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Pipelines are an essential component of the energy industry in Alberta. The primary responsibility for maintaining safe and reliable pipelines rests with their operators, who directly influence the condition and operation of a pipeline throughout its lifecycle. The Alberta Energy Regulator’s (AER) role is to ensure pipeline operators comply with regulatory requirements, with public safety and the environment as their priority. Even an effective regulator cannot eliminate the risk of pipeline incidents, but what a regulator can do is have well-designed and effective systems to appropriately oversee industry operations and reduce the risk of incidents occurring. In June 2013, the AER began operating as a full lifecycle energy regulator. The AER faced many challenges inherent with this transition—incorporating new people and processes, implementing a new oversight model, and making improvements to existing systems—all while trying to maintain the quality of existing regulatory processes. We believe our audit of AER’s systems for regulating pipelines provides useful recommendations to assist in this ongoing transition and continuous improvement.

Objective and Scope

Our audit objective was to assess whether the AER has adequate regulatory systems to help ensure the safe and reliable operation of the pipeline systems it oversees.

Our scope included the AER’s core pipeline activities: surveillance, inspection, compliance, incident response and regulatory enforcement, as well as the foundational components of risk management and performance measurement. Our audit did not include the AER’s systems for pipeline applications and abandonment. We did not assess the merits of the regulation that gives the AER the authority to regulate pipelines within Alberta. The government contracted a third party to assess the sufficiency of the
pipeline safety regulation5 and prepare a report with recommendations.


The AER has well-functioning systems to regulate pipeline operations in Alberta. Albertans can be assured that the regulator is adequately performing its function of overseeing pipeline safety and reliability. Nonetheless, with the AER’s goal to be a leading regulator, coupled with greater expectations and scrutiny on the AER’s and industry performance, continuous improvement is necessary. Therefore, we identified a number of areas where the AER can make improvements:

  • The enterprise risk management system is still under development. There isn’t a clear link between the risk information and resource allocation activities that will help AER reach its targets.
  • A skills gap analysis of pipeline staff has not been completed and a formal training program is not in place.
  • A primary target of reducing incidents 4% by 2016 is in place, but this target does not encapsulate the severity of incidents. Overall, measures and targets could be enhanced and better aligned with individual staff performance goals.
  • The AER collects a lot of data from pipeline operators, but it has not completed an evaluation of its present and future data needs to confirm it has all the information it requires to better regulate pipelines in an evolving industry.
  • While the response and investigation of critical incidents are performed well, the AER did not go as far as it could have in highlighting contributing factors and sharing these lessons learned with industry.
  • Pipeline operator integrity management programs are a key component of keeping product safely in the pipeline. The AER does not have a defined process to evaluate the effectiveness of these programs.

During the course of the audit, we also identified a number of positive and noteworthy practices that the AER employs:

  • The emergency response process in each of the five pipeline critical incidents we reviewed was strong and well-documented.
  • The AER has a process to promptly post details of incidents that meet certain criteria. Such a process offers transparent and timely information to the general public and the industry.
  • Based on past operator performance, the AER identified those that may pose a greater risk and met with their senior management to promote pipeline safety practices.
  • The AER carried out its enforcement activities as stipulated by the rules and regulations. With the new enforcement framework that came into effect in 2014, the AER has more tools and powers; as such, continued operational effectiveness of this system will be critical.

Perhaps most importantly, through our interactions with AER staff, we observed a strong commitment to what the AER is trying to achieve. We also observed that the AER began the process of responding to our recommendations and findings while the audit was still underway – this willingness to improve will serve the AER well in reaching its goals.