You know an organization has lost its way when two of its formative leaders openly express dismay at its direction, effectively taking it out to the woodshed for a tough talk.That’s the state of the Alberta Energy Regulator today.The board of directors was replaced last month and the AER’s mandate is under review by the provincial government.Its former CEO, Jim Ellis, was found by Alberta’s ethics commissioner to have had a conflict of interest, as several independent investigations into the AER were released last week.Employees described a “culture of fear” within an organization of about 1,200 people that is mandated with overseeing the efficient, safe and environmentally responsible development of Alberta’s energy resources.“I was very distressed to read about it and a bit sad, on the behalf of a lot of people who spent a lot of time there,” said Gerry DeSorcy, who led Alberta’s predecessor energy regulatory agency as chairman between 1987 and 1994.“I think that changes do have to be made.”Neil McCrank, who chaired Alberta’s Energy Resources Conservation Board from 1998 until 2007, expressed similar concerns.“I was just shocked to read the reports,” McCrank said.“Alberta has been known throughout the world as having one of the best oil and gas regulatory systems on the face of the planet. And that has been diminished, tarnished, substantially, by these findings.”The controversy surrounding the International Centre of Regulatory Excellence (ICORE) saw Ellis help establish the external non-profit corporation in 2017, which used AER resources. It was intended to generate revenue by offering training and services to foreign regulators.It led to critical reports, released Friday by three independent legislative offices, which found ICORE was outside the mandate of the regulator.Alberta’s public interest commissioner found Ellis grossly mismanaged public funds in establishing and supporting ICORE, and by “misappropriating or by attempting to misappropriate the intellectual property of the AER.”Ethics commissioner Marguerite Trussler found Ellis breached the Conflicts of Interest Act, and said the main motivation behind ICORE was to create future employment or remuneration for the former CEO.The auditor general found the AER spent public money inappropriately on ICORE activities, and oversight by the board of directors was ineffective.“There are still hundreds and hundreds of people in that organization … very committed, solid individuals, working hard. And they must be looking with their head down at their desk today thinking, ‘Oh my God, what happened?’” said McCrank.“It’s not the way the organization is supposed to be run.”Indeed.
Jim Ellis, former Alberta Energy Regulator CEO.
Crystal Schick /
Alberta has a long, proud history of operating a world-class regulator to provide oversight of its oil and gas resource development, dating back to the 1930s.For years, Alberta’s regulator has been visited by international agencies seeking its expertise, but never charged for it, seeing this role as part of the broader “brotherhood of regulators,” said McCrank.So why did it change gears and what will it do next to get back on track?I wish I could tell you.The AER executive turned down several interview requests this week, although the organization issued a vague statement late Monday, noting it has “initiated improvement in our governance policies, controls and culture.”It did an internal audit to recommend improvements and ensure effective oversight, and is reviewing the reports’ recommendations, the AER said.That’s a start. But it’s not good enough.It needs to speak out and fully explain how the dysfunction occurred, what precisely the management and board did (or did not) do, and — most importantly — discuss plans to rebuild any lost trust with its staff and the public.Related
The organization has a duty to its employees, the industry and all Albertans to be forthright about how it will resolve the underlying issues identified in these reports.Going forward, the critical issue ahead comes down to one key word: trust.As DeSorcy and McCrank stressed, a public regulator must be built and operated on a solid foundation of trust. The AER must trust (but also verify) the industry will operate in a safe manner and will provide authorities with accurate and timely information.The industry must have confidence in the agency, to be fair, efficient and transparent.And the public (including the government) must trust the regulator to look out for the best interests of all Albertans.“It’s critically important that people have confidence in the AER. It’s one of the flagship regulatory bodies in the country on energy development,” said former Alberta energy minister Ken Hughes, who helped create the restructured organization in 2012.
Ken Hughes on Monday May 12, 2014.
Now let’s match up the ideals with what the auditor general’s report found:• The former AER chief executive held multiple potentially conflicting roles;• The “tone at the top at AER did not support a strong control environment or compliance with policies;”• AER staff, in interviews with the auditor general’s office, commonly talked about a “culture of fear” at the regulator and employees who expressed concerns were at risk of losing their job.Both DeSorcy and McCrank said structural changes made in 2012 to set up the AER with a separate CEO and board should be examined to see if it’s the most effective way to run the organization.It’s also clear the AER and its board need to be open with the public about what it’s doing to address the issues head-on, not worrying about saying the wrong thing or waiting for the issue to blow over.Yet, it can take solace that it was a whistleblower at the AER — and others inside who expressed concern — that led to these problems coming to light.“The core of the organization — the very dedicated people that are in the organization today and have been for years — they remain. They just have to be reassured the people at the top … (are) in line with their thinking,” said McCrank.And what should the new management and interim board of directors do next?“They have to talk to the people about a new day, but more importantly, they have to mean it,” added DeSorcy.“They have to open the door to their offices and mean it. That’s all there is to it.”Chris Varcoe is a Calgary Herald email@example.com