'No rules' feared in oilpatch

B.C. infractions report 'boggles' expert's mind

Larry Pynn
Vancouver Sun
November 17, 2006

The provincial Oil and Gas Commission is coming under sharp criticism for claiming the oilpatch in northeast B.C. has a near-perfect compliance record, despite more than 2,500 known infractions last year, two-thirds of them officially rated major or serious.

"It boggles the mind that the commission could characterize this kind of blatant and consistent rule-breaking as being in any way acceptable," Wayne Sawchuk, an award-winning conservationist and former member of commission's advisory board, said from his home near Dawson Creek.

"It looks like there's a free-for-all going on up in the oil patch. This is plainly unacceptable. It calls into question the abilities of the commission to effectively police the companies."

Fearing that "no one is minding the store," Sawchuk called for an independent body to regulate the industry rather a commission that exists under the wing of the Ministry of Energy, Mines, and Petroleum Resources.

At issue is the way the Oil and Gas Commission, the provincial agency overseeing oil and gas exploration, based in Fort St. John, reports and calculates compliance in the oilpatch.

The 2006 inspection and compliance report shows that commission staff found 2,643 infractions -- 874 minor, 1,645 major and 124 serious -- while inspecting 116,248 items at 2,547 oil and gas sites.

The commission subtracts 2,643 from 116,248 to produce a compliance rate of 97.7 per cent, a figure that makes both the commission and industry look very good.

Sawchuk counters that one could just as easily use the same figures to conclude a failure rate of 100 per cent, since an average of more than one infraction was found at each individual site.

Kin Lo, an associate professor in the Sauder School of Business at the University of B.C., has his own concerns about the way the commission publicly reports on industry compliance.

He said it is illogical for the commission, in making its calculations, not to distinguish between the seriousness of the items inspected. An item might include minor matters such as paperwork and safety signs all the way to something serious such as maintaining equipment designed to control a blowout.

"In legal circles, one would never add together the number of homicides with misdemeanours," said Lo, taking The Vancouver Sun up on a request to look at the commission's report.

Lo also said it's "a little troubling" the commission added all three categories of non-compliance together to arrive at a non-compliance rate of 2.3 per cent.

He also said he would like the commission to indicate to what extent observed infractions are rectified within the regulatory time frames. And he urged that the sites and operators that have the most number of serious or major infractions be "specifically singled out."

Steven Simons, director of communication for the commission, responded that the inspection and compliance report for the 2005/06 fiscal year represents a new way of reporting on industry compliance. As such the commission is open to hearing new suggestions for improvement, he said.

The commission more typically issues compliance reports based on short-term field audits of specific sectors of the oil patch.

Simons cautioned against singling out operators while investigation files remain active. "We would not want to jeopardize future or contemplated enforcement action. That being said, we continually look to balance our commitment to transparency."

The commission last year issued 22 "operating penalties" and seven temporary closures of oil and gas sites.

Simons added the commission employs deficiency timelines on non-compliant items depending on severity of the non-compliant items, to ensure compliance within defined timelines.

Minor infractions must be rectified within 30 days, major infractions within 14 days, whereas serious infractions require immediate correction or shut down of operations.

Dave Pryce, vice-president of western operations for the Canadian Association of Petroleum Producers in Calgary, said the important issue is not how the commission determines its statistics -- or even the number and amount of fines levied -- but how the government and industry responds to infractions.

"If there is a major or serious issue raised, that goes right to the boardrooms of the companies," he said. "The people who work for the company have a pretty quick accountability back to their boards of directors."

Simons said a deficiency on one item of an inspection should not imply non-compliance overall, especially in cases where the inspector looked at a large number of items and found the vast majority to be compliant.

He supported a risk-based approach in which the more serious infractions get more attention.

Pryce added that the cost of shutting down a productive operating well is generally much higher than any financial penalty the commission might assess. "What are the consequences?" he said. "Companies don't want to be out of compliance. They'll react accordingly."

NDP energy critic John Horgan, MLA for Malahat-Juan de Fuca, called for a system of reporting that allows the public to know the true level of non-compliance in the oilpatch.

"What troubles me is the conclusion of 97-per-cent compliance," he said. "It's fun with numbers. It's misleading at a minimum and does nothing to instil confidence in our communities in and around the northeast that regulations are being met."

Horgan also believes the commission should be providing more detail on the 124 serious violations. "I'm more concerned now than ever before. I want an explanation of the impacts on the public and environment."

The commission report does not provide details on which companies committed the various infractions or the exact nature of what happened.

Instead, it provides a range of examples on a three-tiered scale:

n Minor infractions such as missing or incorrect signs, garbage and debris improperly stored, or failure to calibrate meters, none of which pose a direct threat to the public or environment or adversely affect operations.

n Major infractions such as leaking fluids, out-of-date emergency plans, failure to test equipment, strong odours, or lack of access to inspectors, with the potential to cause an adverse impact on the public and environment.

Serious infractions such as conducting an unapproved activity, locating equipment an insufficient distance from an operating well, or unauthorized releases into water, problems that display disregard for regulations or requirements despite the potential for "significant impact" on the public or environment.

The report also noted there were 320 "incidents or events" last year in which the Provincial Emergency Program was notified. These incidents or events are also ranked on a scale: Level 1 has no effect outside company property and no immediate public threat; level 2 has potential to extend outside company property and requires emergency services (federal, provincial or local); level 3 extends beyond company property, involves an uncontrolled release of substance, and has significant and ongoing environmental effects.

Of the 320 incidents and events, 288 were rated level 1, 27 level 2, and five level 3.

The commission laid no charges in connection with these incidents or events.

The report does not provide further details on the events or indicate the effect on people or the environment.

It does say that most problems occur at the site where the oil or gas is being extracted or processed, including drilling and servicing rigs, tank trucks and pipelines.

According to WorkSafeBC, there were 28,453 work days lost in the oil, gas, and mineral sector in 2005, up from 25,702 days in 2003, but down from 36,733 in 2001.

There were seven fatal benefit claims accepted in 2005, up from six in 2003 and down from eight in 2001 ,