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.

What we examined

To determine whether the AER has adequate systems to regulate the operation of pipelines in Alberta, we focused on activities that are essential for regulatory oversight:

  • the risk management system to identify, assess and manage pipeline risks
  • measuring performance, assessing results, and identifying learnings for improvement
  • systems for collecting information from pipeline operators
  • monitoring and enforcing of pipeline operator regulatory obligations
  • responding to, investigating and reporting on pipeline critical incidents

What we found

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.

Why this is important to Albertans

Pipelines are a critical component of the energy industry in Alberta and Albertans expect pipelines to be safe and reliable as well as to deliver economic benefits. Albertans expect the AER to have wellfunctioning regulatory systems to oversee the energy industry and ensure its pipeline operators act responsibly. Protecting public safety and the environment is an integral responsibility of the energy industry and the AER.

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