Whenever discussion turns to the high cost of energy projects, a predictable lament is that the regulatory hurdles are so high and the time frames so long, that cost estimates are driven skyward. "The cost estimates of the typical oilsand production facility or pipeline project would not be blown-out, if somehow the government could get a grip on the regulatory process.".Or so the argument goes. I have used this sad lament to cover my tracks on a few such projects and understand the loud sighs and profane comments directed toward the government when they meddle in the “real” work of building an economy. But is it always so?.Here is some boilerplate wording used in both National Energy Board (NEB) and Canadian Energy Regulator (CER) decision reports. “… pipeline projects generally follow a three-phase design process consisting of a conceptual phase, a preliminary engineering phase and a detailed engineering phase which would lead to the final design. Applications submitted to the Board for a Certificate of Public Convenience and Necessity (CPCN) typically contain information based on conceptual and preliminary engineering data that have been determined at the application stage and, therefore, detailed designs cannot be completed for all aspects of the project. “.The review process which, under the NEB Act was limited to 15 months and goodness knows what it is under the CER Act, start with conceptual or preliminary engineering data. For a large industrial project like a pipeline, the engineering period is typically up to two years..This means that the regulatory process is designed to fit within the timeframe scheduled for engineering. That is, the regulatory and engineering processes are parallel activities. Sometimes the proponent makes scope changes to the project during the regulatory process which cause a repeat or recycle of the process. But, that is an issue that the project owner needs to take up with their engineering team, rather than squawk about regulatory delays..This means that while there have been exceptions, project delays are rarely due to the regulatory process..Are regulatory reviews expensive?.Yes, they are but before we bemoan this expense let’s review a few facts:.· If I want to install my television cable across your yard, you will want me to first knock on your door and ask permission..· If I think that I’ll need to pull out a bunch of your flowers during the cable laying project, you will expect me to let you know how many and which ones. More importantly you will want me to replace them with similar flowers of similar colour. Failing that you will want some cash..· If you are like me, you will want me to sign an agreement that states that if anyone is hurt by a stray current or other hazard from the cable then I will be on the hook for the liability..· If I subsequently decide to buy my internet services from Elon Musk rather than a cable or telephone company, then you may want me to remove the cable and fix up the mess at my cost..· If my cable needs to cross several of my neighbour’s properties, then each of those neighbours will have a similar expectation about how I communicate and negotiate with them. If I want to continue to live in the neighbourhood, then I had better treat everyone pretty much the same..Has the cost of my cable laying project gone up in price because of all this palaver? In terms of my time and energy it certainly has. If because I am an introvert, I hire someone to talk to my neighbours for me, then my out-of-pocket cost has also gone up..Now let’s say that I own the biggest house on the block and drive the nicest car and that some of my neighbours work in my company. Should I ignore them and just put my cable into their lawn and tell them to suck it up? I suppose I could but if I don’t want my house to be routinely egged, I should talk to my neighbours..The point is that the right of one party to develop an important project carries a defined responsibility to deal with the property and treaty rights of the adjacent landowners which are inherent to that development. We may squabble over the definition of “neighbour” but once defined, the responsibilities accrue. In some respects, these responsibilities can be traced back to Magna Carta. I may be happy for the king to have his castle near my home but, be it ever so humble, it is my home and I want the king to respect that fact..So yes, the regulatory process involves added cost. Apart from ensuring the safety of the infrastructure, someone must ask the adjacent landowners, “Has the proponent talked to you? Are you happy with the outcome of the conversation? What would you like us to do about it?”.When there are significant power imbalances between project proponents and those affected by the project there will be problems and they are best resolved at the beginning of the project by a regulatory process rather than later by a judicial process. It is called adjudicating the public interest..In my experience, project development companies are pretty good at this stuff. I just wish they would stop blaming the regulatory process for their engineering hiccups..Murray Lytle, Ph.D. is a retired engineer living in Alberta. His resource development career took him around the world, and he was one of the last permanent members of the National Energy Board before it was modernized to the Canadian Energy Regulator.
Whenever discussion turns to the high cost of energy projects, a predictable lament is that the regulatory hurdles are so high and the time frames so long, that cost estimates are driven skyward. "The cost estimates of the typical oilsand production facility or pipeline project would not be blown-out, if somehow the government could get a grip on the regulatory process.".Or so the argument goes. I have used this sad lament to cover my tracks on a few such projects and understand the loud sighs and profane comments directed toward the government when they meddle in the “real” work of building an economy. But is it always so?.Here is some boilerplate wording used in both National Energy Board (NEB) and Canadian Energy Regulator (CER) decision reports. “… pipeline projects generally follow a three-phase design process consisting of a conceptual phase, a preliminary engineering phase and a detailed engineering phase which would lead to the final design. Applications submitted to the Board for a Certificate of Public Convenience and Necessity (CPCN) typically contain information based on conceptual and preliminary engineering data that have been determined at the application stage and, therefore, detailed designs cannot be completed for all aspects of the project. “.The review process which, under the NEB Act was limited to 15 months and goodness knows what it is under the CER Act, start with conceptual or preliminary engineering data. For a large industrial project like a pipeline, the engineering period is typically up to two years..This means that the regulatory process is designed to fit within the timeframe scheduled for engineering. That is, the regulatory and engineering processes are parallel activities. Sometimes the proponent makes scope changes to the project during the regulatory process which cause a repeat or recycle of the process. But, that is an issue that the project owner needs to take up with their engineering team, rather than squawk about regulatory delays..This means that while there have been exceptions, project delays are rarely due to the regulatory process..Are regulatory reviews expensive?.Yes, they are but before we bemoan this expense let’s review a few facts:.· If I want to install my television cable across your yard, you will want me to first knock on your door and ask permission..· If I think that I’ll need to pull out a bunch of your flowers during the cable laying project, you will expect me to let you know how many and which ones. More importantly you will want me to replace them with similar flowers of similar colour. Failing that you will want some cash..· If you are like me, you will want me to sign an agreement that states that if anyone is hurt by a stray current or other hazard from the cable then I will be on the hook for the liability..· If I subsequently decide to buy my internet services from Elon Musk rather than a cable or telephone company, then you may want me to remove the cable and fix up the mess at my cost..· If my cable needs to cross several of my neighbour’s properties, then each of those neighbours will have a similar expectation about how I communicate and negotiate with them. If I want to continue to live in the neighbourhood, then I had better treat everyone pretty much the same..Has the cost of my cable laying project gone up in price because of all this palaver? In terms of my time and energy it certainly has. If because I am an introvert, I hire someone to talk to my neighbours for me, then my out-of-pocket cost has also gone up..Now let’s say that I own the biggest house on the block and drive the nicest car and that some of my neighbours work in my company. Should I ignore them and just put my cable into their lawn and tell them to suck it up? I suppose I could but if I don’t want my house to be routinely egged, I should talk to my neighbours..The point is that the right of one party to develop an important project carries a defined responsibility to deal with the property and treaty rights of the adjacent landowners which are inherent to that development. We may squabble over the definition of “neighbour” but once defined, the responsibilities accrue. In some respects, these responsibilities can be traced back to Magna Carta. I may be happy for the king to have his castle near my home but, be it ever so humble, it is my home and I want the king to respect that fact..So yes, the regulatory process involves added cost. Apart from ensuring the safety of the infrastructure, someone must ask the adjacent landowners, “Has the proponent talked to you? Are you happy with the outcome of the conversation? What would you like us to do about it?”.When there are significant power imbalances between project proponents and those affected by the project there will be problems and they are best resolved at the beginning of the project by a regulatory process rather than later by a judicial process. It is called adjudicating the public interest..In my experience, project development companies are pretty good at this stuff. I just wish they would stop blaming the regulatory process for their engineering hiccups..Murray Lytle, Ph.D. is a retired engineer living in Alberta. His resource development career took him around the world, and he was one of the last permanent members of the National Energy Board before it was modernized to the Canadian Energy Regulator.
