Good luck with that.

The fascist Brimstone the Harp and his gang of thugs are 100% owned by Big Oil. Dumbass voters scammed by the NDP and the fascist MSM gave him dictatorial powers for the next 5 years.

You are just wasting your time.

It is not a waste of time

Though in the short term there may be no reason for hope, in the long term chronicles like this are very useful. (assuming such records survive the passage through the Fan WTSHTF)
For some reason a quote of Churchill's words came to mind a few days ago, something like:

Never in history
Has so much been owed
By so many
To so few

Seems he was referring to the Fighter Pilots defending the UK in about 1941 but to me it now fits the modern "economic" situation where the "great unwashed" pay the price for the rip off enjoyed by the "few".
T'was ever thus, I guess.
But just maybe, given some time, this actual information (above article) will survive the flood of Utube Videos and iTunes and texted "How are you"s

Out of Context

This post written by a U of A business prof suggests you've purposefully taken quotes out of context and failed to get across the reality of how the NEB operates. Hope you'll make time to respond: http://andrewleach.ca/energy/if-youre-going-to-make-accusations-you-best-back-them-up/#more-577

Andrew Nikiforuk replies (part one)

Dear Readers

Andrew Leach, an Alberta-based regulatory economist who writes a very interesting blog (Rescuing the frog), has taken issue with several points made in my column about the NEB. And they are not convincing:

1.) Leach first argues that a regulatory board such as the NEB can be objective and still be financed 90 percent by industry through a system of levies based on the principle of cost recovery. Here, we simply disagree. As a journalist and landowner I remain unconvinced by his assurances that such funding formulas are all okay. Ordinary Canadians know that the guy, who pays the piper, calls the tune.

2.) Next Leach questions the authority and credibility of Canadian Association of Energy and Pipeline Landowner Associations (CAEPLA) and its founder, David Core. I think people who live with the full impact of the board’s policies and decisions are actually more informed than journalists or academics. It wasn’t’ regulatory economists that disclosed the corrupted nature of the Texas Railroad Commission or the US Mineral Management Services but good auditors and researchers. So, I invite Leach to leave his ivory tower and have an open conversation with Dave Core. (Oddly, I have yet to meet a pipeline executive or a regulatory economist that has accused a regulator of capture.)

3.) I’m not the first person to question the impartiality of the board. Nor will I be the last. I’d suggest that Leach find a library and read the 2000 Purvin & Gertz report: “Formative Evaluation of Effectiveness of the National Energy Board’s Program Delivery.” (And why isn’t this critical report on the NEB’s website?) The report raises many serious questions and I quoted the accurately and in context. The document talks about the perception of regulatory capture repeatedly. Perception is based on performance. Adds the report: “A surprisingly wide range of stakeholders with little experience with the Board, as well as regional representatives outside Alberta, mentioned this phenomenon as a major weakness that could eventually have a serious impact on the Board’s credibility…..Environmental NGOs also generally perceive the Board as being captured by industry.” It also found that the Board had “no standards on pipeline abandonment”; “no environmental policies and standards;” and “no integrated environmental information management system.” I argue that these critical deficits, which the Board has belatedly and half-heartedly tried to address, are more evidence of capture.

Andrew Nikiforuk replies (part two)

4.) Leach doesn’t address some of my column’s most important charges because they prove my point about capture. If the Board is an independent and impartial body than why does it call itself a industry “partner”? (Leach suggests it simply a matter of semantics; but I would argue that it really describes the actual mechanics.) And if the NEB is such a responsible and transparent agency, then why does it reply to information requests about industry lobbying and partnerships with 300 blank pages? And if it is concerned about public safety than why does it wait weeks before telling Canadians that it has forced companies to reduce pressure in their pipelines to avoid another Michigan-like Enbridge fiasco?

5.) Last but not least, Leach takes umbrage with two quotes in the column taken from a Senate report on energy. Because I provide links and sources in the interests of accountability and debate, Leach smartly checked them. And here I frankly agree with one of his criticisms. One of the quotes was, indeed, taken out of context. I made a mistake and I’ve removed it from the article. But that error doesn’t subtract from the essence of my argument: the NEB does a great job for pipeline companies but a poor one for Canadians and landowners.

6.) Leach humorously suggests that I need to marshal more evidence for regulatory capture and get a bigger boat. May I suggest that regulatory economists such as Leach pay more attention to who runs and funds our regulatory boats as well as what ordinary sailors have to say about their navigation. The evidence I presented in my column raises critical questions about the agency’s performance and transparency. I stand by my column.

Andew Nikforuk replies (part one)

Andrew Leach, an Alberta-based regulatory economist who writes a very interesting blog (Rescuing the frog), has taken issue with several points made in my column about the NEB. Unfortunately, they are not convincing.

1.) Leach first argues that a regulatory board such as the NEB can be objective and still be financed 90 percent by industry through a system of levies based on the principle of cost recovery. Here, we simply disagree. As a journalist and landowner I remain unconvinced by his assurances that such funding formulas are all okay. Ordinary Canadians know that the guy, who pays the piper, calls the tune.

2.) Next Leach questions the authority and credibility of Canadian Association of Energy and Pipeline Landowner Associations (CAEPLA) and its founder, David Core. I think people who deal with an energy regulator everyday and must live with the consequences of the board’s policies and decisions are more informed than journalists or academics. It wasn’t’ regulatory economists that disclosed the corrupted nature of the Texas Railroad Commission or the US Mineral Management Services but good auditors and researchers. So, I invite Leach to leave his ivory tower and have an open conversation with Dave Core. (Oddly, I have yet to meet a pipeline executive or a regulatory economist that has accused a regulator of capture.)

3.) I’m not the first person to question the impartiality of the board. Nor will I be the last. I’d suggest that Leach find a library and read the 2000 Purvin & Gertz report: “Formative Evaluation of Effectiveness of the National Energy Board’s Program Delivery.” (And why isn’t this critical report on the NEB’s website?) The report raises many serious questions and I quoted the accurately and in context. The document talks about the perception of regulatory capture repeatedly. Perception is based on performance. Adds the report: “A surprisingly wide range of stakeholders with little experience with the Board, as well as regional representatives outside Alberta, mentioned this phenomenon as a major weakness that could eventually have a serious impact on the Board’s credibility…..Environmental NGOs also generally perceive the Board as being captured by industry.” It also found that the Board had “no standards on pipeline abandonment”; “no environmental policies and standards;” and “no integrated environmental information management system.” I argue that these critical deficits, which the Board has belatedly and half-heartedly tried to address, are more evidence of capture.

Response (1/many)

Andrew, Thanks for reading and responding to my comments, and for your kind
words with respect to my blog. I also appreciate your
willingness to change your article in response to my comments – many would not.
I think you mis-read or mis-interpreted some of my comments, and I think
perhaps some of my language was not clear. Below, I’ll respond to each of your
individual points. I may also write a second blog post with some follow-up.

Regarding your #1, I think you need to acknowledge that very little of the
NEB’s work, although admittedly some of their more controversial files, allow
for the NEB to take the side of “industry”. Certainly in toll hearings, the
clients on either side of the table are both under the “industry” umbrella.
This is also true in cases like Northern Gateway or Keystone XL. While you and
I both work in the environmental space, and so put our emphasis on these
aspects, the first pass for the regulatory hearings is on whether a project is
needed – assessing whether commercial demand is there for the pipeline. In
these cases, it is often the case that two or more industry players will be
opposed, as I have shown with my Gateway example, because transportation
volumes are essentially zero sum. Kinder Morgan is well aware that a refusal to
permit Gateway makes it more likely that their TransMountain expansion will be
approved, thus allowing them to grow their asset base. In these cases, the NEB
choose to side with industry.

In the “industry-vs-ENGO” or “industry-vs-Henry-and-Martha” cases, I don’t see
any reason to support your capture-by-funder hypothesis. In order to be able to
leverage their status as a funder, a party has to be able to threaten to remove
funding. Unless you think that Kinder Morgan is going to the NEB and saying,
“If you turn down my project then I will shut down my existing regulated assets
in Canada and stop paying levies and you’ll be out of a job,” then I don’t see
how they can leverage funding to sway decision making. You paint it as
analogous to an employer-employee relationship, which it really isn’t.

Response (2/many)

Re: your #2, it was not my intention to question either the authority or
credibility of CEAPLA or David Core, whom I have not met. My intention was to
point out that they represent those people who, as you point out in your
article, bear the direct cost and risks energy infrastructure. In other words,
even a project which is in the broad public interest is not in the interest of
the landowners directly affected, and the regulatory process is designed so
that individual landowners don’t have the power to hold up projects. My point
was that it is not surprising to me that this group feels that the NEB does
them a disservice whenever a project is built. I’d have the same critique if
you only cited Total’s view on capture at the ERCB. It’s not a reflection on
the group, but a reflection of their position relative to the issue you bring
up.

As for leaving my ivory tower, I’d be more than happy to meet and talk with
David Core (or you, incidentally) any time.

Your second comment that you have yet to meet a regulatory economist who would
accuse a regulator of capture is astounding. Regulatory economists (and
political economists and regulatory law experts) work on these questions
constantly. Among the 6000 or so papers that cite Stigler’s seminal paper on
regulatory economics, a significant proportion are either looking at evidence
of capture, or regulatory design to mitigate capture. If you want a (now a
little dated) paper on the economic theory and empirical evidence, this one is
pretty good http://oxrep.oxfordjournals.org/content/22/2/203.short.

Re: your comment about pipeline Executives, had you attended Hal Kvisle’s
speech at our Canadian Business Leader Award Dinner a couple of years ago, you
would have heard him suggest that the regulatory boards were captured by
special interest, and that it had made building energy projects prohibitively
time consuming and risky. Ironically, his view of what should change was
similar to the conclusion of the Senate report you cited – more streamlining.

Re your #3, we should all question the impartiality of the Board, and I am by
no means discouraging anyone from doing so. I also wish the report you cited
was available on-line. The point of my article was to suggest that, with the
research background you have, I am sure you can do a better job of it, and I
encourage you to do so. The challenge that anyone has in doing so is that it’s
difficult to do without instead asking the question of whether the Board
represents your perception of the public interest. I’ve been very critical of
some of the decisions of the ERCB for exactly that reason – I don’t think they
reflect what is in the best interests of this province. Whether that means they
are biased in their view or I am biased in mine is in the eye of the beholder,
and I am not sure how you prove it.

Response (3/4)

I agree with your comment on abandonment standards and requirements – there is
no question that those should be in place. That said, you have to ask who is
capturing the Board to keep these at bay. If you believe it is the project
proponents (Enbridge, TRP, etc.), they would be agnostic to abandonment costs
as long as those costs are deemed into the rate base and are not sufficiently
large as to make the project commercially non-viable. The proponents would bear
the liability if the pipeline is not properly abandoned, so they want it in
their rate base, or else it increases their risk which utility shareholders
don’t want. Talk to anyone at a pipeline company and they will likely tell you
the same thing. The shippers are interested in low rates, and so for them to
have to pay abandonment costs is a bad thing. So, if you think the Board is
captured by the proponents, I am not sure that supports your argument. It’s
very possible that the Board does not see the broad value of maintenance,
redundancy, and reclamation, and this is the subject of my forthcoming column
in Alberta Oil Magazine.

Re your #4, if you re-read my post, I didn’t say that you were wrong, nor did I
ever say that I believed the Board to be impartial. I said that you were not
making your case well. Here, the fact that they use the word ‘partner’ seems
pushed way too far. You can go into the NEB documents and find some much more
direct statements. For example, here on the Gas and Oil Pipelines slide, you
will find a quote from the NEB chair that says, “I want to emphasize the
importance of enabling the development of infrastructure as a key goal of a
regulatory agency.” Enabling development is not really the right way to
describe the mandate of the NEB in my view. So, again, to re-emphasize, I said
that if you are going to go after them, bring a better case – don’t confuse
that with my saying you shouldn’t challenge the Board’s impartiality.

Response (4/4)

Re your #5, I thank you again for changing your article. I think that your use
of the word Canadians in your comments still doesn’t quite get at what I (and
the Senate report) was saying – even if a project is in the public interest,
that does not mean it makes everyone better off. Part of the NEB mandate, and
arguably the most important part, is to balance those interests. If you think
they aren’t doing so on a broad basis, cite a decision or two, deconstruct who
wins and who loses, and make the case that the losses outweigh the gains, or
that the compensation doesn’t cover the losses even if it’s in the broad public
interest.

Re your #6, I hope you find that I do pay a great deal of attention to
regulatory decisions both here in Alberta and nationally. While my preferences
and yours may not align on every issue, I think we agree on the need for
vigilance. I think the funding issue is a red herring though – I don’t see how
the funders have any leverage. If you look at the paper I cited, and something
called the Regulatory Revolving Door, that’s closer to where my concerns would
lie – whether or not board members are personally connected through career
histories to the industries they are now asked to regulate.

Apologies for writing an essay in response to a comment. Thanks again for
reading.

THE NEB

National Energy Board is a court of record, with the powers, rights and privileges of a superior court. As such, there is no way it can act as a partner of the parties which appear before it.

This isn't a question of semantics.

I of 4

Mr. Leach’s views on regulatory capture seem to be more an issue of perspective than they are a substantive disagreement with Mr. Nikiforuk. Even though these men have a different view of how they see particular aspects of the National Energy Board (NEB), both indicate there is a need to look more closely at the relationships between the NEB and those it regulates.

Leach thinks the issue “of regulatory revolving doors” is more significant than the regulatory cost recovery issue. In referring to regulatory revolving doors he highlights the fact that industry people end up acting as board members and employees. In saying it is a “revolving door,” he is also acknowledging the fact not just that ex-industry people will work for the NEB, but that ex-NEB staff end up working for industry—at times in important and influential positions. A prime example is the president of the Canadian Energy Pipeline Association (CEPA), Brenda Kenny, who worked at the NEB for years.

In reference to CAEPLA and landowners, Leach affirms that landowner rights are compromised by the regulatory process and that landowners are therefore left to bear costs and risks that should belong to pipeline companies. He states: “My intention was to point out that they represent those people who… bear the direct cost and risks [of] energy infrastructure. In other words, even a project which is in the broad public interest is not in the interest of the landowners directly affected, and the regulatory process is designed so that individual landowners don’t have the power to hold up projects”.

2 of 4

Leach also suggests that regulatory influence over the NEB extends to the oil and gas companies that utilize the NEB regulated pipelines. He states:

“I agree with your comment on abandonment standards and requirements – there is
no question that those should be in place. That said, you have to ask who is
capturing the Board to keep these at bay. If you believe it is the project
proponents (Enbridge, TRP, etc.), they would be agnostic to abandonment costs
as long as those costs are deemed into the rate base and are not sufficiently
large as to make the project commercially non-viable. The proponents would bear
the liability if the pipeline is not properly abandoned, so they want it in
their rate base, or else it increases their risk which utility shareholders
don’t want. Talk to anyone at a pipeline company and they will likely tell you
the same thing. The shippers are interested in low rates, and so for them to
have to pay abandonment costs is a bad thing. So, if you think the Board is
captured by the proponents, I am not sure that supports your argument.”

In 1985, NEB staff created a discussion paper on this issue of abandonment and abandonment funding. It was entitled the “Background Paper on Negative Salvage Value”. The report essentially concluded that as long as the pipeline regulations require the companies to remove their facilities subsequent to abandonment, the companies can be expected to continue to seek the NEB’s views on what must be removed.

Under such circumstances, the pipeline companies would also continue to request higher tolls at toll hearings, that reflect the cost of abandonment. In other words, as long as the pipeline companies were responsible for the costs of pipeline abandonment, they wanted to charge tolls to cover those costs. This was a bone of contention at toll hearings between pipeline companies and their shippers, because as Leach infers, the oil and gas companies do not want to pay shipping fees that include the cost of remediation for abandoned pipelines.

To address the situation, rather than determining the true cost of abandonment and what would therefore need to be charged as part of the toll to cover these costs, the regulations were changed. The change allows the NEB to approve abandonment in place, leaving the risk of contamination, seepage, and the inevitable eventual collapse of pipelines, with landowners. The abandonment issue was then no longer a concern to pipeline companies, or to their shippers. During this same period, Section 112 of the NEB Act was created. It imposed crossing restrictions and land use restrictions upon property owners, which shifted company risks and liabilities to landowners. In light of all this, it is certainly appropriate for anyone to ask: “who was in the room when these changes were drafted, and then implemented.” The NEB refuses to say.

3 of 4

With respect to regulatory recovery, Leach is quite correct in suggesting that it is standard practice in many regulatory jurisdictions. However, what he neglects to say is that there is a profound and important difference between cost recovery where many people or many businesses pay small amounts of money, and cost recovery where just a few pay huge sums of money.

It is certainly the case that the NEB regulates many pipeline companies, but it is also the case that just a handful of these companies cover the bulk of the NEB's budget. At the same time, the NEB is in a position to approve tariffs that apply to these same “contributors”.

In the case of the NOVA jurisdictional hearing, which decided whether the Alberta government or the NEB should regulate the 24,000 km NOVA pipeline network in the province, the NEB ruled that it should do so rather than Edmonton, even though Edmonton had been regulating the system quite successfully for 50 plus years. In this instance, the NEB was the judge and the beneficiary of its own decision. In one fell swoop, on the basis of its own decision, the NEB expanded the size of its regulatory portfolio by 50%. At the same time, it did not require that the pipeline company inform individual landowners of the negative and long term effects that such a shift would have upon them. As Leach will know, there are important differences between provincial and federal regulations. The overall result is a bigger budget and more employees for the NEB.

There isn't a credible court in the country where a judge would allow him- or her-self to render a verdict in which that judge would be the beneficiary of his or her own decision. That the NEB did exactly that, and saw absolutely no conflict of interest whatsoever, speaks so loudly about its corporate culture and disposition that little else needs to be said.

Leach may want to look into the inquiries made by CAEPLA under the provisions of the Access to Information Act that the NEB refuses to answer, or answer in a complete fashion. Perhaps he too might ask why, “who was in the room when NEB policy decisions were made” should be kept secret.

Additionally, when evaluating the NEB, Leach will want to consider the propriety and importance of the principle of ex parte. The NEB engages in ex parte as a matter of course. For he, or anyone else, to suggest that a regulator with the power of a bona fide court, can as matter of ongoing practice meet ex parte with one party to an adjudicated matter, and then later hold public hearings that are purported to be unbiased, is simply not a reasoned position to advance or defend.

4 of 4

With respect to Leach’s pooh-poohing the NEB's self-declared partnership with the companies that cover its budget, saying it doesn't matter, perhaps he might consider the fact that there is not a Highways Department Weights and Trucking Division in the country that would dream of referring to itself as being engaged in a “partnership” with the trucking companies and truck drivers that it monitors, and to whom it issues citations for infractions. The same would apply to health inspectors that evaluate restaurants, and to weights and measures regulators who evaluate the integrity of such things as fuel pump gauges at retail filling stations.

Real regulators know that they are not in a partnership with anybody, and that they are obligated to be unbiased agents that act in the public interest. That the NEB didn't know this, and doesn't know this, says about all that needs to be said about the corporate culture of Ottawa's National Energy Board.