Copyright of the Daily Oil Bulletin 2018
Canada’s Energy-Decision System Not Suited To Challenges: University Of Ottawa Report
Canada’s energy-decision system is under growing stress, reaching the point of dysfunction, and the future will be difficult given the economy’s energy intensity, the country’s vast hydrocarbon and other energy resources, as well Canadians’ conflicting attitudes towards their energy resource economy, says a new University of Ottawa report.
“We are quite concerned about the long-term consequences of the status quo, and nobody is happy with the current system we have,” Monica Gattinger, professor and report co-author, told the Bulletin.
“The ultimate negative impact of not strengthening the system and undertaking informed reform of the system is lost economic potential for the country. There could also be lost potential in terms of environmental performance and trying to meet Canada’s greenhouse gas emissions-reduction targets.”
Public confidence is low and declining towards decision processes impacting energy, says the report. As a consequence, public authorities’ energy decisions are becoming increasingly protracted and uncertain, leading to outcomes contrary to Canada’s interests, and unsatisfying to communities, advocacy groups, as well as business.
“We are also dealing with other imperatives of energy decision-making, notably the investment climate,” Gattinger said, adding creating the “perfect” system for making decisions is pointless if it becomes so heavy, labourious, time consuming and uncertain that investors are not willing to invest in the Canadian energy sector.
Gattinger outlines three priorities in energy decision-making, including policymaker/regulator relationship examination, particularly in policy questions such as climate change, the impacts of multiple energy projects, as well as the role indigenous peoples play in energy decisions.
Secondly, she suggests, local authorities’ role in energy decision-making should be reconsidered, starting with indigenous communities desiring sustainable energy development and with decision-making inclusivity, as well as municipal governments concerned about meeting local energy needs with both local and imported resources.
Thirdly, the role of citizens in energy decision-making must be reconsidered to ensure citizens have access to the information needed to make informed decisions.
In System Under Stress: Energy Decision-Making in Canada and the Need for Informed Reform, the authors begin with a fundamental understanding Canada’s energy decision-making system is comprised of multiple components, each operating with their own logic and imperatives.
“All of our recommendations are not aimed at only one part of the energy decision-making system,” Gattinger said. “What we are calling for in this report is what we call ‘informed reform.’ We look at energy decision-making as a system with component parts that interact, all of which have roles and responsibilities when it comes to strengthening public confidence in the system.”
According to the report, informed reform requires a systems-based, careful, deliberate path forward, which starts from a systems perspective focusing on both the effectiveness of and public confidence in the figurative machinery that extends from energy policy to operation of energy production and delivery systems.
This decision-making “machinery” consists of two parts: the policymakers, including cabinet, legislatures and government departments; and, the regulators, including numerous types of quasi-autonomous bodies such as resource, economic, environmental and power-system regulators.
Gattinger said: “While regulatory reform is important, and it is important to strengthen regulatory processes, it is a necessary-but-insufficient condition when it comes to strengthening public confidence in energy decision-making. Our research has underscored, time and again, the issue is really a systems issue.”
Failure to treat energy decision-making as a system with policy and regulatory components in a physical and market energy system blinds Canadian decision-makers to accurately diagnosing both the problems and opportunities Canada faces when it comes to energy development and public confidence in energy decision-making, as well as it hinders their ability to identify the right solutions, thus generating and exacerbating energy conflicts and public confidence.
Clearing up policy and regulatory confusions
Achieving informed reform requires every reform to consider social media communications and how social and value change plays into it. New inherently-political, non-regulatory policy priorities such as climate change and indigenous rights are now layered into decision-making and must be addressed in those terms.
In the absence of policymakers moving on several key policy issues, many of those policy gaps are left for regulatory agencies to face, Gattinger noted. “We actually see lower levels of confidence to participate in regulatory processes, when really the issue is at the level of policy. One of the things we call for in this report is that policy decision-makers need to address those policy gaps.”
She added: “We wind up with situations where regulatory agencies and individual public hearing processes hear from people who are concerned about the project not necessarily because of the specific project per se, but because of broader questions of public policy such as climate change, reconciliation with indigenous peoples, as well as cumulative, broader effects of energy development on such things as land and water.”
According to Gattinger, policymakers and regulators should improve communication with one another so as to strengthen ongoing energy decision-making. Further, regulatory independence is important when it comes to making decisions about individual energy projects.
“We have seen a number of instances where policymakers have made pronouncements about individual energy projects before they have found their way through the full decision-making processes of regulators. What that does is implicitly or explicitly call into question the credibility, objectivity, rigor and competence of regulatory agencies. That does not serve the overall decision-making system well.”
Informed reform also requires clarity on policy objectives, which in energy systems includes security, health and safety, cost and decision timeliness, affordability efforts, economic competitiveness and innovation, as well as environmental imperatives. Important too is defining the relevant public — those whose confidence is essential to understand. The public decision system must account for impacts on physical energy and energy market systems.
It is important to collaborate and co-ordinate, especially as much real decision authority lies outside the hands of any one government or even a well-meaning collection of governments, especially given the architecture of Canadian confederation. Decisions must be based on adequate, reliable and accessible information.
The report urges governments and those interested in strengthening Canadian energy decision-making to begin from a holistic, systems-based perspective explicitly focusing on core system elements, how they interact and evolve, as well as the main stress points to address, and how to address them in balanced, durable and effective ways, comprehensively considering their impacts on and feasibility within Canada’s physical and market energy systems.
Serious efforts to strengthen public confidence in energy decision-making require more sophisticated understanding of how the various system components work together, or at least ought to work together, suggests the report.
“A more systematic, comprehensive approach is both possible and necessary — we need informed reform,” said Gattinger, who is also chair of the university’s Positive Energy project. “Modernizing the system is essential if we are to come even close to meeting the challenges of the decades ahead.”
According to Gattinger, industry appears willing to do its part, recognizing there is a challenge to be resolved and tensions in the energy decision-making process. Companies legitimately want to resolve these issues in a way that creates a more stable, predictable and attractive investment climate for the sector.
“It can mean changes in the ways companies are interacting, notably with communities, and thinking through how they can help to build more productive relationships with communities in whose areas they are developing energy.”