Aug 14, 2019

BC’s Oil and Gas Commission: A captured regulator

Photo © Garth Lenz

In June 2015 “in an effort to expedite” the building of a pipeline by Alliance Pipeline Ltd., a company called Synergy Land Services submitted falsified documents to British Columbia’s Oil and Gas Commission.

The documents were deliberately altered to suggest that archaeological work was done at two sites when in fact it had only been done at one. Yet the imprimatur of the professional archaeologist somehow magically made it onto both documents.

Two years later when the Commission (OGC) issued an “administrative finding” on the matter, it noted how Synergy’s “applications were altered to include different geographic areas and different purposes from the initial applications while retaining original signatures of the archeologist and Alliance’s company representative.”

The company wasn’t even ordered to pay a dime fine.

Fraud is a serious criminal matter. Under BC’s Oil and Gas Activities Act, which guides the OGC’s work, companies found to have submitted false or misleading documents may be liable to fines of up to half a million dollars.

Synergy subsequently laid the blame for what happened on a junior employee who didn’t know better. The employee was let go and the company allegedly altered its hiring practices to “add a training component on documentation expectations.”

While the OGC later said it was not satisfied that Synergy took “all reasonable steps” to ensure the fraud did not occur, it concluded that the company had done enough to prevent it happening again.

The company was not even ordered to pay a token dime by way of a fine.

Unfortunately, this is not an isolated incident. When it comes to vigorously enforcing the rules, the OGC rarely does and today I published a report outlining this.

Regulatory failure

In just the past two-and-a-half years, three spectacular examples of regulatory failure by the OGC have surfaced.

In May 2017, word surfaced that the OGC had allowed dozens of unlicensed dams to be built on its watch by fossil fuel companies that impounded massive amounts of water behind the structures to use in their controversial, earthquake-inducing fracking operations.

Many of those “illegal works” (two of the largest unlicensed dams were described as such by BC’s Environmental Assessment Office) were subsequently found to have serious design flaws that could have had deadly consequence for any oil and gas industry personnel or landowners working or living immediately downstream.

Then, in late fall 2017, it was learned that the OGC had knowledge of numerous gas wells that had failed and were leaking methane into groundwater. What did the OGC do with that knowledge? It hid it from the public for four years, only confirming it after a copy of its “internal” audit was leaked to an investigative reporter.

Word surfaced that the OGC had allowed dozens of unlicensed dams to be built.

In spring 2018, word surfaced about yet another damaging OGC audit. This one itemized how numerous oil and gas companies had violated operational rules aimed at protecting some of the most threatened caribou populations in the province. Once again, the OGC suppressed that information, only acknowledging it after it fell into outside hands.

The worst that appears to have happened in all three cases involving multiple violations of provincial regulations is that the OGC ordered the offending companies to fix their mistakes.

Such orders, however, are not official findings of wrongdoing—something that the OGC appears intent on avoiding.

To demonstrate this, the BC office of the Canadian Centre for Policy Alternatives looked at 115 different enforcement actions posted on the OGC website. Fully 99 of those actions involved orders where no finding of guilt was made. Another two involved tickets. Only 14 involved administrative tribunals where harsher penalties could theoretically be meted out. Even then, they rarely were.

In total, the penalties resulting from those 14 investigations totaled $92,750, a drop in the bucket compared to the more than $5 million in penalties that could have been levied.

Competing interests

From its advent 21 years ago to the present day, the OGC has outperformed on its key mandate of being a “single-window” agency that fast tracks industry development applications. But it has underperformed, spectacularly, when it comes to holding that same industry to account when it does wrong—as it all too frequently does. This suggests that the agency is captured by the industry it regulates, which is never a good thing as far as the public interest is concerned.

This state of affairs will continue and likely get worse with a predicted rapid run-up in natural gas drilling and fracking operations that would be required if one or more liquefied natural gas plants materialize on BC’s coast.

There is one effective way to reform the current state of affairs, something that both a former all-party committee of the provincial legislature recommended in the aquaculture or salmon-farming industry and that BC Auditor General Carol Bellringer more recently recommended for regulation of the province’s mining industry.

This suggests the agency is captured by the industry it regulates.

When regulators are essentially tasked with both expediting development applications and simultaneously policing the industry that it grants development approvals to, problems inevitably arise. Bellringer quite rightly concluded in the case of the mining sector that a provincial agency saddled with such a dual role was caught in an “irreconcilable conflict.”

To end that conflict and restore public confidence, one agency should review and subsequently approve or deny industry applications. A second very separate agency should do the policing work and ensure that companies abide by the rules. When those rules are broken, it should fall to the stand-alone compliance and enforcement agency to determine what the appropriate penalties will be.

British Columbians deserve to see this simple yet vital reform enacted along with a handful of other reforms aimed at turning the OGC from an agency captured by the industry it regulates to one that more properly serves the people of the province.

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This piece was published as part of the Corporate Mapping Project, a six-year research and public engagement initiative jointly led by the University of Victoria, the Canadian Centre for Policy Alternatives’ BC and Saskatchewan Offices, and the Alberta-based Parkland Institute. This research was supported by the Social Science and Humanities Research Council of Canada (SSHRC).

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