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Fed Up with 'Captured' Regulator, Exec Quits Kinder Morgan Review

Marc Eliesen speaks on his decision to resign.

Andrew Nikiforuk 4 Nov

Andrew Nikiforuk is an award-winning journalist who has been writing about the energy industry for two decades and is a contributing editor to The Tyee. Find his previous stories here.

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Economist Marc Eliesen addresses the Northern Gateway Joint Review Panel at hearings in Vancouver on Jan. 16, 2013. Photo: Metro Kate Webb.

Marc Eliesen, a senior energy executive who once served as CEO of BC Hydro, has quit his role as an intervenor in the federal review of Kinder Morgan's Trans Mountain pipeline and oil tanker expansion project, calling the National Energy Board "a truly captured regulator."

Eliesen has worked in the nation's energy sector for 40 years. In addition to running the nation's largest hydro utilities, he served in a variety of senior positions in both federal and provincial governments of all stripes, including as Ontario's deputy minister of energy.

Now retired and living in Whistler, B.C., the 73-year-old Eliesen resigned from his intervenor responsibilities after the board repeatedly demonstrated what he called a "lack of respect for hearing participants," as well as a disregard for "the standards and practices of natural justice that previous boards have respected."

His criticisms are detailed in his letter of resignation, which you can read here.

The National Energy Board, set up in 1959, has a mandate to regulate more than 70,000 kilometres of pipelines that cross provincial borders. Now based in Calgary, it is chaired by Peter Watson, a former deputy energy minister for Alberta.

The former chair of the board, Gaétan Caron, once said that "If we're not fair, we're nothing. We're everything because we're fair."

But First Nations, pipeline whistleblowers, and landowners such as the Canadian Association of Energy and Pipeline Landowner Associations have questioned the board's fairness for years.

In 1991, the board moved to Calgary and changed its funding formula. Ninety per cent of its $50-million plus budget comes from corporate levies. Appointed members of the board exclusively come from legal, corporate or engineering backgrounds.

In 2012, Canada's oil and gas industry lobbied then Natural Resources minister Joe Oliver for significant changes on how the board operated its public hearings.

In Bill-38, the Harper government delivered a series of reforms that limited public participation and timelines for environmental assessment in pipeline hearings.

The omnibus bill, which changed 70 pieces of legislation, also gave the chair of the board new powers to expedite pipeline and power line applications. The chair also has the power to remove other members from decision-making and issue a recommendation unilaterally. In addition, the federal cabinet -- not the board -- now has the final authority to say yes or no to pipelines.

These changes partly explain why Eliesen believes the Kinder Morgan review has become "a waste of time and effort."

To date, intervenors have asked that Kinder Morgan answer 2,000 questions on the costly and complicated expansion of the Trans Mountain pipeline to transport bitumen to foreign markets. According to Eliesen, the board compelled the company to answer five per cent of the questions and rejected the rest.

The Tyee got in touch with Eliesen to ask him more about why he quit the federal review process.

Tyee: As a senior energy executive, you dealt with lots of regulators over four decades. What distinguishes an effective and accountable regulator from what you call a 'captured' one?

Eliesen: "I think the main aspect is the importance of being independent from political influence. Everyone knows people appointed to be the regulator are order-in-council appointees. The government decides whom to appoint. The most effective regulators show independence from the political pressures that normally take place.

"When the [National Energy Board] was based in Ottawa, it was a solid regulator. There wasn't a scintilla of evidence they were too close to industry. But when they moved to Calgary in 1991, the board changed. It developed over the years an attitudinal bias that wouldn't be there. If you live and breathe in the oil and gas atmosphere (and board members must live there), you can't help but be influenced by that.

"Now [the board] has a difficulty separating the industry's best interests from the public's best interests. Their stated objective is to ask what is in the public interest? But now they want to facilitate the transportation infrastructure. They are making judgments now more in favour of big oil companies."

Why would the board surrender its objectivity at this time, as you claim?

"I think amendments to the board's legislation that the Harper government brought in have played a role. The amendments limit participation and shorten time period for hearings. There is now pressure to get the whole process over as quickly as possible. These constraints force them to make judgments, such as they've done with Kinder Morgan, saying, 'There are no more issues'; 'Here is the schedule, and there will be no oral cross examination here.' That put them on a slippery slope.

"Even though there was dissatisfaction with the [Northern Gateway review] process, the board was more open. There was a three-month period to put forward issues and there was oral cross-examination. They considered the views of people participating in the process. The Kinder Morgan process has been bullying in nature since day one."

What sort of questions has Kinder Morgan refused to answer, and why would the board allow that?

"I wish I had an easy answer to that question. My background relates to energy and economics. Kinder Morgan refused to answer my economic questions, or they answered them flippantly. Even when the board was requested to compel Kinder Morgan to answer the questions, the board refused and sided with Kinder Morgan.* Questions about the environment, marine risk, energy economics and pricing have not been answered. Questions from the provincial government have not been answered. I wish I could give you an answer why the board would allow this. If most of the questions from the province are being rejected, what does that say about the process?"

The impact of bitumen pipeline projects on oilsands expansion or the nation's climate change commitments has been excluded from public discussion by the board, too. Why?

"The board publicly declares that those decisions are already being made by Alberta. The board doesn't have any regulatory response for marine operations, yet it is part of their overview. The board should have included those issues. You can't include the economic benefits, and then ignore the costs. The board made that decision, and they made the wrong one, and the public knows that. How can you make a judgment in the public interest by excluding the project's impact on greenhouse gas emissions? It has to be considered for evaluation."

Former National Energy Board members have consulted for Enbridge, or worked for industry lobby groups. What does this say about the board?

"There are limited legal requirements which restrict people who work for regulators. There is a time limit. But whenever you see people who act as the face of the regulator or when you see the staff change over to work for industry, this only suggests the regulator is not an effective watchdog, but more of a facilitator. Admittedly, these people know the industry, but it raises a lot of questions about this interplay between government and industry. We are eroding the appearance of independence with this kind of interchange."

You have questioned the claimed economic benefit of the Kinder Morgan project. Why is the business case questionable?

"There are a number of factors. The number one thing was they put forward a case that there would be significant oil price uplifts over the next 20 years. I questioned the accuracy of the whole forecast. But more specifically, the company presented the opposite argument at their hearing on tolling over the prices the shippers pay for their oil to go through the pipeline. Normally, the tolling application goes along with the need application, but with Kinder Morgan, the board separated the two.

"In the tolling application, the same economic experts made arguments that contradicted the company's economic forecasts during the needs application. Moreover, they refused to put forward their data. Why isn't the board asking questions about energy economics? They don't seem to be interested. A very unusual thing is taking place in this hearing. No economic questions have been advanced by the federal government or the provincial government. Isn't that in the public interest?"

What should Canadians do?

"I can't speak for the country. But I think when it comes to this project, the province of B.C. needs to exercise its authority. It has the ability to do its own independent environmental assessment. The province has to uphold the public interest now on behalf of B.C., and that's what citizens should encourage their MLAs to do."

This interview has been condensed and edited

*Story corrected Nov. 4 at 8 p.m.  [Tyee]

Read more: Energy

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