The Economist magazine once described "regulatory capture" as a simple case of a gamekeeper behaving like a poacher.
Whenever industry captures the power of the state to foster private goals (and it's an occupation older than prostitution), regulators get captured and corruption surely follows.
And that's now a big problem for North America's energy regulators, which, arguably, are the continent's most powerful public servants. Yet their integrity appears to have peaked along with conventional oil and gas in the 1970s, and most are now abusing their powers. In an era of volatile energy prices, it appears that regulators would rather please industry than police it.
Take the former U.S. Mineral Management Services (MMS), or the guys in charge of regulating complex offshore oil drilling. Dogged by financial corruption, safety lapses, "cozy relationships" with industry, and the BP Horizon disaster, the U.S. government broke up the totally conflicted body into three distinct agencies last year. One now oversees development; another enforces environmental laws and a third collects the money.
MMS wasn't the only energy watchdog caught sleeping on a rig or betraying the public trust. A damning 2011 legislative review of one of the continent's oldest oil and gas regulators, the Texas Railroad Commission (TRC), concluded that it barely enforced the law. In 2009, the TRC recorded 18,000 violations but only issued 379 penalties. After reading the report, one U.S. congressman called the TRC "probably the most corrupt agency in the state of Texas."
'It's a facilitator, not a regulator'
But here comes the bad news: Dave Core, director of federally regulated projects for the Regina-based Canadian Association of Energy and Pipeline Landowner Associations, (CAEPLA) says the situation isn't much better at the National Energy Board (NEB) in Canada.
For the last 10 years, Core, an Ontario-farm boy and founder of CAEPLA, has represented thousands of rural Canadians at scores of regulatory functions. The former grain grower also corresponds with the board regularly. As such, he's had a front row seat on the doings of the NEB, which claims to be strong and independent. "But it's not a regulator," Core says. "It's a facilitator."
Nor is it all that independent. The NEB, which must behave in an unbiased fashion, even dropped the word regulator from its lingo and replaced it with "partner." In fact, the board repeatedly described itself as an industry "partner" until CAEPLA politely asked how one partner could regulate another partner.