Environment and Sustainable Resource Development: Responses to Public Accounts Committee Question 1, PA-93: Ms. Calahasen: On page 54 of the Sustainable Resource Development Annual Report, an explanation of what the allocated costs associated with ministry support services, forestry, Land Use Secretariat, lands, fish and wildlife, and quasi-judicial land-use and compensation decisions are. These accommodation costs are for leasing office space for the ministry. The actual cost of leasing office space is managed and paid for by Alberta Infrastructure. At the end of each year, Alberta Infrastructure provides cost amounts to each of the ministries for inclusion in this schedule. The ministry then allocates this cost across all its programs. For Alberta Sustainable Resource Development, the costs were allocated based on the number of fulltime equivalent positions in each program. Question 2, PA-97: Mr. Kang: What has been done in the year under consideration to ensure that the licensing and permitting of oil and gas development is taking a serious look at the impact on caribou and their habitat requirements. Alberta Environment and Sustainable Resource Development has contributed to this issue by implementing the caribou-related provisions of the Enhanced Approvals Process. The Enhanced Approvals Process now provides a unified set of provincial requirements for upstream oil and gas applications and development activities. In addition, applications and activities out-of-scope to the Enhanced Approvals Process are still required to submit Caribou Protection Plans, which identify mitigation that will be required for the application to be approved and the development to proceed. Alberta Environment and Sustainable Resource Development has done all of the background work necessary to develop and put forward a new updated caribou range map, which will identify revised caribou management zones for application of Enhanced Approvals Process conditions and other caribou planning and permitting requirements. This map will become the official caribou land use map for all industrial sectors on April 1, 2013. Long-term caribou population and habitat monitoring work was again completed in 2012/13 to inform planning requirements and a variety of management and regulatory actions. Question 3, PA-97-98: Mr. Allen: How the department reconciles land where the reclamation process is certified as complete with what is showing as outstanding for land reclamation, and whether it is financially accounted for. The 51,000 hectares identified as being outstanding was being actively used for mining or plant operations, so it was not available for reclamation. This includes all disturbed areas, but a large component of this area is for the plant sites, tailings ponds, and mine pits. 2
- 2 - The fundamental principle of the Mine Financial Security Program is that the Environmental Protection and Enhancement Act approval holder is responsible to carry out suspension, abandonment, remediation and surface reclamation work to the standards established by the province and to maintain care-and-custody of the land until a reclamation certificate has been issued. Under the Mine Financial Security Program, there is no direct relationship between outstanding land reclamation (current disturbance) and how much financial security we have on hand. The amount of financial security held is not based on the amount of land that is disturbed, remaining to be reclaimed. The Mine Financial Security Program takes an asset-to-liability approach to managing financial risks and recognizes that the resource value associated with an approved project is an asset in terms of the cash flow generated by its operations. The program requires a base amount of security for each project to provide the necessary funds to safely secure the site and suspend any operating equipment. Where a project has assets at least three times larger than its liabilities, is 15 years or more from the end of its reserves, and is meeting its reclamation targets, additional security is not required. Where a project has assets less than three times its liabilities, or is less than 15 years from the end of its reserves, or is not meeting its reclamation targets, additional financial security is required. Question 4, PA-99: Mr. Anglin: Whether or not the reverification of carbon credits and carbon offsets are publicly available. Government audits (or reverification) are part of Alberta Environment and Sustainable Resource Development s compliance assessment. These documents are internal documents used to ensure compliance with the Specified Gas Emitters Regulation. They are not public and releasing them could affect the objectivity of future audits; however, in situations where corrections are required to an offset project based on audit findings, all revoked offset credits are publicly displayed on the Alberta Emissions Offset Registry, and an overview of the error is included in the Notice of Revocation, which is posted on-line as part of the supporting documents for the offset project. Question 5, PA-99: Mr. Anglin: Whether there is a reason, a determination has not been made with respect to projects that are pending, particularly those pertaining to reverification. On the Alberta Emissions Offset Registry, the Pending category indicates offset credits that have been retired and submitted to Alberta Environment and Sustainable Resource Development for compliance under the Specified Gas Emitters Regulation. Projects are listed as pending until Alberta Environment and Sustainable Resource Development has completed its compliance review of the facilities; at which time, the department will confirm final retirement. This is done because, in some cases, facilities may have retired more offset 3
- 3 - credits than they needed to come into compliance. Projects that are placed On Hold are projects that have been instructed to complete corrections based on a government audit (reverification). These projects have one year to complete corrections and undergo a re-audit managed by the department and paid by the project developer through a third-party contract. A final compliance decision is based on the results of the reaudit. This process is detailed in Section 7.4 of the Technical Guidance for Offset Project Developers available at www.environment.gov.ab.ca/info/library/8525.pdf. It has been Alberta Environment and Sustainable Resource Development s experience that it takes time to correct errors identified through audit and that a one-year period is a reasonable amount of time for this work. Question 6, PA-99: Mr. Anglin: Why companies are still participating in the reverification process, when there has not been the settlement of material deficiencies in the process. Errors and discrepancies are considered to be part of the learning curve for a new program. To date, the department has completed supplemental government audits on all offset project developers, third-party verifiers, and offset projects. More than 80 per cent of the projects have passed this supplemental audit. For those projects that have had issues identified during audit, the Government of Alberta has worked diligently with project developers and regulated facilities to address the issues identified. This process has resulted in a number of corrections to offset projects serialized on the Alberta Emissions Offset Registry. Justification for the corrections is available in the notice of revocation available for each project. Question 7, PA-99: Mr. Anglin: The number of times the ministry has overridden material deficiency reported in a reverification, as well as the value of this override, and whether the information will be publicly available. Supplemental audits are used as a second opinion on the validity of the offset credits. If a material finding is identified, Alberta Environment and Sustainable Resource Development works with the project developer to understand the errors and determine appropriate corrective actions. All material errors require significant investigation to clarify the error, and determine corrective actions. Corrections are done consistent with the errors correction policy provided in our technical guidance (see Question 5). The department has not specifically overturned an audit finding; however, in some cases, 4
- 4- additional information has been provided that has resolved the issues to the department s satisfaction. No further corrections were required. Question 8, PA-99: Mr. Anglin: With larger companies which have purchased large amounts of offsets, why it takes as long as it does. Whether there should be timelines so they can get on with business. Why the verification sits in limbo for a year or more? Alberta Environment and Sustainable Resource Development s Technical Guidance for Offset Project Developers outlines the error correction process for offset projects where errors are identified through government audit. Project developers have from the end of the audit (typically October) to March 1 to make corrections and pass a re-audit using an audit team appointed by the department. If the project passes, project information is up-dated on the registry, including a notice of revocation for any tonnes that are revoked from the Government of Alberta offset system. If project developers are not able to resolve issues by this time, all offset credits associated with the project are revoked and companies are required to pay alternate compliance into the climate change and emissions management fund. The project developers have one calendar year to address issues to the department s satisfaction and have the project pass a government audit. If issues are resolved, credits will be reserialized and available for use as a compliance option. If issues are not resolved, all offset credits associated with that project are permanently revoked from the registry. While the department works with affected parties to resolve issues as expediently as possible, it is recognized that corrections take time, and may not, in all cases be fully resolved within published dates. Question 9, PA-101: Mr. Stier: With respect to royalty rates and the amount of security deposits that are being held; whether they're appropriate for the marketplace and for the costs of the current times. Royalty Rates The department assessed whether the current royalty rates for aggregate resources on public lands meet the program goals and objectives. The department contracted Acton Consulting (March 2009) to complete a comparison of the gravel royalty rates across Canadian jurisdictions. The report showed that Alberta gravel royalty rates are slightly higher in Alberta ($0.60 per cubic yard) than other jurisdictions. Security Deposits The department is assessing options related to security deposits to more fully reflect 5
- 5 - reclamation costs and is assessing a number of other more appropriate tools, especially for smaller operators. Examples are, performance bonds, judicious use of ministerial orders under the Environmental Protection and Enhancement Act, and conditions for lease renewal based on inspections of the lease holder s performance. Incentives to ensure timely reclamation can include both monetary and non-monetary tools. The department contracted Meyers Norris Penny to complete a cross-jurisdictional scan for effective reclamation incentives and recommend options for reclamation incentives to promote the timely reclamation on public lands. One of the options considered was to assess the potential to design a public land stewardship and reporting system that would include a performance rating protocol, and benchmarking system to encourage operator accountability and enable government to gain assurance that desired land outcomes are met. The department is completing a contract with Anielski Management Inc. as an initial step to further consider this option. Further opportunities to review the security deposits in relation to the sand and gravel management system were presented by the merger of Alberta Environment and Alberta Sustainable Resource Development. The department initiated a systems review to describe the current sand and gravel pits programs as a whole system. The program review identifies opportunities to develop a stewardship culture and continue the Government of Alberta s transition to an outcomes-based cumulative effects management system. Also, such a review will advance the ministry's work of maintaining, updating and developing new policies and programs to enable a cumulative effects management approach, to promote innovation, and to maximize efficiencies. Systems description and analysis are necessary first step that will inform and complement, but not replace, technical or capacity reviews, program evaluation, and design of improvements.