
unique.
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