RESTORING TRUST AND COOPERATION IN INDUSTRY-LANDOWNER

RELATIONS IN ALBERTA’S PETROLEUM INDUSTRY:

THE “APPROPRIATE DISPUTE-RESOLUTION” INITIATIVE OF

ALBERTA’S ENERGY AND UTILITIES BOARD

By

G.E. (Gerry) Kruk

Instructor:

Ms. Jonnette Watson Hamilton

Alternative Dispute Resolution

Law 663

University of Calgary

December 8, 2000

THE “APPROPRIATE DISPUTE-RESOLUTION” INITIATIVE OF ALBERTA’S ENERGY AND UTILITIES BOARD:

RESTORING TRUST AND COOPERATION IN INDUSTRY-LANDOWNER

RELATIONS IN ALBERTA’S PETROLEUM INDUSTRY:

INTRODUCTION

Just as distrust serves to ignite and fuel disputes, so the building of “trust” is a vital lubricant for the successful resolution of conflict. The current relationship between Alberta’s oil and gas industry and residents directly affected by its operations is often threatened by significant levels of distrust. This distrust is not only inherently unhealthy, but it impairs the kind of collaborative and creative decision-making that is essential to ensuring industry’s responsiveness to legitimate public concerns and the retention of public confidence in the petroleum industry and the regulatory regime that oversees it.

The Alberta Energy and Utilities Board (EUB) recognizes this growing interrelated problem of distrust and conflict. In response, it is now undertaking a major initiative it calls the “Appropriate Dispute Resolution” (ADR) program. The EUB has long been a leader among North American regulatory agencies in creatively addressing the tension between energy developers and local residents. This latest initiative continues this positive tradition.

The purpose of this research paper is to describe, analyze and evaluate the Board’s ADR program, relying primarily on interviews conducted with many of the people who helped the EUB to design the program.[1] But the purpose of this paper is also to discuss the pivotal importance of trust in the success of any “Alternative Dispute Resolution” (ADR) process. Specifically, this paper will argue that distrust is a very important aspect of the principal type of industry vs landowner conflict that is of concern to the Board, that is, conflicts over the risk posed to public health and safety by the possible accidental release into the

atmosphere of poisonous “sour gas” -- that is, natural gas which contains potentially lethal hydrogen sulphide. The paper will then go on to argue that the Board has succeeded in designing an ADR strategy that is likely to prove “appropriate” for moderating if not resolving such risk conflicts, despite their highly emotive nature.

The paper will be divided into the following sections. First, we will describe and analyze the existing institutional and procedural context for the introduction and operation of the Board’s ADR program. Part II will be a “Needs Assessment” that describes the factors contributing to the decision that this ADR initiative was required. In Part III, the paper will assess the nature of the parties and issues that characterize risk conflicts, as well as discuss the role of distrust in risk conflicts and the vital role of trust in effective ADR. Part IV will then describe the components of the Board’s ADR program while Part V will focus on why we believe this ADR program will prove effective in addressing the challenges of risk conflicts. Part VI will identify some remaining issues raised by this ADR program and make recommendations for their resolution.

(I) THE CONTEXT

1. Mandate of Alberta Energy and Utilities Board (EUB)

The EUB regulates all aspects of energy exploration, development and upgrading in Alberta. According to s.4(c) of the Oil and Gas Conservation Act, the principal statutory objective of the Board is “to provide for the economic, orderly and efficient development in the public interest of the energy resources of Alberta.” In promoting its ADR program to stakeholders, the Board interprets this mandate in the following “mission” statement:

“To ensure that the discovery, development and delivery of Alberta’s resources take place in a manner that is fair, responsible, and in the public interest.” [2]

2. The Board’s Existing Project Application Review Process

a) Technical Reviews The EUB has developed procedures for the processing of site-specific energy development applications which are comprehensive in eliciting adequate information from the applicant to permit a full review of the projects, including environmental and public safety impacts. After the Board staff advise an applicant that it considers the application complete, the staff will commence an internal technical review of the application. If the application meets all regulatory requirements, staff will recommend approval to the Board. The application will be advertised to determine if any affected residents have concerns. If there are none, the Board approves the application. If there are objections and the applicant is unable to resolve them, the Board will set a hearing date. There may be a pre-hearing meeting to clarify issues, intervenors and procedures.[3]

b) Public Hearings Quasi-judicial public hearings provide both directly affected residents and interested stakeholders a detailed and procedurally fair opportunity to make their concerns, views, and specific recommendations known to the Board and, through possible media coverage, to the broader public. In its hearings, the Board hears the evidence submitted by all the participants and then renders a judgment on whether, in the words of section 2.1 of the Energy Resources Conservation Act, the project is “in the public interest, having regard to the social and economic effects of the project and the effects of the project on the environment.” Through this “public interest” test, the EUB balances the public safety, environmental and other potential adverse impacts of the project against the socio­economic benefits and the “need” for the project to determine if the unavoidable residual impacts are reasonably acceptable. Typically the projects that undergo a public hearing are approved by the EUB, but with a variety of stringent “terms and conditions” attached to the approval. The Board judges each application on the basis of the relevant site-specific circumstances and on its merits; the Board is not bound by precedent.

c)Intervenor Funding To ensure that the EUB’s adversarial, quasi-judicial public hearings are fair and balanced, the Board can require applicants to pay all the reasonable costs of “directly affected” residents or landowners -- but not the costs of public groups. Included costs cover relevant scientific studies and the fees of technical experts as well as lawyers.

3. Existing Voluntary Conflict Resolution Programs: Public Involvement Guidelines, 1989

By the late 1980’s, the Board had become concerned about the polarizing effects of the adversarial, win-lose nature of its hearings and the view of several companies that dealing with landowners opposed to proposed industry operations was the responsibility of the Board and not the operator’s job. Accordingly, in June 1989, the Board introduced Information Letter 89-4: “Guidelines on Public Involvement in Alberta’s Energy Industry” in an effort to reduce the number of public hearings through proactive pre-application consultation and facilitated conflict-resolution. In this document, the Board explained its expectations as to how industry will provide the public with appropriate opportunities to become adequately informed about and meaningfully involved in the planning of petroleum projects in their area. In this Information Letter, the Board also said it expected industry to explore every avenue of problem solving available to it before bringing the unresolved concerns of citizens to an ERCB public hearing.

(II) NEEDS ASSESSMENT

Factors Contributing to the Introduction of the ADR Program

1. Increased conflict:

The principal concern and driving force behind the introduction of the EUB’s ADR program is a widespread concern that several factors are contributing to more numerous and more intense disputes between industry operators and the public.

a) More companies and more operations. The dramatic increase in the number of oil and gas companies, combined with the huge expansion in the level and geographic extent of energy industry activities, creates more potential for industry - landowner conflict. In comparison to 1974 when there were 70 companies operating in Alberta’s oil and gas industry, there are now about 1300 companies. This not only means more development applications but more new operators who are less familiar with landowner concerns and Board expectations. There is also concern by numerous landowners that because many of these new companies are small, under-capitalized and private, they are potentially more inclined to try to minimize expenditures by “cutting corners” on environmental matters.

b) Cumulative Impacts. There is a rapid and ongoing proliferation of oil and gas facilities. There is also a public perception that there is an increase in associated emissions. This has fuelled public and environmental group concerns about potential cumulative impacts adversely affecting environmental conditions, public health and the rural quality of life.[4] Moreover, this is occurring in a context where the public is more concerned than ever about all types of environmental issues, ranging from Special Places programs and grazing leases to gas flaring / air quality and public health risks. Understandably, affected publics are demanding more information on and involvement in the siting and planning of projects proposed for what they regard as their “backyard”.

c) Changing Character of Rural Communities. Demographic trends are seen as also contributing to the increase in conflicts. More and more relatively affluent urban professionals, many of them (retired) executives from the petroleum industry, are purchasing acreages, often in the urban fringe areas upon which the sour gas industry has been increasingly encroaching in recent years. These “acreage owners”, unlike established “rural landowners” and farmers in the area, are typically not in need of the income the sour gas industry provides, and therefore tend to be comparatively uncompromising in their opposition to proposed new sour gas facilities. They also tend to be adept in the strategic, political, organizational and communications skills necessary for successful advocacy, and often have the time to win elected office in local rural governments. Consequently, many rural landowners who welcome the economic diversity brought by local oil and gas operations are increasingly worried that the growing opposition to sour gas supported by many of the newer acreage owners is discouraging petroleum development, putting their local economy and civic harmony at risk.

These rural landowners therefore welcome the EUB’s ADR initiative as a potentially useful additional means for improving communications and facilitating dispute resolution in a manner that is less divisive to relationships, both between industry and the public as well as within the rural community itself.[5] On the other hand, the perspective of most acreage owners can be reasonably paraphrased in the following manner: we don’t mean anyone any economic harm but, given the technical information we have, we are genuinely concerned about the health and safety risks of sour gas operations; as well, we are simply exercising our rights to be involved in the EUB’s hearing process.

d) Changed Industry and EUB Practices. With more and more industry activity being conducted by the small, new companies, there was a move away from the use of surface landmen who were company employees to the use instead of contract landmen. Many rural landowners have acquired the impression that contract landmen, perhaps because they tend not to work one geographic area on a sustained basis, are typically less commited than company landmen to taking the time and care to build strong, credible relationships with local landowners. Because first contacts with a landowner are pivotally important in determining whether a positive relationship or protracted acrimony will ensue, there is a feeling that this trend to contract landmen has contributed to an increase in local landowners’ anxiety about and distrust in operators, further fuelling conflict.[6]

2. Concern about the Number and Duration of EUB Public Hearings.

Over 99% of the energy facility applications processed by the EUB do not require a public hearing. However, given that approximately 20,000 applications were filed in 1999, the EUB’s 1999 Annual Report revealed that unresolved disputes between project applicants and affected residents resulted in the Board having to conduct 33 public hearings as well as 7 prehearings. Sour gas development proposals constitute a majority of the disputes now resulting in hearings.

To paraphrase Hobbes, many of these hearings have been “nasty, brutish and ....long”, encumbered by issues that could have been resolved or mitigated by a more effective and proactive ADR intervention. A classic example was the unprecedented 8 day hearing in May 1998 into Canadian 88 Energy’s application to drill just one sour gas well near the northwest border of Calgary. This hearing was triggered as much by the residents’ outrage over what they felt was the company’s refusal to meaningfully consult with them as it was by their risk concerns. The company asked the Board to approve its application by June 1998; instead the approval was not granted until July 1999. Even as of December 2000, the company still has not been granted final authorization to drill by the Board because it is still trying to fulfill the stringent public consultation and other conditions the Board imposed on the company as part of its approval. In all, a classic example of the difficulties that can ensue when effective communications, consultation and ADR is not conducted proactively.[7]

Such protracted disputes and public hearings are very costly and inefficient in terms of resources and time for all parties -- including the public as well as the Board and industry. The proliferation of project applications and related company requests for public meetings are overwhelming affected residents.[8] The unresponsiveness to public concerns often exhibited by the corporate applicants during these consultations are an additional cause of concern to the residents.[9] Many affected residents also find the Board’s adversarial public hearings to be very frustrating and unproductive “non-dialogues” between battling experts in which both landowners and companies “lose” while only the enriched lawyers “win”.[10] As a result, interviews indicated there is widespread support amongst both landowners and industry operators for the view that ADR is worth trying as an additional tool that may provide a more effective and efficient way of avoiding and resolving disputes while simultaneously strengthening mutual trust and working relationships.

3. Public Consultation Failures.

All members of the EUB’s Steering Committee were aware of significant failures in the pre-application public consultation program mandated by the Board in IL 89-4. Often corporate applicants were simply giving pre-application notification to residents, but not engaging in meaningful consultation; industry’s approach to discussions was essentially positional rather than interest-based. Too often the companies were also poor communicators, particularly on the emotive subject of risk.

Many different factors contributed to the consultation failures, but the frequent inability to persuade key decision-makers to “come to the table” was particularly important. All of this was happening in a context where both the applicants and the public were preoccupied with their legal “rights” and confident in the correctness of their “position”, but not very aware of the potential benefits of an approach to negoations that is more interest-based than positional.[11]

4. Media Coverage.

The mass media tends to define news as necessarily involving conflict, controversy or crisis. Unsurprisingly therefore, dramatic events such as landowner acts of violence against petroleum company executives or facilities or even successful legal battles by some ranchers against major sour gas producers, attracted a great deal of media coverage. Such media attention in turn helped to mobilize the political will in the government of Alberta to provide the EUB with the mandate and additional resources it needed to launch a more formal ADR program.[12]

5. Public Distrust of Industry and the EUB

The frustrations and anxieties engendered by all of the above trends increased public distrust in industry and damaged relationships. The accumulating impacts and concerns eroded public confidence and further fueled residents’ anxiety over the perceived risks and impacts of future as well as existing developments.

A number of factors have also been cumulatively eroding the credibility of the Board. The de facto “disengagement” by the Board from its previous informal dispute resolution and facilitation initiatives, largely because of substantial budget and staff cutbacks, left many residents feeling that the Board was an uncaring regulator.[13] This credibility concern was further aggravated by the fact the public only notices how few development applications are rejected by the Board, rather than how the Board effectively prohibits many applications through its stringent regulatory requirements and mitigates the impacts of the other projects it approves through the stringent terms and conditions it imposes. Therefore, many residents as well as environmental groups viewed the Board as not just uncaring but actually “captured” by industry. This suspicion that the Board “piper” played too many industry “tunes” while ignoring public “requests” grew when, in the 1990’s, the percentage of the Board’s costs paid by industry increased to eighty percent.

6. Balance of Power

Parties to a conflict who have a strong commitment to their respective “rights” are only likely to enter into mediation or any other form of ADR if they fear their legal position will not prevail through adjudication. That is, the two sides must believe there is a rough balance of power between them such that the outcome of any expensive legal battle is highly uncertain. This delicate balance now prevails because, although the EUB almost never totally rejects an energy development application, it does regularly impose onerous terms and conditions in its approvals.[14]

7. Existing Examples of Effective ADR.

The success of the ADR programs pursued by other tribunals, such as the Alberta Environmental Appeal Board, were also instrumental in the creation of the EUB’s ADR program. The success of some of the EUB’s own past multi-stakeholder ADR processes, such as the Northeast Calgary Application Consultation Committee and the Sundre Petroleum Operators Group, also inspired many ADR advocates.

8. Industry and Stakeholder Support.

Another factor that paved the way to the ADR program was the encouraging contribution made to dispute resolution by the programs initiated by the EUB, industry associations, landowner organizations and other groups to educate and encourage their constituencies in the use of public involvement and mediation strategies as forms of ADR.[15]

The key role played by specific individuals cannot be overstated. For example, the new ADR Coordinator at the EUB is Bill Remmer, whose many years of field and hearing experience have made him a longstanding proponent of ADR, both within and outside the Board. Remmer reports to an EUB member, Arden Berg, whose extensive industry experience has also led him to a strong belief in the value of ADR. In turn, they and the EUB’s ADR program generally, are strongly supported by the Chairman of the EUB, Neil McCrank, and other Board members and by the political will of the Alberta Government.

Key individuals in industry, such as Dave Savage of BXL Energy Ltd., Bob Garies of Magin Energy Inc. and Joanne Nutter of Imperial Oil Resources, all with a background in surface rights, have also been dedicated and articulate promoters of ADR within their industry associations and companies as well as strong supporters of the Board’s ADR strategy. All of these individuals illustrate how pivotal the personal or idiosyncratic factor can be in the promotion and development of new organizational priorities, programs and cultures.

(III) CONFLICT ASSESSMENT: RISK CONFLICTS AND DISTRUST

To determine the potential usefulness of the EUB’s ADR strategy in resolving industry - public conflicts over the risks of sour gas operations it is first necessary to carefully assess both the nature of the parties and the issues involved in those risk conflicts. Most of the conf1icts between an energy company and affected residents that trigger an EUB public hearing draw their intensity from the emotive subject of “risk.” Specifically, the controversy is most frequently over the real and perceived threats posed by sour gas facilities to the safety and health of both affected residents and livestock. A landowner’s concern over possible environmental damage to his land /homestead can also be a very emotive issue. Fuelled by both the technical complexity of risk assessment and the fundamental value differences associated with the emotive question of “how safe is safe enough?”, risk disputes are typically intense conflicts characterized by a high level of public concern and a low level of public trust in industry and government.

Given these defining characteristics of a risk dispute, it is now necessary to analyze the underlying dynamics of a risk dispute in order to determine whether and how the ADR process developed by the EUB can effectively resolve such conflicts. In particular, we will address the question of whether such conflicts that involve fundamental value differences an nevertheless be voluntarily and consensually resolved through ADR or whether such value-based conflicts must instead be adjudicated by the Board in a decision that creates a clear winner and a loser.

The following are typically the distinguishing characteristics of a “risk” dispute with which any ADR program must grapple.

1. The Parties to a Risk Conflict: ‘Cross-Cultural’ Conflict between Experts and Laymen[16]

A pivotal factor in risk controversies is the very different approach that the technically trained risk experts in industry tend to adopt relative to risk issues, as compared to the perspective of the general public. The differences are so significant that they virtually define two conflicting risk cultures. The very basic value differences involved often result in a frustrating non-dialogue between the public and experts as well as intense public concern about the risks of sour gas facilities. Such public concern can exist even when scientific evidence and industry’s record indicate the facilities are actually very safe.

Technical Experts’ Approach to Risk Put simply, technical experts tend to underestimate or ignore many dimensions of risk that the general public believes are important. Risk experts tend to focus on the quantifiable level of risk, which they recognize as a function of not only the consequences of an accident but also the (im)probability of it even occuring. Technical experts are also aware that zero risk is impossible and tend to view reasonable risk-taking, like “trial and error”, as an inherent aspect of “progress”. They also believe in the benefits and reliability of modem science and technology. Due to their technical training, they emphasize the importance of objective scientific facts in risk management decision-making and tend to view emotions and subjective perceptions as inappropriate considerations. They believe that when reliable scientific studies indicate that the risk associated with a project is or has been reduced to a low level, this project should be accepted by the public as “safe”. When the public still opposes a project despite such technical evidence, frustrated risk experts often dismiss such opposition as the result of the public’s alleged emotionalism and lack of knowledge or attribute it to the tactics of environmental groups and to sensationalist media reporting.

The General Public’s Approach to Risk In contrast, when the general public evaluates whether a project or activity is “safe”, they consider many other legitimate aspects of risk in addition to what science indicates is the quantifiable “level” of risk. For the public, the key issue is not the level of risk but its acceptability,--something is safe only if the risks are deemed acceptable. Even statistically low risks can be judged by the public to still be unacceptable for the following kinds of reasons.

Some risks, such as sour gas risks, are inherently frightening to the general public because they exhibit the following characteristics. The threatening substance (eg sour gas) is invisible. It is potentially dreadful in its health consequences, especially for the most vulnerable members of society such as young children, the ill and the elderly. The technologies involved areunfamiliar. The risks are potentially catastrophic and are often dramatic and memorable because of sensationalist media coverage. The public is further frightened by the fact that sour gas risks are souncertain that even technical experts often disagree on how dangerous they are. Finally, any risk that isman-made, particularly if created by a profit-seeking corporation, is less acceptable to the public than a naturally occuring risk.

2. Risk can Trigger Public Outrage

Moreover, the public’s fear about even low levels of sour gas risks can quickly escalate into outrage when the corporate proponents or regulator of sour gas facilities conduct themselves in a certain manner. Specifically, if the project proponent or regulator acts in a way that leads affected publics to believe the project risks are being imposed involuntarily on them or seem largely beyond their personal control, the affected residents will feel outraged. Similarily, if the public concludes that these risks, however low, are managed by corporate or government people who seem dismissive or disrespectful to their feelings and by a process that is insensitive and unresponsive to their specific concerns, outrage will often result. Additionally, risks created by organizations that the public feels they cannot trust, and risks seen as unfair and therefore morally objectionable because they bring no counter-balancing benefits to the residents put at risks, also tend to fuel public outrage.

In short, risk disputes are characterized and complicated by the interlocking presence of all five types of conflicts described by Christopher Moore [17]. Value conflicts are present in the very different risk cultures displayed by experts and laymen. We see interest conflicts in the positional stand-off over whether or not the proposed facility should proceed. We see relational conflicts in the strong emotions and stereotyping that alienate the parties from each other. We see structural conflicts growing out of the power discrepancies that often characterize the conflicts --with well-connected and politically astute opposition groups sometimes enjoying the power advantage over a corporate applicant, rather than vice-versa.

And finally, discernable in the lack of adequate data and disagreements over its interpretation are data conflicts. However, on balance, it is the fundamental value conflict inherent in the emotive question, “how safe is safe enough?” that ultimately defines risk conflicts as value conflicts.

3. The Pivotal Role of Distrust in Risk Conflicts

Trust, like leadership, is difficult to define but very easy to detect. You quickly know when there’s an absence of trust and all that follows from this very fundamental barrier to

communications and cooperation. One useful definition of trust is the following [18]:

Trust can be summarized as faith or confidence in the intentions and actions of a person or group to be ethical, fair, and nonthreatening concerning the rights and interests of others in social exchange relationships. It also relates to a willingness to a place ourselves in jeopardy, to become vulnerable, that is, to take a chance that our dependency will not be exploited. It means giving another party the benefit of the doubt in a situation that we cannot fully control. Mistrust, on the other hand, suggests a belief that someone’s intentions and motives are not always what they appear; that a person is insincere, unethical, has ulterior motives, or is unwilling to honour an agreement.

I would add that in risk conflicts another concern fuelling distrust is the belief that the

person or organization imposing or approving the risk on you is not genuinely caring or empathetic about your concerns. When the issue is risk, concerned “people don’t care what you know until they know that you care.”

Trust therefore involves assumptions about people’s motives, dedication, honesty, reliability, moral character, and credibility in situations where there is dependency in a relationship fundamentally characterized by an inequality of power. Since trust involves dependency, it raises the issue of possible harm.. In other words, trust involves risk that our willingness to invest our faith in essentially a stranger will leave us unharmed. This is why such vulnerable people not only need to be safe, but they must also feel secure . The former is achieved through science and technology; while the latter largely depends on the quality of communications, relationships and processes for conflict resolution.

Such dependency and vulnerability characterizes the situation of Albertans potentially exposed to accidental releases of potentially lethal sour gas from facilities approved by the EUB and built by industry. Trust is therefore particularly important in risk conflicts such as sour gas. When the key issue is the emotive one of risk, the principal concern of affected residents is their judgement of the reliability of a company to do the right thing to ensure the safety of their families: to consistently do the right thing even when the public, media or the regulator is not looking over their shoulder.

Whether it originates from the affected public or the corporate proponent of a development project, distrust begets distrust in a self-reinforcing cycle. Regardless of the specific context, the many negative results of distrust are the same. Distrust causes people to engage in defensive, self-protective behaviours to shield themselves from harm. One common manifestation of this defensiveness is the impossible demand that “Only zero risk is acceptable!” often stated by distrustful residents angry over a sour gas risk. Where there is little trust, an “us versus them” attitude prevails in which cooperative sentiments and constructive and creative thinking are suppressed. When people are suspicious, they are less open to the data and influence of others and are hesitant to share the information they have or even be candid about their interests. The sharing of information -- the key to learning and cooperation -- is stifled. When one side detects distrust on the other side, it becomes obsessed about not giving up control -- precisely the opposite of what is needed. In such an environment, conflicts multiply, further aggravating distrust.[19]

The Relationship Between Trust and Effective ADR

ADR techniques depend heavily on trust. This is due to the fact that ADR processes attempt to strengthen relationships by persuading people to communicate, to stop stereotyping each other and to dispassionately evaluate the costs of conflict versus the benefits of cooperation. In turn, effective ADR then cultivates trust as people have experience working with one another and resolving issues together over a period of time, all in a process they control.

(IV) DEFINING FEATURES OF THE EUB’S ADR PROGRAM

The EUB’s draft Information Letter and Guidelines on its new Appropriate Dispute Resolution (ADR) Program for Energy Industry Disputes, to be released in early 2001, (IL-ADR) describes the purpose of the program as:

To directly involve decision-makers in an interest-based, collaborative approach to develop a clear understanding of concerns and issues, discuss their interests, and then develop options for resolution.

The Board describes the following as the key features and principles of the ADR program.

1. Public Consultation Remains Core Program. The EUB’s expectation that industry will address the public’s concerns and issues through proactive public consultation and disclosure programs remains the bedrock component of the EUB’s effort to encourage voluntary resolution of conflicts.[20]

2. ADR is a Voluntary Option. ADR processes are simply an additional, optional tool available to the parties if disputes arise out of the consultation process, “something between the kitchen table and the hearing process.”[21] Although voluntary, the EUB has stated that it will “strongly encourage” the parties to attempt mediation, or to at least participate in a preliminary meeting about possible ADR options.[22]

3. Flexibility. The options available for resolving petroleum industry vs landowner disputes are varied and exist along a continuum. At one end are processes like consultation negotiation and facilitation where the parties retain control over the the final agreement, while at the other end are techniques such as arbitration and formal EUB hearings where a final resolution is imposed on the parties by a neutral third party. The EUB’s ADR program is meant to further bolster the facilitation option while also promoting mediation as yet another alternative in which the parties retain control over the substance of any resolution.

This program is called “Appropriate” rather than “Alternative” Dispute Resolution because it is not meant to necessarily replace either consultation or hearings. Rather the program simply emphasizes the value of disputants cooperatively determining what particular ADR technique may be most appropriate to their particular circumstances.[23]

4. Inclusiveness.The EUB’s ADR program is inclusive in nature and spirit. All interested stakeholders, including not only directly affected local residents but also provincially-based public interest groups, will participate.

5. Parties Retain their Rights. By entering into a mediation program, neither the applicant or public groups give up their right to have a Board hearing.[24]

6. Face-to-Face Discussions. The EUB’s ADR program is premised on the belief that it is critically important to have face-to-face dialogue between the key decision-makers in a dispute if the conditions conducive to collaborative resolution are to be created.[25]

7. Preliminary ADR Meeting. If attempts to resolve issues through consultation and informal negotiations fail, EUB staff will strongly encourage the parties to expeditiously proceed to a Preliminary ADR Meeting. Its purpose will be to allow the parties to consider the dispute resolution options they might jointly consider pursuing in light of the particular issues and scope of their dispute. Many practical issues would have to be discussed first, including: the design, procedures and timetable of the process; who would participate; information-gathering requirements and procedures; the selection and mandate of a possible mediator; and questions of confidentiality. If the parties agree to proceed with mediation, they will develop a mediation agreement describing the particulars of the process they have tailored for themselves. In any case, through this preliminary meeting, the parties would at least be making an informed and considered decision about the ADR option.[26]

8. Joint Fact-Finding. The Board recognizes that the kind of adversarial science and “battling experts” that makes quasi-judicial public hearings so frustrating, divisive and corrosive of relationships must be avoided within a mediation. Board staff and the mediator therefore will encourage a cooperative approach to identifying information needs, selecting required experts, and scoping, conducting and interpretating the subsequent study.

9. Cost Sharing. The costs of the Preliminary ADR Meeting will be paid by the applicant, but the Board expects such a meeting to usually be of limited duration and nominal cost. Part of the agenda of this preliminary meeting will be to consider the magnitude and division of the costs of any ADR program they may decide to initiate, including costs for service providers, mediators, technical experts, meetings and, possibly, legal counsel. The fact that any relevant technical study conducted as part of the mediation can later be used in the EUB hearing serves to encourage applicants who have no desire to pay for a second study to consent to a cooperative approach to the conduct of studies.[27]

10. Confidentiality Another important issue the parties must agree upon before entering into mediation is the degree to which the proceedings will be confidential and the discussions will be “without prejudice”.This not only means the mediator cannot be a witness at any subsequent proceeding but that none of the comments made in the mediation can be used outside of the mediation unless the other side consents or waives his rights by himself breaching the confidentiality agreement. These conditions are deemed essential to encouraging the type of candour and flexibility essential to cooperative conflict resolution.

11. Assistance of Neutral Third Parties. If the consultation program, the Preliminary ADR Meeting or subsequent facilitated problem-solving meetings are unable to resolve certain issues, the parties may decide to proceed to formal mediation. Consultants to the EUB define mediation as follows:

A collaborative conflict resolution approach in which two or more parties in dispute are assisted in their negotiation by a neutral and impartial third party and empowered to voluntarily reach their own mutually acceptable settlement of the issues in dispute. The mediators structure and facilitate the process by which the parties make their own decisions and determine their outcome, in a way that satisfies the interests of the parties in the dispute. [28]

The Board’s ADR Information Letter defines “Mediator” as a person who

Assists the parties in their negotiations by ensuring complete, balanced and respectful communications and by moving the parties through the mediation process toward reaching a fully informed, voluntary agreement. Mediators are not decision- makers, legal advisors, or solution providers.

EUB staff will not perform the role of mediators. The parties will be able to select a

mediator from a prepared roster of (currently 22) qualified mediators.

Another very important third party participant will be “service providers” which are companies with recognized expertise in mediation, facilitation, communications and case management. They will work with EUB staff and the mediator in handling the adminis-trative aspects of promoting, planning, managing and coordinating a mediation process.

12. No Delays; Parallel EUB and ADR Processes. Project applicants understandably want to ensure that no party will be able to use the ADR process in a deliberate, bad faith effort to oppose an application by delaying a Board hearing or inflicting needless additional costs on the applicant. The EUB has therefore indicated that, if a proponent wishes to attempt ADR but does not want regulatory consideration of its application to be delayed, it should file its application with the Board early in the ADR process so Board staff can review it in a time-frame paralleling the ADR program.

If the applicant starts the ADR process and then decides to file while the dispute remains unresolved, it must disclose in its application the nature and substance of the dispute -- as has been the case since Guide 56 was released in 1996. When Board staff have completed its technical review of the application, their recommendation to the Board will consider any timing constraints on the applicant growing out of the ADR. The Board will either approve the application, reject it or schedule a hearing -- unless the parties to the ADR jointly request that the hearing not be scheduled yet. However, the applicant’s control of the hearing schedule is not absolute because the EUB, in assessing the need for and timing of a hearing if mediation is already under way, will take into consideration any requests to defer or proceed with a decision.

13. Active Role for EUB Staff. As part of this ADR initiative, the EUB has committed increased personnel and resources to further enhance the traditional role of its staff in

facilitating proactive consultation and cooperative problem-solving. The EUB has also created a new position, a Coordinator of ADR Services, who will be responsible for implementing and promoting the ADR program.

EUB staff will now also have the expanded role of identifying emerging conflicts that could benefit from the intervention of trained and neutral third parties, to explain the nature and benefits of such interventions, and to encourage the parties to carefully consider such an ADR option. EUB staff will also be available as a resource to the mediator both during the Preliminary ADR Meeting and subsequent mediation. They can serve as impartial providers of information relating to technical or other issues, the Board’s regulatory policies and procedures, and the approach adopted by the Board in past decisions, but they may not speculate on the outcome of any possible future hearing.[29]

14. Training Programs To do this work effectively, involved EUB staff, who have already been trained in the related field of risk communications,[30] will now also be trained in “conflict resolution, facilitation skills and mediation awareness”.[31] Industry associations such as the Canadian Association of Petroleum Producers, the Small Explorers and Producers Association of Canada, and the Canadian Association of Petroleum Landmen will also undertake similar training programs.[32] In terms of “consciousness building” amongst the public, rural landowners like Dave Brown of the Sundre Petroleum Operators Group (a multi-stakeholder forum consisting of local operators, residents and other stakeholders which has had considerable success in identifying and cooperatively resolving issues) are generously devouting considerable volunteer time in promoting similar proactive communications and cooperative problem solving strategies to concerned residents and groups in other regions of Alberta.

15. Reaching and Enforcing an Agreement. The parties to the ADR may or may not reach an agreement. That agreement may be complete, permitting a hearing to be avoided entirely, or it may be a partial agreement, in that some issue are resolved but others will have to be passed on to the Board for adjudication at a hearing. Enforcement of agreements are facilitated if they are clearly drafted. When the agreement falls within the Board’s guidelines, there should be little difficulty. However, in more complex situations, the parties will have to consider how future enforcement challenges would be handled.

16. Monitoring Program. The ADR program will be iterative, especially in its early years. A multi-stakeholder committee will monitor the program over the next three years. Parties who participated in ADR will be encouraged to generally share their experiences and learnings with the committee and EUB, to the extent this can be done without breaching confidentiality requirements. Periodically, progress reports and recommended improvements to the ADR Guidelines will be issued; data on the success of the program and testimonials will also appear on the Board’s web-site.[33]

In conclusion, the EUB’s ADR program can be characterized as essentially a form of the “Collaborative Problem-Solving” model described by Ron Fisher.[34] That is, it is characterized by the four attributes of face to face interaction between the parties under norms of mutual respect, a third party facilitator who helps the parties move off the rigid advocacy of extreme and irreconcilable positions in favour of the integrative process of candidly communicating about possible areas of common interests and needs, respectful and productive intergroup engagement based on principles of stakeholder inclusiveness, openness, authenticity as well as mutual respect and sensitivity, and, fourthly, collaborative and potentially transformative strategies animated by trust, a sense of partnership and the search for a creative win-win outcome.

(V)  THE EUB’S ADR STRATEGY IS WELL DESIGNED TO EFFECTIVELY ADDRESS NORMATIVE I RISK DISPUTES

The principal characteristics of the EUB’s ADR program discussed above will contribute to

the building of trust, the strengthening of relationships and the facilitation of agreement. In this section I will explain why these procedural attributes will likely prove successful in resolving or at least moderating many of the sour gas conflicts that are now burdening Board hearings, despite the emotive and normative nature of these conflicts.

Notwithstanding my conclusion that risk conflicts are primarily “dissensual” value-based conflicts and not the type of mere competition over a “scarce resource” amenable to a negotiated or mediated resolution, I do not agree with Aubert that normative conflicts are not open to at least partial resolution through ADR.[35] This is because Aubert’s economic model seriously underestimates the emotional, psychological and relationship aspects of conflicts. In other words, normative conflicts over a subject such as risk involve not just issues of science, technology and economics but also human feelings and perceptions -- issues that are inter-related and can be effectively addressed by collaborative ADR techniques.

In other words, because effective ADR processes conducted by well trained, neutral facilitators and mediators will acknowledge and be sensitive to such feelings, ADR can pave the way to conflict resolution by accomplishing the following transformative effects:

(a) defusing the public’s risk-related emotions, such as anxiety, anger, even outrage; and

(b) enhancing public trust in the project proponent and/or the EUB;

(c) creating an atmosphere based on mutual understanding and respect in which there can be a more calm, candid and informed discussion of all relevant issues and data, including the actual, scientifically calculated level of “risk” (and regulatory safeguards) as well as the counter-balancing benefits of the proposed facilities;

(d) a more cooperative assessment and management of the risks; and

(e) helping the parties resolve some or even all their differences in a way that is not only more timely and cost-effective but that also enhances their working relationships.

Essentially, it is the self-reinforcing, attitude-transforming interpersonal dynamic associated with face to face communications, consultation and facilitated, joint problem-solving that is the principal mechanism through which all of the non-technical dimensions of risk of

concern to the public are effectively addressed and the consensus-building benefits of ADR described above are achieved. The following examples are provided.

Sharing Control. The Board’s ADR process responds to the public stakeholders’ legitimate demand to have a meaningful opportunity to be informed about and involved in the project planning process. The impartial facilitator also helps to assure the public representatives that, despite any inequalities of resources as between them and the applicant, and despite their (potential) relative unfamiliarity with the technical issues,

they would not be at any disadvantage in discussions on the identification, clarification and resolution of the risk management and impact mitigation issues of concern to them.

Within an ADR process, requested information will typically be provided when available, and if a new study is necessary, it is hoped the proponent will provide funding for a single, mutually acceptable, independent expert to conduct a study whose scope will have been jointly agreed upon and the results of which will be collectively assessed. If two separate experts and studies are judged necessary, the calmer atmosphere of the ADR forum will at least facilitate their ability to reach as much agreement on the substantive and methodological scientific issues instead of encumbering an inappropriate forum like an adversarial, quasi-judicial Board hearing with such technically complex and time­-consuming issues. In short, ADR provides an opportunity for a constructive, collaborative approach to fact-finding to replace the adversarial science that typically further divides the parties rather than serving as a basis for consensus.

Building Trust and Credibility: In order to be viewed as a trustworthy source of information concerning the emotive subject of risk, it is not enough for the individual or organization in question to be viewed as technically competent, which the public usually just takes for granted. As in personal relationships, it is also necessary that the individual be judged as open and honest, as well as dedicated and committed to the issues of concern to the other party. However, the attribute which overwhelmingly determines how trustworthy a person is seen on a risk issue is how genuinely empathetic they are to the public’s concerns, feelings and perceptions. As suggested below, people don’t care what you know until they know that you care.

Consultation processes are ideal opportunities for organizations to demonstrate, by both word and deed, that they and their representatives possess all these attributes and that they are or will be responsive to the public’s concerns --and therefore are worthy of trust. Within an ADR forum, industry and EUB officials will have an unequalled opportunity and inclination to acknowledge the legitimacy and reasonableness of the public’s risk concerns.

Industry and the EIJB will also typically take care not to alienate concerned residents by suggesting that they see their role as educating the “uninformed, irrational and therefore needlessly frightened public.” Instead, they can make it clear that their objective is instead to understand and effectively integrate the residents’ concerns and values into the project’s design. The interpersonal dynamic of ADR processes will also provide industry and EUB officials with an opportunity, if appropriate, to build more rapport and earn more trust by a willingness to candidly acknowledge past shortcomings and current uncertainties. Above all, within a non-threatening, mutually respectful ADR environment, residents are less likely to feel pressured on the question of whether a particular level of risk is acceptable; instead, they will simply be provided the information needed to make up their own minds.

Fairness: After the issues of control and trust, probably the next most important non­technical dimension of risk that can enrage the public is the feeling that their community is being unfairly singled out to bear to an inordinate degree the risks associated with a specific industrial operation while the benefits go to all the residents of the province. This fairness issue can understandably generate feelings of moral outrage that any ADR process will have difficulty resolving. However, there are other occasions when an ADR process will help defuse this fairness issue because of the opportunities it provides, in a calm and mutually respectful environment, to explain a number of relevant points: that many other communities in Alberta have sour gas operations adjacent to them; that there may be significant counter-balancing local benefits for the area in question, and that the proponent recognizes the legitimacy of the fairness issue and will commit to address it through its hiring, procurement and donations programs. Because of the trust that will have already been built up and the commitments provided on public safety, the fairness issue could be addressed without the appearance of bribery. Public safety must always be the priority issue but, within ADR, fairness tends to be treated as a legitimate separate issue.

How is Trust Earned? Facilitated face to face communications is key to explaining how the EUB’s ADR program, including the upfront consultation process, is an effective setting for transforming the attitudes of all parties, breaking down stereotypes and psychological barriers to effective dialogue and cooperation, improving mutual understanding and respect, and building trust. Such an ADR process encourages its participants to model all the kinds of healing and bridge-buildingbehaviour that we know from our personal lives help to build trust and sustain relationships.

This ADR process and the atmosphere it creates in turn encourages participants to act as a “good neighbour,” that is, in a caring, responsive and helpful manner. It encourages personable behaviour that is also courteous, thoughtful and considerate. It encourages open and honest communications --candidly giving “straight answers” to simple questions, with minimal technical jargon. When a party (typically the petroleum company) doesn’t know or is uncertain of an answer to a question, the EUB’s ADR process encourages all-important authenticity, a tendency for people to be disarmingly frank about the fact that despite their

technical expertise, they don’t have all the answers --- they don’t even know what all the questions are --- and that is why they welcome the personal interaction inherent in ADR. ADR also encourages industry participants to acknowledge the reasonableness and legitimacy of the public’s risk concerns, values and perspectives, and to make and keep (promptly and thoroughly) appropriate commitments regarding the management of those risks. The adoption of this reassuring kind of empathetic attitude is more conducive to trust-building and to constructive dialogue than is the traditional strategy of simply trying to using often bewildering technical data or inappropriate risk comparisons to “educate” and persuade the public that their risk concerns are unwarranted

Finally (and something that can be of pivotal importance in facilitating dispute resolution) ADR encourages people, when appropriate, to act on what we as individuals already know to be true: that when you have made a mistake, when you know you could have done better, there is probably no more effective approach for restoring trust and relationships than by extending a voluntary, timely and sincere apology. Although one must always be sensitive to how the specific wording of the apology or expression of regret may impact on questions of potential legal liability, such basic human sentiments help to demonstrate and reassure the concerned public how the organization and its representatives are animated by a strong sense of social and moral responsibility rather than constrained by a narrow, technical preoccupation with only their legal rights and obligations.

(VI) SOME ISSUES AND RECOMMENDATIONS

1. Parallelism: Trying to Cooperate while Preparing to Fight? Is industry’s desire to minimize delay by having the EUB’s application review process parallel the ADR process inherently contradictory if not impossible? After all, when preparing for an adversarial hearing, parties get caught up in an escalating spiral of conflict such that they have difficulty seeing beyond each other’s rigid position to understand each other’s legitimate underlying interests and needs -- a potential problem for efforts to settle disputes in the concurrent ADR process.

On balance, we believe this potential problem is manageable, given the critical importance of a strong industry commitment to the ADR process, the promise of retained rights, the burden placed on those seeking a discontinuation of the particular ADR process to explain their decision, the flexible / adaptive nature of the ADR process, as well as its transformative potential for creating trust and a cooperative approach to dealing with the potentially poisonous question of a possible hearing. It must also be acknowledged that some hearings will be unavoidable given the particularly serious and contentious nature of the issues. Moreover, under some circumstances a public hearing may simply be appropriate for other legitimate reasons, such as providing people with a public forum and an opportunity to have their concerns and position heard, or because of the value of having a potentially important policy issue clearly adjudicated and articulated by the EUB in a formal and public manner rather than having the resolution of the issue left potentially uncertain in the private settlements to which ADR gives rise.

2. What Constitutes ADR Success? We have already indicated that some public hearings will continue to be necessary, both because they can be valuable platforms for articulating public values and explaining the public interest, and because no ADR process can resolve all concerns. But the success of the EUB’s ADR program will come in other important forms as well. We have mentioned the positive transformative effects of ADR in terms of defusing emotions, building trust and strengthening relationships. This is important in helping to resolve or narrow some difficult issues, resulting in the public hearing being shorter, less acrimonious and less costly than otherwise. These transformations also facilitate ongoing cooperative problem-solving, even during the operations phase and relative to possible problems associated with the enforcement of the mediated agreement in the wake of new circumstances such as a change in operatorship. Finally, ADR success also comes in the form of an enhanced desire and ability to better understand and address legitimate stakeholder concerns. This enhances the satisfaction of the affected residents in the outcome while enhancing the credibility of not only the industry but also of the EUB and the regulatory regime as a whole. This is truly of benefit to the broad public interest.

3. Mediation Should Not Simply Replace Proactive Consultation. There are already reports from practicing regulatory lawyers that mediation is being so strongly promoted that companies are tending to start at that point in the ADR continuum at the expense of what the Board itself rightly describes as the core of its ADR strategy: facilitated, pre-application communications and consultation. This is already of concern to some landowners who strongly believe in the communications and trust-building value of informal two-way dialogue.[36] ADR depends on the trust generated by these informal upfront processes and shouldn’t be allowed to become an alternative to consultation; nor should it come to be seen as a de facto mandatory, industry paid, and relatively formalized substitute for, if not supplement to, a hearing.

Recommendations:

a) Joint Fact-Finding. The effort to take a collaborative approach to scientific fact-finding may become derailed over the sensitive issue of the selection of a mutually acceptable expert. [37] This is particularly true when the affected residents or public groups involved in the ADR process are voicing deeply felt concerns about risk or other issues about which they believe they cannot “compromise”. Because certain risk assessment experts are known as either pro or anti sour gas development because of their past work and affiliations, the EUB should consider the creation of a roster of neutral technical experts to complement the existing rosters of mediators and service-providers.

b) Rural-Sensitive Mediators.Given the concerns of rural residents described above, the EUB should also ensure that a number of mediators on its roster be demonstrably sensitive to rural community concerns as well as possessing the other substantive and technical skills necessary for facilitation and mediation.[38] This sensitivity can derive from either the mediator’s personal background or personal and professional experience. There are probably such professional mediators now on the roster but this needs to be better explained to retain the rural community’s confidence in the mediation option.

c) Moral Suasion. In 1991, Board Vice-Chairman Frank Mink played a determinative role in persuading reluctant community associations to participate in what became the facilitated multi-stakeholder forum called the Northeast Calgary Application Consultation Committee to review CanadianOxy’s draft proposal to drill more sour gas wells near NE Calgary. This historical ADR success story illustrates the moral suasion of EUB members as champions of ADR --- although this role may necessitate that the EUB member in question not participate in any possible future EUB panel to avoid legal concerns about possible “apprehension of bias”.

However, as the EUB’s ADR program is currently structured, EUB staff will be exclusively responsible for such “promotion” activities. The EUB therefore should carefully address the question of whether and how the status, authority and resources of the Coordinator of ADR Services might be further enhanced to ensure the incumbent will be clearly recognized as an emissary of the entire Board whenever he states that the Board “expects” an organization or person to “consider” the ADR option.

d) Promoting the ADR Concept. There is little indication to date that senior corporate decision makers are or will become directly involved in mediation exercises. However, because corporate leaders play such an important role in fashioning their organization’s culture and acceptance of innovations such as ADR, it is important that the ADR Coordinator personally contact and “sell” the ADR programm to these senior executives. Leaders of public groups, associations and the media should also be similarily approached on a personal basis.

CONCLUSION

We have argued that ADR in the form of facilitated, multi-stakeholder consultation, collaborative problem-solving and formal mediation processes is of great value in building trust and relationships, thereby paving the way to the resolution or mitigation of a wide variety of conflicts, including deeply-rooted normative conflicts. These ADR processes accomplish all this by the unique opportunity they provide the parties to effectively integrate the scientific rigour of environmental / risk impact assessments and the economic rationality of cost-benefit analysis with the procedural fairness of the EUB’s quasi-judicial hearings and the democratic principles of inclusive public participation.

For this the Alberta EUB should be applauded and supported. Through this timely ADR initiative, the EUB, although no longer called the “ERCB”, continues to fulfill its mandate to protect the public interest by judiciously balancing its concurrent roles as both the “Energy Resources Conservation Board” and the “Enraged Residents Conciliation Board”.

G.E. (Gerry) Kruk

University of Calgary