INTRODUCTION

With the coming into force on August 28, 2019 of Bill C-69¹ enacting the Canadian Energy Regulator Act² (“CER Act”) and the Impact Assessment Act³ (“IA Act”), the federal assessment process for energy infrastructure projects was fundamentally restructured. Bill C-69 was highly controversial, referred to by many of its opponents, including by some provincial government leaders, as “the no more pipelines Bill.”⁴

The changes implemented with the proclamation of Bill C-69 included the abolition, after 60 years, of the National Energy Board (“NEB”) and established its replacement, the Canadian Energy Regulator (“CER”).⁵ At the same time, primary responsibility for the impact assessment of designated projects that had previously been within the jurisdiction of the NEB was assigned to the newly-established Impact Assessment Agency of Canada.

Under the new regime, decisions to approve or reject proposed major energy infrastructure projects will be made at the political level of government (practically speaking, by the federal cabinet) rather than by an independent quasi-judicial tribunal (formerly, until 2012, the NEB). As the Minister of Environment and Climate Change stated in the House of Commons on February 14, 2018:

“[T]he final decision on major projects will rest with me or with the federal cabinet…”⁶

The role of the review process is to make recommendations to government, which can be accepted or rejected without further review.⁷

The changes implemented by the CER Act, however, extend beyond entrenching a redefined role for the regulator. The Act also introduced a significant structural change that is a radical departure from the model that has generally, and until recently,⁸ been adopted for quasi-judicial energy regulatory tribunals in Canada.

Under the National Energy Board Act (NEB Act), the NEB’s regulatory and other functions were vested in a single board, the members of which were appointed by the Governor in Council.⁹ The Board was not overseen by any supervisory body and answered only to its statutory mandate, subject to limited judicial appeals and review. Indeed, the unitary structure of the Board was integral to maintaining its position as a fully independent quasi-judicial tribunal.

One of the members of the Board was designated as Chairperson. The Chairperson was also defined to be the “chief executive officer” of the Board, with authority to apportion work among the members and to supervise and direct the work of the Board’s staff.¹⁰ As will be discussed further, until 2012 the Chairperson did not have any authority to direct the work of Board members. As a Board member, the Chairperson was in effect “a first among equals.”

The model implemented under the CER Act trifurcates the roles of regulatory decision-making (vested in a “Commission”), executive management (vested in a “Chief Executive Officer”) and “governance” (vested in a “board of directors”). The pivotal role within this structure is that of the Chief Executive Officer, who is neither a commissioner nor a member of the board of directors. The Chief Executive Officer is not directly accountable to the board of directors but, rather, to the responsible Minister.

The model raises obvious questions about the relationship between, on the one hand, the quasi-judicial Commission and, on the other hand, the Chief Executive Officer and the board of directors, in particular with respect to the independence of the Commission. The accountability of the Chief Executive Officer (the pivotal function in the tripartite structure) to the political level could also be seen as undermining the independence of the CER overall.

Under this tripartite structure, the CER cannot be said to be as independent of government as was the NEB, which, with its unitary structure, was not subject to any external influences. When combined with the consolidation of decision-making at the political level of government, the change represents a significant retreat from past reliance on decision-making by independent, quasi-judicial, expert, regulatory agencies. The consequences of this paradigm shift will only become apparent with experience.

This tripartite structure appears to have been first introduced in Alberta with the enactment in 2012 of the Responsible Energy Development Act (“RED Act”)¹¹ and the establishment in 2013 of the Alberta Energy Regulator (“AER”), as successor to the Energy Resources Conservation Board. A similar model is also being implemented in Ontario,¹² based on the recommendations in the Final Report of the Ontario Energy Board Modernization Panel.¹³

Remarkably, a clear rationale for the model has not been articulated in Alberta, Ontario or by the federal government. Indeed, the fact that such a fundamental change was proposed under Bill C-69 was not even mentioned in the responsible Minister’s second reading speech.

This article analyzes the new structural model and its implications for the management and operation of the CER. It also analyzes provisions in the CER Act that are aimed at protecting the independence of the Commission from direction by the Chief Executive Officer (executive function) or the board of directors (governance function).

STRUCTURE AND INDEPENDENCE OF THE NEB PRIOR TO 2012

The National Energy Board was established in 1959 in the wake of what is known as the “Great Pipeline Debate,” which arose from the government’s support of a proposed Crown corporation to build the Ontario section of what would become the natural gas pipeline system owned and operated by TransCanada PipeLines Limited (now TC Energy), over a competing proposal to build a pipeline from Alberta to the east by way of a southern route through the U.S.¹⁴ On May 14, 1956, due to concerns that the financing of the project would be jeopardized if the proposed legislation was not passed quickly, the government invoked closure in Parliament and the legislation was passed on June 6. However, the government was defeated in the general election the following year; its use of closure was widely accepted at the time as the single most significant contributor to that defeat. The episode has been described as “one of the most famous confrontations in parliamentary history.”¹⁵

Against this background, the overriding purpose of Parliament in establishing the NEB in 1959 was to entrench an independent, quasi-judicial, expert tribunal that would be insulated from political influence. In debate on the proposed National Energy Board Act in May 1959, the Prime Minister assured Parliament that the Board would “operate beyond any suggestion of control in any way.”¹⁶ Decisions on future pipeline projects would be made outside the political realm.

This intention was reflected in several features of the NEB Act as originally enacted and as largely continued until 2012.¹⁷ For example, the Board was established as a court of record and its members could only be removed by the Governor in Council (“GIC”) “on address of the Senate and House of Commons.”¹⁸

Further, the Board’s decisions were indeed decisions and not mere recommendations. Decisions to deny an application for a facilities certificate were final and were not reviewable by cabinet. Board decisions to grant a certificate were subject to the approval of the GIC but the GIC could only approve, or deny approval of, the Board’s decision; the GIC had no authority to modify the decision or even to refer it back to the Board for further consideration.¹⁹

In an analysis of the independence of the NEB prior to 2012, one of the present writers concluded that, while an absolute guarantee of entrenched independence for a regulatory tribunal is not possible (such tribunals are often and tellingly described as “subordinate” agencies), the NEB Act prior to 2012 “provided as much of a guarantee [of independence] as is possible within the framework of Parliamentary supremacy.”²⁰

In the present context, it is to be emphasized that, prior to 2012 the NEB was unquestionably the master of its own procedure — a defining measure of a tribunal’s degree of independence. The Board (and its members) answered only to its mandate under the NEB Act, free from any external influence, direct or indirect. The unitary structure of the Board was an integral element of this independence.

THE 2012 AMENDMENTS TO THE NEB ACT

In 2012, the role of the NEB in reviewing proposed energy infrastructure projects was changed from that of decision-maker to instead making a recommendation to the GIC, which was empowered to make a final decision, rather than merely approve a decision by the Board. After the adoption of these amendments, the GIC could ultimately make a decision that was contrary to the Board’s recommendation.

The 2012 amendments to the NEB Act also introduced requirements with respect to time limits for the Board’s proceedings, some of which empowered the Chairperson, to ensure that a specific application was dealt with in a timely manner, to give directives to the members of individual Board panels in specific proceedings “regarding the manner in which they are to do so.”²¹ Thereafter, Board panels could not be said to be masters of their own procedure, at least not to the same extent as they had been previously.

These changes had clear implications for the independence of the NEB, at least as that independence had been entrenched up until that point.²² However, the structure of the Board remained as it had been before, with the Board (and its members) being responsible only to its mandate under the NEB Act, without any non-judicial oversight.

THE TRIPARTITE STRUCTURE OF THE CER

The CER Act establishes the Canadian Energy Regulator as a corporation, referred to throughout the Act as “the Regulator.” However, unlike the NEB Act that defined the Board to consist of the members appointed by the GIC,²³ the CER Act separately establishes three constituent entities — a Chief Executive Officer, a part-time board of directors and a Commission. There are no overlapping memberships; members of the Board of Directors are not members of the Commission and the Chief Executive Officer is not a member of either the Board or the Commission.

THE CHIEF EXECUTIVE OFFICER

The key official in this tripartite structure is the Chief Executive Officer (“CEO”), whose role is defined as follows:

The Chief Executive Officer is responsible for the management of the Regulator’s day-to-day business and affairs, including the supervision of its employees and their work. The Chief Executive Officer must not however give directions with respect to any particular decision, order or recommendation by the Commission or a commissioner.²⁴

The CEO is appointed by the GIC, on the recommendation of the Minister after the Minister has consulted the directors, and is to hold office on a full-time basis during pleasure for a term of up to six years.²⁵ The CEO can be reappointed but is to serve no more than 10 years in office in total.²⁶ The CEO has the rank and powers of a deputy head of a department,²⁷ as defined under the Financial Administration Act²⁸ and other federal legislation.

The CER Act does not provide that the CEO is accountable to the board of directors. As is discussed in the next section, the board is responsible only for “governance functions including providing strategic direction and advice.” Further, the board is not responsible for the management of the CER’s day-to-day business and affairs.

Rather, given that the CEO is appointed by the GIC on the advice of the Minister, and serves “at pleasure,” the CEO appears to be accountable to the political level of government, meaning in practical terms the responsible Minister.²⁹ This central feature of the structure of the CER appears to run counter to the statement in the Preamble to the CER Act that the government “is establishing an independent energy regulatory body…”

THE BOARD OF DIRECTORS

The board of directors of the Regulator is to consist of at least five but not more than nine part-time directors, including a Chairperson and a Vice-Chairperson. At least one of the directors must be an Indigenous person. The Chief Executive Officer, members of the Commission or employees of the Regulator are not eligible to be a director. Directors are to hold office on a part-time basis and during pleasure for a term of five years and may be reappointed.

The role of the board is defined as follows:

The board of directors is responsible for the governance of the Regulator and its governance functions include providing strategic direction and advice to the Regulator. The board of directors must not however give directions or provide advice with respect to any particular decision, order or recommendation that is made by the Commission or a commissioner.³⁰

The board of directors is also charged with submitting an annual report on the Regulator’s activities to the Minister who must cause the report to be laid before Parliament.³¹

The respective roles of the board of directors and the CEO are discussed further below.

THE COMMISSION

The Commission of the Regulator is to consist of up to seven full-time commissioners, at least one of whom must be an Indigenous person. There may also be a complement of part-time commissioners. Generally, three commissioners constitute a quorum. Commissioners are to be appointed by the GIC to hold office “during good behaviour” for a term not exceeding six years.³² A commissioner may be reappointed but is to serve no more than 10 years in office in total.

Many of the institutional elements of the Commission are similar to those of the former NEB. For example, the Commission is a court of record with the same powers and jurisdiction to inquire into, hear and determine matters and issue orders and prohibitions as the former NEB.³³ It is to be noted, however, that commissioners do not have the same security of tenure as did members of the NEB, who could only be removed by the GIC on address of the Senate and House of Commons;³⁴ commissioners can be removed by the GIC “for cause,” without address to Parliament.³⁵

Some of the responsibilities of the Chairperson of the former NEB are now conferred on a Lead Commissioner, whose role is defined as follows:

The Lead Commissioner is responsible for the business and affairs of the Commission and, in particular, is responsible for apportioning the Commission’s work among the commissioners and for establishing panels — of at least three commissioners — to exercise the powers of the Commission and perform its duties and functions in relation to a matter before it.³⁶

This provision appears to be a necessary, and reasonable, means by which the work of the Commission with respect to individual matters can be assigned, without itself introducing any risk that the Lead Commissioner could interfere in an individual panel’s proceedings. It is a similar authority to that of a chief justice in the courts.

However, additional authorizations in the CER Act for the Lead Commissioner to intervene in individual proceedings clearly could impinge upon the independence of the commissioners designated to conduct those proceedings and are discussed further below.

SEPARATION OF COMMISSION AND EXECUTIVE FUNCTIONS

The tripartite structure of the CER is fundamentally different from the unitary structure of the former NEB. Under the NEB Act, the NEB was itself responsible for all aspects of its mandate, with the exception of executive functions which were vested in the Chairperson. It is to be emphasized, however, that combining the dual functions of the Chairperson — as chief executive officer and as a Board member — in a single appointee ensured that the executive function was fully informed of, and responsive to, the needs of the Board in exercising its quasi-judicial and other responsibilities.

Under the CER Act, responsibility for the executive function within the CER resides solely with the CEO and, as a result, the Commission is wholly dependent for financial, administrative and staff support on the CEO who, in turn, has a clear reporting function to the Minister. Section 25 of the CER Act is clear:

For greater certainty, the Chief Executive Officer is responsible for the provision of the support services and the facilities that are needed by the Commission to exercise its powers and perform its duties and functions in accordance with the rules that apply to its work.³⁷

As already noted, the CEO is not a member of the Commission. There may, therefore, be a potential for indirect constraints on the Commission’s ability to meet its responsibilities, resulting from resource allocation decisions over which the Commission has no control.

It is interesting to note here how executive responsibilities are dealt with in the Supreme Court Act³⁸ under which the Court Registrar is responsible for various administrative support and management functions. While defining the Registrar’s functions in this regard, that Act prescribes the Registrar’s authority as being “[s]ubject to the direction of the Chief Justice,”³⁹ “under the supervision of the Chief Justice”⁴⁰ or “as the Chief Justice directs.”⁴¹ These provisions recognize that the proper role of management of judicial bodies is to support the substantive work of such bodies. In this context, a failure to provide adequate resources to support the performance of a judicial body’s substantive responsibilities could directly undermine the independence of that body.

Under the CER Act, the provision of support services and facilities to the Commission is exclusively within the authority of the CEO, who is not accountable to the Commission.⁴² Under the NEB Act, while the Chairperson was not accountable to the Board as chief executive officer, the link that existed by virtue of the dual roles of the Chairperson and chief executive officer being vested in the same person no doubt mitigated the risk of the Board’s work being impeded by its dependence on resources allocated by a third party.

ADVISORY FUNCTIONS

Under Part II of the NEB Act, in addition to its regulatory decision-making responsibilities, the NEB also had “advisory functions,” to study and keep under review certain specified energy matters.⁴³ Further, the Minister could request advice from the Board and call on it to prepare studies and reports.⁴⁴ This inclusion of advisory functions in the responsibilities of an independent quasi-judicial tribunal was anomalous, and sometimes was questioned on the ground that it arguably impinged upon the Board’s independence from government.⁴⁵

These advisory functions have been carried forward in the CER Act but are now assigned to the Regulator, rather than to the quasi-judicial Commission.⁴⁶ When considered in the context of the overall structure of the CER, the result is that functions of the CER, other than those assigned to the Commission, will be carried out under the immediate direction of the CEO, as overseen by the board of directors. This separation of advisory functions from the Commission’s quasi-judicial responsibilities has removed at least part of the basis for past criticism, although the appropriateness of combining advisory functions in the same agency in which the regulatory function is found might still be questioned by some.

INDEPENDENCE OF THE CER

The Preamble to the CER Act states that “the Government of Canada is establishing an independent energy regulatory body…” Measures are included in the Act aimed at ensuring the independence of the Commission of the CER and these are reviewed in the next section. However, the degree of independence of the CER as a whole might be questioned, particularly in light of an acknowledgement by the CER itself of an ongoing role for the Minister:

The Minister may exercise substantial discretion regarding the extent of personal engagement with the CER, and also regarding the role of the portfolio deputy, but in all cases communication with the senior leadership of the CER, specifically the Chairperson of the Board and the CEO is important.⁴⁷

This suggests that the word “independent” is used in the Preamble to the CER Act in a qualified sense.

INDEPENDENCE OF THE COMMISSION

The tripartite structure of the CER warrants separate discussion of whether the independence of the Commission, in the exercise of its quasi-judicial functions, might potentially be undermined by the exercise of the functions of either the board of directors (responsible for “governance”) or the CEO (responsible for “management”).

The CER Act includes provisions directly aimed at minimizing this risk. In defining the role of the board of directors, it is provided that the board must not “give directions or provide advice with respect to any particular decision, order or recommendation that is made by the Commission or a commissioner.”⁴⁸ It is also provided that the CEO shall not give directions with respect to any particular matter before the Commission.⁴⁹ Surprisingly, however, the CEO is not explicitly prohibited from providing “advice,” as is the board of directors.

It must also be noted in this context that the GIC may “give to the Regulator directions of general application on broad policy matters with respect to the Regulator’s mandate.”⁵⁰ Such directions are to be given by “binding” order.⁵¹

These provisions are probably sufficient to guard against any direct impingement on the Commission’s independence. Their effectiveness in preserving the perception of the Commission’s independence must, however, remain to be assessed on the basis of experience.

INDEPENDENCE OF COMMISSION PROCEEDINGS

However, while the CER Act includes measures intended to guard the Commission’s independence from the board of directors and the CEO, the Act also includes provisions that could seriously undermine the Commission’s independence from within, arising from the imposition of binding time limits within which certain specified steps must be taken by the Commission. These include reports to the Minister on the issuance of a certificate of public convenience and necessity for a pipeline,⁵² orders for leave to open pipelines⁵³ and the issuance of certificates for power lines.⁵⁴

The very imposition of time limits may have some impact on the independence of a tribunal’s proceedings.⁵⁵ The immediate concern under the CER Act, however, arises from section 41, which provides:

To ensure that an application before the Commission is dealt with in a timely manner, the Lead Commissioner may give instructions to the commissioners authorized to deal with the application respecting the manner in which they are to do so.⁵⁶

Furthermore, section 42 provides that, where the Lead Commissioner is satisfied that any of the specified time limits is not likely to be met, the Lead Commissioner may take “any measure that he or she considers appropriate to ensure that the time limit is met,” including removing any or all commissioners, authorizing one or more commissioners to deal with the application and increasing or decreasing the number of commissioners dealing with the application. For greater certainty, it is added that the Lead Commissioner may designate himself or herself as the sole commissioner to deal with an application to ensure that a time limit will be met.⁵⁷

These provisions — broadly similar to provisions introduced into the NEB Act in 2012 — directly undermine the independence of the Commission as measured by the degree to which Commission panels are masters of their own procedure.⁵⁸

THE NEB MODERNIZATION PANEL REPORT

As discussed further below, Alberta had adopted a similar tripartite model when it established the Alberta Energy Regulator (“AER”) in 2013.⁵⁹ The adoption of the model for the CER, however, can be directly linked to the 2017 Report of the Expert Panel on the Modernization of the National Energy Board.⁶⁰ The Panel noted that the NEB did not operate as a traditional corporate board of directors and described it as being “more akin to a group of commissioners or judges.”⁶¹ Apparently based only on this self-evident observation, the Panel then concluded that “we can already see the seeds of dissonance between what the NEB is organized to do and what might reasonably be expected of it by a broad range of players.”⁶²

The Panel observed:

[T]he NEB has a Board which performs some of the functions of a traditional board of directors, but without formal accountability for governance except for the Chair, but the Board also represents the pool of Board members who may sit on hearing panels overseeing projects. What’s more, the Chief Executive Officer of the NEB (the organization) is also the Chair of its Board. This creates an unenviable situation whereby the very people who oversee the NEB’s performance are the same people who make its major decisions as members of hearing panels. What’s more, this arrangement generates the contorted linguistic situation of having to distinguish between the National Energy Board, and the National Energy Board’s Board.⁶³

The validity of these observations is questionable. Indeed, it is submitted that they reflect a misreading of the NEB Act under which the members were the Board,⁶⁴ the members were not responsible for overseeing their own performance and there was no need “to distinguish between the National Energy Board and the National Energy Board’s Board.” Nevertheless, in spite of these contradictions and misreading of the NEB Act, the Panel proceeded to recommend the three-tiered structure.

The Panel specifically recommended that the Chief Executive Officer not be a hearing commissioner. However, it also recommended that the Chief Executive Officer not be a board member, which, as already discussed, has been incorporated into the CER Act. No reason for this particular recommendation was given and it is puzzling in light of the Panel’s apparent reliance on the corporate model for a governing board of directors. It noted:

Most corporations and government entities with a “Board” are governed by a board of directors responsible for setting strategic direction and conducting broad oversight of the organization’s operations. These types of organizations are managed on a day-to-day basis by a Chief Executive Officer or equivalent, responsible for implementing the vision and strategy of the board of directors.⁶⁵

What these observations overlook is that corporate CEOs are directly accountable to a board of directors that has the authority to hire and fire them. As discussed above, the CEO of the CER is not directly accountable to its board of directors but, instead, is accountable to political entities who may remove the CEO “at pleasure.” Further, as noted, the CER board has only to be “consulted” in the CEO’s appointment.

THE AER PRECEDENT

As noted earlier, Alberta adopted the tripartite model when it established the Alberta Energy Regulator (“AER”).⁶⁶ There are, however, significant differences with respect to the role of the board of directors and the status of the Chief Executive Officer of the AER compared to the CER. First, the AER board of directors (the members of which are appointed by the Lieutenant Governor in Council⁶⁷) “is responsible for the general management of the business and affairs of the Regulator,”⁶⁸ whereas the board of directors of the CER is responsible for “governance, includ[ing] providing strategic direction and advice…”⁶⁹ Second, the CEO of the AER is appointed by the board (subject to the approval of the Minister),⁷⁰ whereas the CEO of the CER is appointed by the GIC on the recommendation of the Minister who, as noted, is required only to consult the directors. Further, the AER board determines the CEO’s remuneration.⁷¹

The AER model resembles a corporate sector model more closely than does the CER model. It is clear from the details of the AER structure that the board of directors has overall responsibility, not just for governance functions, but for “the general management of the business and affairs of the Regulator” and that the CEO is accountable to the board for day-to-day operations.

Recent experience with the AER, however, illustrates that governance and executive management structures do not themselves provide any guarantees against abuse.⁷² On October 3, 2019, separate reports were released by the Alberta Auditor General,⁷³ the Public Interest Commissioner⁷⁴ and the Office of the Ethics Commissioner⁷⁵ concluding that the AER had wrongfully used its resources to establish an international regulation centre (“ICORE”) outside the AER’s mandate and that the CEO had displayed “reckless and wilful disregard”⁷⁶ for the proper management of public funds. The report of the Office of the Ethics Commissioner concluded that the CEO had breached the Conflicts of Interest Act⁷⁷ in making decisions that furthered his private interests and in failing to appropriately or adequately disclose a real or apparent conflict of interest to the board of directors of the AER.⁷⁸

None of the three reports suggested that the institutional relationship between the board of directors and the CEO had contributed to the respective findings. Two of the reports, however, did comment on the absence of proper oversight by the board. The report of the Auditor General concluded that the board had been overly reliant on management and, further, had not received complete and accurate information about ICORE.⁷⁹ Board oversight was “ineffective.”⁸⁰ The report of the Public Interest Commissioner found that the board did not appear to have the expertise, focus or detachment required to oversee the CEO.⁸¹ The board was replaced soon after the release of these findings.⁸²

As noted, the board of directors of the AER is expressly charged with responsibility for “the general management of the business and affairs of the Regulator.” However, apparently the CEO of the AER did not agree with what appears to be the clear meaning of these words. In his interview with the Ethics Commissioner, the CEO stated that the board was “purely a governance board and not an operational board.”⁸³ It seems clear that this (apparently mistaken) view of the respective roles of the board and the CEO was a significant factor in leading to the serious findings of each of the three critical reports.

The AER experience suggests, therefore, that a structure with “purely a governance board and not an operational board” should be avoided. That is, however, precisely the model that has been adopted for the CER. Under the CER Act, it is clear that the board is a “governance” board only and that “management of the Regulator’s day-to-day business and affairs” resides exclusively with the CEO. Furthermore, the CEO of the CER is not directly accountable to the board of directors, which is all the more concerning given that the serious issues with the AER experience arose notwithstanding that the CEO was appointed by, and could be dismissed by the board. It is to be recalled in this context that the CEO of the CER is appointed by the GIC (on the recommendation of the Minister, after merely consulting with the board of directors) and serves “at pleasure.” The CEO’s accountability, de facto, is to the Minister, which is to say, to the political level of government.

The view expressed by the CEO of the AER that the board of directors was “purely a governance board” appears to have been mistaken in light of the statutory wording of the board’s mandate. However, the view accords with the relevant wording in the CER Act and suggests the need for a cautionary note about the respective roles of the board of directors and the CEO of the CER. The responsibility of the CER board is expressly described as “governance [including] providing strategic direction and advice…” and not “management of the Regulator’s day-to-day business and affairs…” which is entirely the responsibility of the CEO.

In sum, the CER Act has, in effect, enshrined a relationship between the board of directors and the CEO in which the CEO is not clearly accountable to the board. The experience with the AER suggests the potential for problems to arise within the CER.

RATIONALE FOR THE TRIPARTITE STRUCTURE

Given the fundamental change imposed by the tripartite structure (compared to the unitary board structure that has been commonplace in Canada until recently), it is surprising, to say the least, that no clear rationale for adoption of the model has been put forward. In a recent article, Bob Heggie (who has extensive experience in energy regulation agencies and has been the Executive Director of the Alberta Utilities Commission for more than 10 years) concluded:

The recent movement to a three-legged governance model for adjudicative agencies seems largely based on theoretical corporate governance, with little consideration for the existing governance, accountability mechanisms and complexities of operating a quasi-judicial agency in the parliamentary system. Nor does it seem to consider whether this new structure would improve the agency objective of delivering its responsibilities in the most effective manner.⁸⁴

We agree. Nevertheless, the CER Act has fully embraced the model.

Furthermore, in light of the experience in Alberta with the AER, the specific version instituted by the CER Act appears to be flawed in providing that the Chief Executive Officer is not accountable to the board of directors, but rather to the Minister.

CONCLUSIONS

As was the case with the former NEB, the CER has a range of responsibilities that extend beyond purely quasi-judicial decision-making. In principle, the separation of the quasi-judicial function from the governance and management functions may be appropriate, provided that the quasi-judicial function is insulated from any risk of interference, direct or indirect. The provisions in the CER Act that expressly restrict the board of directors and the CEO from giving directions with respect to any particular matter before the Commission may prove to be adequate in this regard.⁸⁵ However, the dependence of the Commission on the CEO (who in turn is accountable, in practical terms, to the Minister) for matters including resource allocation could potentially interfere with the Commission’s ability to meet its responsibilities and thereby indirectly undermine its independence.

The relationship between the board of directors and the CEO of the CER is potentially problematic. The board of directors is expressly a “governance” board only, with no responsibility for “management,” which is exclusively the role of the CEO. The CER Act has enshrined the very relationship that existed de facto between the board of directors of the AER and its CEO — a relationship that was a major factor leading to the serious ethical and statutory breaches in that organization.⁸⁶

Further, the accountability of the key figure in the tripartite structure — the Chief Executive Officer — to the political level of government arguably undermines the goal stated in the Preamble to the CER Act of establishing “an independent energy regulatory body…”⁸⁷

Whatever the theoretical merits of this new model (and they have nowhere been clearly articulated), it is clear that the CER is a very different entity from the NEB established in 1959 to ensure that decisions would be made outside the political realm, “beyond any suggestion of control in any way.”⁸⁸

 

* Co-Managing Editor, Energy Regulation Quarterly; former Permanent Member for 14 years of the National Energy Board.

** Counsel, Borden Ladner Gervais; former Chair, Albert Energy Resources and Conservation Board.

*** Dr. Ron Wallace has served on energy and environmental regulators and advisory boards for federal, provincial and territorial agencies. He was appointed as a Permanent Member to the National Energy Board in 2013 and retired in 2016.

1. Bill C-69, An Act to enact the Impact Assessment Act and the Canadian Energy Regulator Act, to amend the Navigation Protection Act and to make consequential amendments to other Acts, 1^st Sess, 42^nd Parl, 2019.
2. Canadian Energy Regulator Act, SC 2019, c 28, s 10 [CER Act].
3. Impact Assessment Act, SC 2019, c 28, s 1.
4. See for example, Josh K Elliott, “Why critics fear Bill C-69 will be a ‘pipeline killer’”, Global News (21 June 2019), online: <https://globalnews.ca/news/5416659/what-is-bill-c69-pipelines>.
5. Notwithstanding that subsection 10(1) of the CER Act expressly establishes the CER as a corporation “to be called the Canadian Energy Regulator”, the agency opened for business as the “Canada Energy Regulator”. See online: <https://www.cer-rec.gc.ca/bts/nws/vds/intdcnghcr-eng.html>.
6. Bill C-69, An Act to enact the Impact Assessment Act and the Canadian Energy Regulator Act, to amend the Navigation Protection Act and to make consequential amendments to other Acts, 2^nd Reading, House of Commons Debates, 42-1, No 264 (14 February 2018) at 17202-3.
7. The change in the NEB’s role from decision-maker to making a recommendation was made in 2012 and is discussed further below.
8. See further discussion below.
9. National Energy Board Act, RSC 1985, c N-7, s 3 [NEB Act].
10. Ibid, s 6(2).
11. Responsible Energy Development Act, SA 2012, c R-17.3.
12. See David Stevens, “Ontario Government Takes Steps to Reform the Ontario Energy Board” (2019) 7:3 Energy Regulation Quarterly, online: <https://energyregulationquarterly.ca/articles/ontario-government-takes-steps-to-reform-the-ontario-energy-board#sthash.CEVLwvNt.5LTyIn9U.dpbs>.
13. Ontario Energy Board Modernization Review Panel Final Report (Toronto: Ontario Energy Board, 2018), online: <https://www.ontario.ca/document/ontario-energy-board-modernization-review-panel-final-report>.
14. See Earle Gray, Forty Years in the Public Interest: A History of the National Energy Board (Toronto: Douglas & McIntyre, 2000) at 9.
15. Robert Bothwell, “Pipeline Debate” (2012), online: The Canadian Encyclopedia <https://thecanadianencyclopedia.ca/en/article/pipeline-debate>.
16. House of Commons Debates, 24-2, Vol IV (26 May 1959) at 4020.
17. The 2012 amendments to the NEB Act are discussed further below.
18. NEB Act, supra note 9 at s 3(2). Members of the Commission of the CER can be removed by the Governor in Council “for cause”, without having to resort to Parliament, as discussed further below.
19. See Rowland J Harrison, “The Elusive Goal of Regulatory Independence and the National Energy Board” (2013) 50 Alta L Rev 757.
20. Ibid at 770.
21. NEB Act, supra note 9 at s 6(2.1).
22. See further discussion in Harrison, supra note 19.
23. NEB Act, supra note 9 at s 3(1).
24. CER Act, supra note 2 at s 23(1).
25. Ibid at s 28(1).
26. Ibid s 21(3).
27. Ibid s 23(2).
28. Financial Administration Act, RSC 1985, c F-11.
29.  Under the NEB Act, while the designation of the Chairperson (and chief executive officer) could be revoked at any time by the GIC, that individual’s status as a Board member could only be revoked by the GIC on joint address to Parliament.
30. CER Act, supra note 2 at s 17(1).
31. Ibid at s 18(1).
32. Ibid at s 28(1).
33. Ibid at ss 31-32.
34. NEB Act, supra note 9 at s 3(2).
35. CER Act, supra note 2 at s 28(3). As noted above, directors and the Chief Executive Officer serve “during pleasure”, rather than “during good behavior.”
36. CER Act, supra note 2 at s 38.
37. Ibid at s 25.
38. Supreme Court Act, RSC 1985, c S-26.
39. Ibid at s 15.
40. Ibid at s 16.
41. Ibid at s 17.
42. Nor, as is discussed further below, is the CEO accountable to the Board of Directors, which is responsible for “the governance of the Regulator and its governance functions…” (CER Act, supra note 2 at s 17(1)).
43. NEB Act, supra note 9 at Part II.
44. Ibid at s 26(2).
45. See for example, Alastair R Lucas & Trevor Bell, The National Energy Board: Policy, Procedure and Practice (Ottawa: Law Reform Commission of Canada, 1977) at 35.
46. CER Act, supra note 2 at ss 80-86.
47.  See Canada Energy Regulator, “Governance of the Canada Energy Regulator – Mandate, Roles and Responsibilities” (2019), online: <https://www.cer-rec.gc.ca/bts/whwr/gvrnnc/mndtrlsrspnsblts/index-eng.html>.
48. CER Act, supra note 2 at s 17(1).
49. Ibid at s 23(1).
50. Ibid at s 13(1).
51. Ibid at s 13(2).
52. Ibid at s 183(4).
53. Ibid at s 214(3).
54. Ibid at s 262(4).
55. See further discussion in Harrison, supra note 19.
56. CER Act, supra note 2 at s 41.
57. Ibid at s 42(2).
58. See further discussion in Harrison, supra note 19.
59. See further discussion below.
60.  Canada, Expert Panel on the Modernization of the National Energy Board, “Forward, Together: Enabling Canada’s Clean, Safe, and Secure Energy Future” (15 May 2017), online: <https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/pdf/NEB-Modernization-Report-EN-WebReady.pdf>; Also see Nigel Bankes, “The Report of the Expert Panel on the Modernization of the National Energy Board and the Response of the Government of Canada” (2017) 5:3 Energy Regulation Quarterly, online: <https://energyregulationquarterly.ca/articles/the-report-of-the-expert-panel-on-the-modernization-of-the-national-energy-board-and-the-response-of-the-government-of-canada#sthash.0S5O4Jow.%20dpbs>.
61. Ibid at 17.
62. Ibid.
63. Ibid at 61.
64. NEB Act, supra note 9 at s3(1).
65. Supra note 60 at 61.
66. The Alberta Energy Regulator is established by the Responsible Energy Development Act (RED Act), supra note 11.
67. Ibid at s 5(1).
68. Ibid at s 6(1).
69. CER Act, supra note 2 at s 17(1).
70. Supra note 11 at s 7(1)(a).
71. Ibid at s 7(1)(b).
72. See Bob Heggie, “Governance of Administrative Agencies” (2019) 7:3 Energy Regulation Quarterly: “People are the key. Effective agencies depend on behaviours and relationships more than procedures and structures.” online: <https://www.energyregulationquarterly.ca/articles/governance-of-administrative-agencies#sthash.uypkrcyZ.dpbs>.
73. Auditor General of Alberta, “An Examination of the International Centre of Regulatory Excellence (ICORE)”, October 2019, online: <https://www.oag.ab.ca/reports/aer-icore-oct-2019/>.
74. Alberta, Public Interest Commissioner, A report of the Public Interest Commissioner in relation to wrongdoings within the Alberta Energy Regulator, (Edmonton: Public Interest Commissioner, 2019), online: <https://yourvoiceprotected.ca/wp-content/uploads/2019/10/2019Oct3-Public-Interest-Commissioners-Report-AER-ICORE.pdf>.
75.  Ethics Commissioner, “Report of the Investigation by the Ethics Commissioner into allegations involving Jim Ellis”, June 14, 2019, online: <https://open.alberta.ca/publications/report-of-ethics-commissioner-into-allegations-involving-jim-ellis>.
76. Supra note 74 at 3.
77. Conflicts of Interest Act, RSA 2000, c C-23.
78. Supra note 75 at 28.
79. Supra note 73 at 8.
80. Ibid at 1.
81. Ibid at 19.
82. See Amanda Stephenson, “UCP cans AER board, launches promised review of regulator’s mandate”, Calgary Herald (6 September 2019), online: <https://calgaryherald.com/business/local-business/ucp-cans-aer-board-launches-promised-review-of-regulators-mandate>; Both the AER itself and the Alberta government have launched comprehensive reviews of the AER and, in January, several dozen senior staff were laid off, see Geoffrey Morgan, “AER lays off dozens of senior staff as board and Alberta government review embattled regulator”, Financial Post (22 January 2020), online: <https://business.financialpost.com/commodities/aer-la.ys-offdozens-of-senior-staff-as-board-and-alberta-go vernment-review-embattled-regulator>. While it is not apparent that the tripartite structure of the AER is explicitly part of either review, it will likely be part of the government’s review.
83. Supra note 75 at 6.
84. Supra note 72.
85. Curiously, however, as noted above, while the board of directors is also prohibited from “provid[ing] advice”, no such prohibition expressly applies to the CEO.
86. Although the three official reports on wrongdoing in the AER were not released until after the enactment of the CER Act, problems in the management of the AER had become known well before then and presumably were known to the federal government.
87. CER Act, supra note 2 at Preamble.
88. Supra note 16.