As we release Issue No. 3 of Energy Regulation Quarterly, controversy surrounding energy continues to escalate and to predominate in many of the headlines and political agendas of the day. The need for an objective forum for reporting, analyzing and discussing the associated regulatory issues could hardly be more apparent.
On April 18, the U.S. State Department unexpectedly announced that the review period leading to a final decision on a Presidential Permit for TransCanada’s proposed Keystone XL project would be extended. No date for the extension was specified, leading observers to conclude that a final decision would almost certainly not come before the U.S. mid-term congressional elections scheduled for November 2014. It is no exaggeration to say that in Canada, as well as in some U.S. quarters, the postponement was met with stunned disbelief.
In Canada, it is expected that, by the time this issue of ERQ is released, the federal government will have announced its decision on Enbridge’s proposed Northern Gateway project. The recommendation of the Joint Review Panel (JRP), in December 2013, that the project be approved was reviewed by Rowland Harrison in Issue No. 2 of ERQ. Under amendments to the National Energy Board Act in 2012, the federal government can accept the recommendation for approval (subject to the 209 conditions proposed by the JRP) or reject the project. (The federal government also has the option of referring the matter back to the JRP for reconsideration. However, the Minister of Natural Resources has stated that he expects a final decision to be announced by mid-June, suggesting it is unlikely that the joint review panel will be asked to reconsider its report.)
The outcomes of the Keystone XL and Northern Gateway processes will have far-reaching consequences for the future of Canadian oil development, at least in the short-term.
In the meantime, there are already valuable lessons to be learned from comparing the two review processes and, in particular, reflecting on the inescapable, if not impossible, challenge of keeping politics out of public or national interest determinations on energy matters. The 2012 amendments to the National Energy Board Act have been widely criticized on the ground, among others, that vesting final decision-making authority for federal pipeline projects directly in the cabinet would inevitably politicize the process. At least to date, overt politicization of the process does not appear to have materialized. In the U.S. on the other hand, the process appears to an outside observer to have become entirely captive to politics. Apart from the obvious interest in the final outcomes, the energy regulation community will no doubt follow developments closely with a view to explaining what appear to be, so far at least, vastly different experiences with each of the two processes.
The evolving dynamics of North American oil supply that shape projects such as Keystone XL and Northern Gateway are being driven largely by developments in technology. Development of the oil sands is being enabled by continually improving extraction technology that increases recovery rates, reduces costs and lessens environmental impacts. So too, shale oil deposits are now being produced as the result of technological developments. (Oil from the Bakken shale deposits in North Dakota, as well as from the Alberta oil sands, would be transported on Keystone XL.)
The changing oil supply picture is also the driver underlying the recently-approved reversal of Enbridge’s Line 9 between Sarnia and Montreal, enabling the movement of oil from western sources (including from the Bakken area) to Montreal, and from there by ship to Quebec and Atlantic Canada. It is interesting to note that the project will return Line 9 to the service for which it was originally proposed nearly 40 years ago, in 1976. Rowland Harrison’s comment in this issue of ERQ analyzes the NEB’s decision to approve the proposed reversal. He suggests the decision offers some encouragement that controversial pipeline projects can still successfully navigate the regulatory process even in the face of widespread and disruptive public opposition.
Developments in technology are not, however, confined to the exploration for, development and transportation of oil. In fact, as discussed in the editorial for Issue No. 2 of ERQ, technological developments pervade energy supply, demand and use. There is every reason to believe they will continue to do so – and that the energy regulatory world will continue to be challenged to be responsive and to not impede the introduction of new technologies that can advance public policy goals and at the same time serve the interests of consumers. Lisa DeMarco and Lauren Heuser’s excellent article in this Issue of ERQ on “Energy Storage: The Green Energy Silver Bullet?” provides an interesting example. Adam White’s article on “An argument for systematic regulation of smart grid expenditures by public utilities” is also focused on issues arising from the availability and introduction of new technologies.
Current energy policy and regulatory initiatives are of course heavily influenced by the debate about global warming and various provincial and federal greenhouse gas (GHG) emission reduction targets. Mark Rodger explores Ontario’s experience in his article on “Looking Back: 5 Years under Ontario’s Green Energy Act.” It will be noted that technological developments underlie many of the measures found in the Green Energy Act.
Developments in technology are not the only innovations that play a large role in framing the current energy regulatory environment. Marketing strategies also continue to evolve, particularly in the largely “deregulated” electricity markets in Ontario and Alberta. Neil Campbell’s article on “Gaming of Electricity Markets – The Ontario Experience” offers a valuable review of the oversight of the wholesale market by Market Assessment and Compliance Division of the Independent Electricity System Operator and the Market Surveillance Panel of the Ontario Energy Board.
As the editors of ERQ, we believe these articles will help advance an understanding of the evolving energy regulation scene, and in particular the critical role that is played by continuing developments in technology and other innovations at every stage, from energy production to distribution to consumption. ERQ will continue to provide a forum for informed analysis and discussion of the regulatory challenges that arise, with the aim of identifying and advancing solutions to those challenges.