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Informational Letter IL 2001-1

January 8, 2001

APPROPRIATE DISPUTE RESOLUTION (ADR) PROGRAM AND GUIDELINES FOR ENERGY INDUSTRY DISPUTES

1 INTRODUCTION

The attached Appropriate Dispute Resolution (ADR) Guidelines provide a framework for the Alberta Energy and Utilities Board (EUB) ADR program, which may be used to assist in the resolution of disputes concerning the Alberta energy industry.

The EUB and a multistakeholder committee have been jointly investigating options and procedures to use ADR tools and techniques to assist in resolving concerns and disputes in the energy industry. They have agreed on a framework for an EUB ADR program detailed in the May 1, 2000, Report for Implementation of an Appropriate Dispute Resolution System for Alberta's Upstream Petroleum Applications, available on the EUB Web site at <http://www.ercb.ca>. The attached EUB ADR Guidelines are based on the recommendations of this report.

The EUB ADR program includes the option to use ADR tools and techniques for dealing with applications or operating facilities. The program is a response to the desire of stakeholders to be more directly involved and have more control in resolving a dispute. ADR is not a cure-all in every situation but creates an opportunity for affected parties to seek mutually acceptable solutions. Participation does not preclude access to an EUB hearing or diminish the rights of the parties.

The EUB ADR program is also consistent with the overall trend in Alberta and North America to use ADR. Within Alberta, ADR is used by many government departments, including Alberta Justice, Alberta Municipal Affairs, Alberta Environmental Appeal Board, and Alberta Agriculture. The Alberta business community has also shown support for ADR initiatives in several industries. The Calgary Chamber of Commerce and the Alberta Chambers of Commerce have passed resolutions in support of the EUB ADR initiative.

GOALS AND PRINCIPLES OF THE EUB ADR PROGRAM

The goals and principles of the ADR program outlined below reflect the desire of the EUB and stakeholders to have available a range of dispute resolution mechanisms to ensure effective and efficient processes for innovative and satisfactory solutions in addition to the use of a traditional EUB hearing.

The goals of the EUB ADR program include

• improved landowner-industry relations in the interest of all Albertans
• better use of the EUB's and stakeholders' time and other resources
• more face-to-face discussions between affected landowners and company decision-makers, leading to local solutions to local problems
• enhanced efficiencies in the effort to meet the needs of stakeholders in the electricity and upstream oil and gas sectors
• increased resolution of industry-to-industry disputes without an EUB hearing
• a more effective and efficient hearing, if one is necessary

The EUB and the stakeholders agreed that the EUB ADR program must include a number of principles:

• Participation in ADR options is voluntary, but the EUB strongly encourages the parties to at least attend a Preliminary ADR Meeting to discuss options and procedures to deal with the dispute. Participation does not preclude access to an EUB hearing or diminish the rights of the parties.
• The development of time lines and deadlines is important. The use of ADR should not delay the EUB's decision on the need for or the scheduling of a hearing.
• Discussions within a Preliminary ADR Meeting or during subsequent mediation should be confidential and without prejudice, unless the parties agree otherwise.
• Certain technical information or parts of an agreement may be required in an EUB application or other regulatory process.
• For the Preliminary ADR Meeting, industry participants should be responsible for the costs, including the direct third-party costs of landowners and the public. Costs and payment for future ADR options should be discussed and agreed to at the Preliminary ADR Meeting.

A multiparty stakeholder committee has been established to monitor the program over the next three years. This committee will periodically issue progress reports to stakeholders and recommend improvements or alterations to the attached ADR Guidelines. Membership on the committee includes representation from a broad cross-section of stakeholders as follows:

• Canadian Association of Petroleum Producers,
• the Farmer's Advocate,
• the Wild Rose Agricultural Producers,
• the Alberta Surface Rights Board,
• the Small Explorers and Producers Association of Canada,
• the Canadian Association of Petroleum Landmen,
• the Alberta Environmental Network,
• the Calgary Chamber of Commerce DR Committee,
• mediators,
• the electric industry, and
• a stakeholder group (Sundre Petroleum Operators Group).

The EUB ADR program detailed in the attached ADR Guidelines includes increased EUB staff training, increased EUB staff facilitation efforts, use of service providers and professional mediators, and other options.

The main intention of the program is 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 Preliminary ADR Meeting and subsequent mediation, if appropriate, should be conducted under the guidance of a neutral third-party professional.

Questions regarding the EUB ADR program may be directed to EUB application or field staff, the EUB ADR coordinator, or members of the stakeholder committee listed in Appendix 1 of the stakeholder report mentioned above. A help line (403-297-3700) and e-mail address (eub.adr@eub.gov.ab.ca) have been established for feedback and to record and respond to inquiries.

A. J. Berg, P.Eng.
Board Member

IL 2001-1: ATTACHMENT

EUB APPROPRIATE DISPUTE RESOLUTION (ADR) GUIDELINES ADR PROGRAM

1 WHAT IS ADR?

ADR stands for "appropriate dispute resolution." It means that a dispute may be resolved through a number of options and the parties are enabled to choose which one of them to use.

The options exist along a continuum. At one end are means for resolution that allow parties control over the process used and the final agreements. These range from agreements with no outside involvement (negotiations) through facilitation and mediation. At the other end are arbitration and an administrative tribunale.g., EUB Board hearing or the court systemestablished formal procedures that result in a decision being made for the parties.

2 USE OF ADR

The ADR process is applicable to any area of the energy industry regulated by the EUB in which public-to-industry or industry-to-industry disputes may be encountered.

The main use of these guidelines is in disputes about proposed facilities or modifications to existing facilities in the energy industry, both those involving the public/landowners/ stakeholders and a company and those between competing companies.

ADR may be used for application or operational disputes involving wells, pipelines, production facilities, electrical substations, transmission lines, or other facilities in the industries regulated by the EUB.

A negotiated settlement process involving utility rate applications is outlined in EUB Informational Letter (IL) 98-4: Negotiated Settlement Guidelines: Tolls, Tariffs, and Terms and Conditions .

ADR also provides an opportunity for parties to develop more complete agreements by dealing with all issues, including, for example, compensation, which is outside the EUB's jurisdiction.

3 WHEN SHOULD ADR BE CONSIDERED?

ADR is an extension of the EUB's expectations for public-to-industry and industry-to-industry contact, consultation, and disclosure. Companies must inform potentially impacted parties of the nature of the proposal or significant changes to operations, respond to questions and concerns, and seek understanding through collaborative efforts. If disputes arise, the use of ADR should be considered.

3.1 Applications

An applicant must comply with the public and industry consultation and disclosure requirements specified in the applicable EUB application guides (e.g., Guide 56: Energy Development Application Guide, Guide 65: Resources Applications, and draft guides for transmission lines and power plants). These guides list EUB expectations on technical matters, public disclosure, and consultation.

The EUB expects that industry will attempt to negotiate and resolve any concerns or disputes that arise with the public/landowners/stakeholders and/or other industry participants as a result of proposed development.

The EUB believes that all parties with concerns should enter into meaningful interest-based discussions prior to accessing EUB staff facilitation efforts or engaging a third-party mediator.

However, public/landowners/stakeholders and companies may at any time contact the EUB for information and assistance.

An application is not required as a prerequisite to access the resources of EUB field or application staff for facilitation assistance or to engage in an ADR process. However, if an applicant wishes to proceed with a timely disposition of its application, the application should be made as early in the ADR facilitation process as feasible. Likewise, public/landowners/ stakeholders may choose to submit concerns and objections to the EUB while ADR is under way.

If the applicant chooses to submit an application while the dispute remains unresolved, the applicant must disclose in the application to the EUB the nature and substance of the dispute, as required by the applicable application guide. EUB staff will process an application while the applicant is proceeding with ADR. This will ensure that the ADR process will not delay the EUB disposition of the application. The EUB assessment will take no longer than it would have without using ADR, unless the parties mutually agree to a delay.

3.2 Operations

The guidelines may also be used for operational disputes when issues about the operations of an existing EUB-regulated facility fall outside EUB regulatory compliance or enforcement requirements.

Regarding disputes about the operations of an existing EUB-regulated facility, the EUB must first ensure that the facility is in compliance and that appropriate surveillance and enforcement measures have been implemented. This procedure will also provide the parties with a fair and reasonable opportunity to ensure that their concerns with operations are thoroughly addressed. The EUB may, if requested, facilitate meetings if jurisdictional boundaries are unclear or if issues involve the EUB and other jurisdictions.

For further details on the use of ADR for facility operations, please contact the closest EUB field centre (see General Bulletin 2000-22 for a map of field centre boundaries and contacts) or the EUB's ADR Coordinator.

4 ROLE OF EUB STAFF

Any member of the industry, public, or landowners engaged in a dispute may access the resources of the EUB. If there is an identified need or a strong likelihood that the EUB could add value to the discussions, the EUB will consider having field staff and applications staff in Calgary attend these meetings and may also make available technical support staff to address technical issues and content.

The role of EUB staff includes the following:

a) Facilitation

Throughout the EUB's involvement, parties may request the EUB to provide regulatory or other information. Staff can facilitate parties' communications to help clarify issues, identify key concerns and interests, and assist the parties in understanding and accessing appropriate ADR options. They can also evaluate consultation efforts and provide feedback.

b) Involvement in the Preliminary ADR Meeting or mediation

The parties may request EUB staff attendance at ADR meetings as sources of information and regulatory information. The EUB staff, as employees of the regulator, must maintain fairness and impartiality at all times.

If attempts at direct negotiations break down or become problematic, EUB staff will strongly encourage parties in a public-to-industry dispute to proceed to a Preliminary ADR Meeting and will expect parties in an industry-to-industry dispute to do so.

5 USE OF INDEPENDENT, NEUTRAL THIRD PARTIES

Any party engaged in a dispute may access the resources of a neutral third party, such as a service provider or a mediator. Parties entering into ADR may select, by mutual agreement, a service provider and/or a mediator either from a roster located on the EUB's Web site at <http://www.ercb.ca> or from other sources.

The ADR Standing Committee has assembled the roster located on the EUB Web site. The purpose of the roster, while not a certification process, is to provide any party in dispute with a source of qualified mediators or service providers.

Service providers can assist parties by

• explaining the process and the merits of ADR, answering questions, and explaining options
• providing convening services and logistical support
• assisting the parties in preparing for collaborative discussions with the other parties
• addressing ADR design issues and assisting with the selection of a mediator or other ADR professional

Mediators are ADR professionals who subscribe to a Code of Ethics that specifies their independence, neutrality, and focus on interest-based mediation processes. Mediators are not decision-makers, legal advisers, or solution providers.

6 PRELIMINARY ADR MEETING

ADR efforts should be undertaken expeditiously, with the Preliminary ADR Meeting held as soon as possible.

The purpose of a Preliminary ADR Meeting is to bring together potentially affected parties to discuss the nature and extent of their dispute and to plan possible options for resolution. The parties, with the assistance of an experienced ADR professional, will clarify the issues under dispute and discuss matters of process and system design.

Many topics may need to be addressed and questions answered before the parties feel able to commit to participating fully in mediation or other options, such as

• Who should participate in discussion, and what level of authority will be required?
• What information will be required, and how should it be obtained? In addition, what assurances do the parties need to ensure that all relevant information will be disclosed?
• How will the mediator be selected?
• What will the role of advisers (e.g., lawyers, EUB staff, and experts) be?
• What are the options available to resolve the dispute?
• What are the key issues?
• What further process steps will be taken?
• What costs should be considered, and how will payment be handled?
• How will matters of timing and deadlines and of confidentiality and privacy be handled?

The Preliminary ADR Meeting is usually of limited duration and nominal cost. The costs of the service provider and/or mediator and associated direct costs should be covered by the industry applicant in public-to-industry disputes. In industry-to-industry disputes, the parties should share the service provider/mediator cost and each party will cover its own costs.

7 MEDIATION

In the Preliminary ADR Meeting, the parties may agree to proceed with mediation of their outstanding issues and create a mediation agreement setting out the process they will follow.

Mediation is a participant-controlled process that occurs outside the EUB's control. The mediator chosen by the parties conducts the process. Decisions reached by the parties in this mediation will cover many aspects, including but not limited to the following:

a) Confidentiality

It is important that the parties discuss and agree to matters of confidentiality and without-prejudice discussions. However, the parties must recognize that any agreement must conform to regulatory and statutory requirements and that therefore certain technical, scientific or other information or components of an agreement may have to be disclosed to the EUB or other regulatory authorities.

b) Technical, scientific, and other information

The parties are encouraged to use a collaborative approach to acquiring technical, scientific, and other pertinent information. Once areas of agreement and those under contention have been clearly identified, a method of information gathering will have to be agreed to as parties seek ways to resolve the outstanding issues to the satisfaction of all.

In mediation, there are direct costs for a mediation service provider and a mediator, as well as those for legal counsel and scientific or technical experts. The matter of who will be responsible for these costs should be decided at the Preliminary ADR Meeting.

It is equally important that parties agree upon how technical and scientific information used in the mediation will be used in the event that the mediation is not successful or is partially successful. Use of technical and scientific information developed in the mediation process may reduce the costs, as well as the time and effort, of all parties to prepare for a hearing, if one becomes necessary because of an incomplete resolution or an inability to resolve the issues.

c) Timing

Mediation is not to be used as a delaying tactic. Early in their discussion of options, the parties must discuss deadlines. They should also discuss timing with EUB staff.

Unless the EUB is otherwise advised or requested, if an application has been submitted staff will continue to process it so that when the applicant has met all requirements the EUB can consider the need and timing for a hearing.

d) The binding nature of a final agreement and how it will be enforced

The parties should strive for a complete agreement that includes

• reviews, if necessary, to determine that the agreed-upon conditions are being met
• what will happen if certain conditions are not fulfilled
• how to deal with changes in ownership
• how to deal with new or unexpected information or circumstances

The EUB may evaluate and enforce only those components of the agreement within its jurisdiction to ensure that the agreement is in the public interest, does not constitute an environmental or public safety risk, and is compliant with regulatory requirements.

In addition, where circumstances relating to the agreement have changed, parties may discuss with EUB staff the option of a Board review of the original application.

8 SUMMARY

The ADR effort may still be considered successful whether or not it results in a complete agreement. A partial agreement would be also thought of as successful if it improves understanding or reduces the number of outstanding issues.

It is important that parties anticipate the possibility of a partial resolution of the issues or a lack of agreement, as discussed in paragraph 7(a) above. Where a partial agreement is reached, the parties, in consultation with EUB staff, may determine the most effective way to proceed.

In the event that a hearing is ultimately required on all or some of the issues, the use of technical, scientific, and other information obtained collaboratively through mediation (item 7[b] above) should reduce hearing costs and time.

Questions and feedback regarding the EUB ADR program may be directed to the ADR help line (403-297-3700 or eub.adr@eub.gov.ab.ca), the appropriate EUB application staff through their help line (403-297-4369 or Guide56.help@eub.gov.ab.ca>), or the closest field centre. The Alberta Government toll-free number, 310-0000, may be used to connect to these telephone numbers.

GLOSSARY ¹

These definitions are provided for guidance purposes only.

Appropriate Dispute Resolution (ADR) The EUB has chosen to use the word "appropriate" to reflect the wide number of dispute resolution options now available and to reinforce the important facilitation role the EUB plays in dispute resolution. It reflects the nature of a process that provides an opportunity to develop local solutions to local issues, as appropriate, and to choose the right option for the right situation. The options include negotiations, facilitation, mediation, arbitration, and an EUB hearing. Parties do not lose any right they may have to a hearing by entering into ADR discussions.

Arbitration a dispute resolution process in which a dispute is submitted through formal presentation of evidence and arguments to a neutral adjudicator, who is empowered by the disputants to either recommend nonbinding terms of settlement or impose a binding decision or award. In the former process, called nonbinding arbitration, the parties must agree before the arbitrator's decision becomes binding. The latter process, called binding arbitration, is rare in the EUB environment but could help resolve issues beyond EUB jurisdiction but where the parties just need an answer (e.g., on compensation).

Facilitation an option whereby a facilitator coordinates an informal problem-solving process. The role of a facilitator is to encourage participation in this process by relevant parties, assist in their dialogue, and help the parties reach their own solutions. EUB staff may assume a facilitation role at times.

Interests and Positions interests consist of a collection of values, beliefs, fears, concerns, principles, hopes, and expectations that a person or group seeks to have met by an agreement. Once the interests of all parties are explored and understood, common interests are often discovered, providing the foundation for parties to build a solution that can satisfy interests they all share.

A party's position, on the other hand, is generally presented as what it wants, does not want, will do, or will not do. A party generally perceives this position as the solution that satisfies its own interests. Typically the parties have arrived at different positions because they have placed emphasis on differing interests.

To create interest-based solutions, it is necessary to explore the interests of each party in order to understand why they form their positions and to uncover and identify interests that they share.

Mediation a collaborative dispute resolution process in which the negotiations of two or more parties are assisted by a neutral and impartial mediator. It is the mediator's job to help the parties reach an acceptable settlement. Note that the EUB will not take on a mediation role, although staff may be present during the Preliminary ADR Meeting and the mediation.

Mediator assists the parties in their negotiations by ensuring complete, balanced, and respectful communication and by moving the parties through the mediation process toward reaching a fully informed, voluntary agreement. Mediators are not decision-makers, legal advisers, or solution providers. Staff of the EUB do not serve as mediators.

Negotiation any form of direct (person-to-person) or indirect (through agents) communication in which the parties discuss steps they could take to resolve a dispute between them.

Privacy and Confidentiality Privacy relates to the information that someone discloses about themselves or something. Confidentiality is the component of privacy that deals with what people do with the information they know about others. As related to ADR, discussions are private and confidential based on the premise that for mediation to work effectively, parties should engage in collaborative discussions and disclose all relevant information so that full understanding of each other's objectives and interests can be achieved. This process should lead to solutions that will satisfy many of their important interests.

However, it is also recognized that information required by the regulatory process cannot be held confidential, such as that dealing with public safety, environmental protection, and resource conservation. Matters that the parties decide must remain confidential might include financial and contractual details, the conditions or circumstances under which a party would remove an objection, the mitigating measures an applicant would offer in order to have an objection removed, or individual health records. (See Section 2.9 of The Report for Implementation 1 for further explanation of confidentiality and how parties may deal with it during the Preliminary ADR Meeting.)

Preliminary ADR Meeting Parties are likely to need an opportunity to talk about how to design their particular dispute resolution process. Many questions often need to be considered and answered before parties feel able to commit to mediation or other options. With the help of a mediator, the parties meet to explore and reach agreement on issues such as timing and deadlines, confidentiality and privacy, costs, the role of advisers, and further steps. This Preliminary ADR Meeting is usually of limited duration and nominal cost.

¹ See also Appendix 5 in Report for Implementation of an Appropriate Dispute Resolution System for Alberta's Upstream Petroleum Applications, available on the EUB Web site at http://www.ercb.ca/.