Report of the Auditor General of Québec to the National Assembly for Report of the Sustainable Development Commissioner.

Transcription

1 Report of the Auditor General of Québec to the National Assembly for Report of the Sustainable Development Commissioner Highlights

2 Cover photo Parliament Building, Daniel Lessard, National Assembly Collection

3 Québec, March 2011 This brochure is a brief version of the Report of the Sustainable Development Commissioner included in the Report of the Auditor General of Québec to the National Assembly for It brings together the main observations and recommendations arising from the work that our audit teams have carried out since the tabling of the last volume. The purpose of this shorter version is to give readers access to information that is both concise and effective. I hope that the Members of the National Assembly and citizens who are interested in the subjects that we address will appreciate this quick reference designed to meet specific needs. Of course, this brochure in no way replaces the full report, which I invite readers to consult. The full report provides a detailed presentation of the results of the value-for-money audit engagements, in addition to offering the point of view of the entities. Renaud Lachance, FCA Auditor General

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5 Table of Contents Page Chapter 1 Observations of Mr. Jean Cinq-Mars, Sustainable Development Commissioner Introduction... 1 Modern Laws... 1 Little Consideration Given to the Principles of Sustainable Development... 2 Findings Concerning Value-for-Money... 6 Major Projects Requiring the Integration of Sustainable Development... 9 Beyond Words Chapter 2 Application of the Environment Quality Act in the industrial sector Recommendations Chapter 3 Government Management of Shale Gas Exploration and Production Recommendations Chapter 4 Regional Development Actions Recommendations Chapter 5 Application of the Sustainable Development Act: Suggested Improvements The numbers of the chapters as well as those of the paragraphs used in this brochure correspond to those of the full report. Report of the Sustainable Development Commissioner Highlights

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7 Observations of Mr. Jean Cinq-Mars, Sustainable Development Commissioner 1 Introduction 1.1 Under the Auditor General Act, the Act that established the position of sustainable development commissioner, I have the responsibility of submitting to the National Assembly a report on my findings and my recommendations concerning notably: the carrying out of the Sustainable Development Act; the procedures or other methods used by departments and agencies to guide the application of this Act; any matter arising from my sustainable development auditing work. 1.2 Chapter 1 of this volume deals with the general aspects of my observations. The ensuing chapters include my specific comments following the audits carried out during the year. Modern Laws 1.3 In 2000, the Government of Québec passed the Public Administration Act. This law introduced the following principles: the quality of services provided to the public, results-based management, transparency and accountability. 1.4 The Sustainable Development Act, another very important law, was enacted in With this enactment, the government established a new management framework to ensure that powers and responsibilities are exercised in the pursuit of sustainable development. 1.5 By means of these two statutes, Québec adopted a management framework that is in line with modern countries and large-scale organizations having embraced efficiency and sustainable development. 1.6 Looking back, it appears that the Public Administration Act provided a framework to guide the implementation of practices or programs promoting the improvement of the Administration s performance and supporting the major changes required by the Sustainable Development Act. This latter Act has two essential objectives: preventing environmental degradation arising from the pressures of unsustainable development (climate change, loss of biodiversity, etc.); maintaining a balance between economic development and social development. Report of the Sustainable Development Commissioner Highlights 1

8 1.7 The achievement of these objectives requires major social changes as well as a modification of production and consumption systems. Among the factors contributing to the success of such an undertaking, mention may be made of the definition of clear policies, decision-making that is consistent with the principles of the Act and an efficient implementation. Little Consideration Given to the Principles of Sustainable Development 1.8 Section 6 of the Sustainable Development Act puts forward 16 principles to guide decision-making, planning and the implementation of programs within the Government of Québec. 1.9 During the past year, my team carried out audits on three main questions: the implementation of the Environment Quality Act in the industrial sector; the government s management of the exploration and exploitation of shale gas; interventions in the regional development field At the same time as the audit that we carried out on the government s management of the exploration and exploitation of shale gas, the Bureau d audiences publiques sur l environnement (BAPE) held consultations on this matter during the fall and the winter. Its report, which was tabled on March 8th, submits several opinions and proposes orientations regarding the development of this activity sector to the government. While the subject matter of our work was the same, our audit focused on the compliance with and the taking into accounting of the Sustainable Development Act by the Ministère du Développement durable, de l Environnement et des Parcs (MDDEP) and the Ministère des Ressources naturelles et de la Faune (MRNF) within the context of the development of the shale gas sector. We also checked to see if the MRNF had taken into consideration the recommendations that we had made in the audit dealing with the mining sector carried out in In other respects, the budget of last March 17th introduced a new system of royalties for the exploitation of shale gas. I look favorably on this initiative to review the system in effect since it ensues from the Mining Act, which is ill-adapted to the gas and petroleum sector. However, due to the non-renewable nature of this resource, it will be necessary to make sure that the benefits obtained compensate for the associated short- and long-term economic, social and environmental costs. It is also important to consider all of the tax measures, such as tax credits, subsidies and other incentive measures for the industry before concluding that the exploitation of shale gas is profitable. Furthermore, one must bear in mind the fact that the gas market is highly speculative and that every scenario concerning economic spin-offs remains very uncertain. 2 Report of the Auditor General of Québec to the National Assembly for

9 As was the case last year during the audits dealing with demographic changes, the maintenance of biodiversity and the application of the Sustainable Development Act, I observed that the principles of sustainable development defined in the Act are still all too often ignored by the Administration or applied only very partially. To illustrate these deficiencies, I chose a few principles of the Sustainable Development Act. Precaution Precaution: when there are threats of serious or irreversible damage, lack of full scientific certainty must not be used as a reason for postponing the adoption of effective measures to prevent environmental degradation. This principle takes on its full meaning within the context of the exploration and exploitation of shale gas. This type of operation entails several unknowns, notably the exact composition of the chemical products injected in the sub-surface to extract the gas, the water and fracturing sludge treatment capacity of municipal facilities as well as the impact of the possible discharge of water and sludge in the environment. It is not without reason that the U.S. Environmental Protection Agency undertook a vast study, the preliminary results of which are expected in 2012, to find answers to these questions. As for the final results, they will be known in In the environmental field, it is essential to apply the precautionary principle when not all of the answers are available. The precautionary principle also applies to the costs that society could be called upon to bear in the event of an accident in a well during gas exploration operations. Consequently, special measures must be taken since this is a heavy industrial activity taking place in an inhabited agricultural area. I found that in the case of shale gas, current government regulations are not very stringent when it comes to civil liability insurance. Indeed, the amount required for a gas exploration well is limited to one million dollars, namely the basic amount for a private residence. I consider this requirement to be minimalist, particularly when one considers that drilling may be done up to a distance of 100 metres from a dwelling. As a result, the risks are higher for the Québec society of potentially having to assume the expenses resulting from an accident or the degradation of the environment than for the private enterprise that will have caused the accident or the degradation. It is also important to avoid finding ourselves in a situation similar to the one that we raised in 2009 in an audit dealing with Québec s mining sector. At that time, we had pointed out the high costs that society would have to pay to decontaminate abandoned sites. As March 31, 2010, the costs of their restoration for Québec were estimated at $648 million. These costs resulting from activities of private enterprises must now be assumed by Québec taxpayers because environmental controls were not carried out in a timely manner. They represent but a portion of the environmental liabilities associated with contaminated sites recorded in the Québec government s financial statements, which stood at $1.8 billion as at March 31, Report of the Sustainable Development Commissioner Highlights 3

10 Respect for Ecosystem Support Capacity 1.18 Respect for ecosystem support capacity: human activities must be respectful of the support capacity of ecosystems and ensure the perenniality of ecosystems We have already observed the limits of ecosystems for absorbing contaminants. One simply needs to think of a lake polluted by a proliferation of blue algae or a beach that has become unfit for swimming due to the presence of coliform bacteria When these limits are exceeded, ecosystems can no longer absorb and degrade the contaminants or provide us with the same benefits as beforehand. The taking into account of the ecosystem support capacity is therefore essential for the protection of the environment During the audit dealing with the application of the Environment Quality Act in the industrial sector, I found that insufficient consideration had been given to the repercussions of the additional pressures exerted on ecosystems by new industrial facilities or the modification of existing facilities. When a certificate of authorization is issued, it is essential, in my opinion, that the ecosystem support capacity be evaluated since this can have a major impact on the living environment of citizens Let us take as an example the case of a watercourse that serves as a source of drinking water for a municipality. It is obvious that its capacity to support pollutant loads should normally influence the number of plants on its banks. At the present time, if each of the new plants meets the regulatory requirements, they can continue to be built along this watercourse without regard for the support capacity. If this watercourse were to become polluted, citizens would have to resort to a more sophisticated and more expensive water treatment plan to obtain adequate quality water By and large, the issue of certificates of authorization is mainly based on compliance with contaminant emission standards for each of the facilities. Since these standards are identical for all of Québec, I find this approach inappropriate. Given the multiple pressures exerted on the environment, one must give greater thought to the cumulative repercussions on the environment when issuing a certificate of authorization and pass regulations that take the environment s support capacity more into account Economic Efficiency Economic efficiency: the economy of Québec and its regions must be effective, geared toward innovation and economic prosperity that is conducive to social progress and respectful of the environment. The exploitation of the natural resources, of which the State is the trustee, must be economically advantageous, particularly when these resources are non-renewable. The analysis of the economic viability of a project must include all of the benefits and all of the costs. An economic evaluation must not be limited to short-term revenues, but must also deal with the long-term repercussions, including all of the environmental, social or economic externalities. 4 Report of the Auditor General of Québec to the National Assembly for

11 As we had noted in the case of the mining sector, I am forced to conclude that the principle of economic efficiency is not yet integrated in Québec s reality when it comes to the exploration and exploitation of shale gas. At the present time, the fees for the granting of exploration permits represent an annual income of approximately $200,000 for Québec. In comparison, the auctioning of permits in British Columbia generated $2.41 billion in total revenue in I also noted that the statutory work required for the development of properties have yielded very little revenue because the regulations were not rigorously applied. One may wonder if the royalties on the volumes of gas extracted in the next few years will succeed in compensating for the very limited revenue derived from the issue of permits and exploration work. In 2009, we had made similar findings concerning the mining sector. Moreover, we had recommended to the MRNF that it re-evaluate mining fees with the goal of making sure that they are sufficient to compensate for the exhaustion of the extracted resources. In an economic evaluation of the development of the gas sector, it would also be important to quantify all of the consequences of greenhouse gas emissions originating from this sector. This evaluation would make it possible to calculate the economic impact of these emissions given the commitments made under the Kyoto Protocol and those related to the Western Climate Initiative. Indeed, if we had to purchase emission rights to compensate for the quantity of gas emitted by the shale gas industry, the royalties would have to be increased proportionately. In other respects, with a view to ensuring medium- and long-term economic efficiency, it is essential to replace the exploitation of a nonrenewable natural capital with another similar capital. This new capital may take different forms: infrastructures or the development of knowledge in a high-tech sector, for example. It may also involve the establishment of an investment fund that generates revenue for the State, as is the case in Alberta or in Norway in the petroleum development sector. Access to Knowledge 1.31 Access to knowledge: measures favourable to education, access to information and research must be encouraged in order to stimulate innovation, raise awareness and ensure effective participation of the public in the implementation of sustainable development The Environment Quality Act stipulates that citizens have the right to obtain the available information on the presence of a contaminant in the environment. This principle of the Sustainable Development Act also supports this requirement. Unlike in the case of what may be observed in Ontario or the United States, I found that little information is available on the web-site of the MDDEP on the subject of discharged contaminants, inspections carried out by the Department and cases of non-compliance. Report of the Sustainable Development Commissioner Highlights 5

12 1.33 In addition, whereas the Sustainable Development Act provides a framework to guide the orientations of departments, it is inconceivable to see that the consultation documents concerning the development of shale gas, intended for the public and prepared by the MDDEP and the MRNF within the context of the work of the BAPE, do not clearly relate the issues in question with the principles found in the Sustainable Development Act. This seems surprising on the part of the MDDEP which is responsible for promoting the implementation of sustainable development within the Administration Access to information allows citizens to participate in the protection of the environment by reporting unacceptable situations; the public is thus able to better support the authorities concerned in their missions Subsidiarity Subsidiarity: powers and responsibilities must be delegated to the appropriate level of authority. Decision-making centres should be adequately distributed and as close as possible to the citizens and communities concerned. My work dealing with government interventions in the regional development field allowed me to evaluate the actual taking into account of the subsidiarity principle. Indeed, regional conferences of elected officers bring together several key players at the supralocal or regional level. I found that their practices (planning tools, granting of financial assistance) do not allow them to play a decisive role in the development of their region. Consequently, it is not always obvious that the decisions made with respect to funded projects fit in with the priorities of the regions. Moreover, the question of the development of shale gas clearly shows that the subsidiarity principle is not sufficiently taken into account. The numerous popular demonstrations held against this development during the fall and the winter testify to this fact. Furthermore, I emphasize, in the chapter in question, the very limited consultation of local stakehold - ers very early in the process and the absence of harmonization with regional planning. The construction of infrastructures and the exploitation of natural resources can have a major long-term impact on a community or a region. The consultation of the populations is essential to ensure the relevance of the transformations envisaged and their social acceptability. In my opinion, this support, often referred to as a social acceptability permit, is just as essential as the various government permits required for a new project. Findings Concerning Value-for-Money 1.39 As I mentioned previously, Québec has passed laws that have been positively received by other administrations. However, my audit work led to me to conclude that the application of these laws has occasionally been less exemplary. 6 Report of the Auditor General of Québec to the National Assembly for

13 Weak Regulatory Enforcement Within the context of the audit dealing with the application of the Environment Quality Act, I found that the MDDEP had made improvements concerning the management of inspections and had achieved some progress with respect to the establishment of a risk-based planning. However, I was surprised to see that numerous notices of contravention are sent repeatedly to the same firms. Yet the firms in question continue their operations without complying with the standards. In addition, there is not always an adequate monitoring of the pollutant emission conditions imposed on firms by a certificate of authorization. This situation may lead to unfair treatment between firms concerning the application of the Act. Within the context of the mandate concerning shale gas, I also noted failures in the enforcement of regulations by the MRNF and the MDDEP. These failures notably concerned the environment, safety and compliance with the requirements related to statutory works. In fact, I wonder about the possibility for the same department to reconcile the application of regulations and the development of sectors such as the mining or shale gas sector. Should the role of regulator be entrusted to the department in charge of promoting these sectors? Recurrent Deficiencies 1.44 Along the same lines, I remain concerned about the fact that some deficiencies highlighted in our past audits still have not been corrected. For example, in the audit dealing with the shale gas sector, we noted problems related to the cost-benefit analysis, inspections focusing on compliance with regulations or the protection of the environment. These problems are very similar to those raised in 2009 with respect to government interventions in the mining sector, a sector that is also under the responsibility of the MRNF and under the aegis of the same Act In other respects, in the audit dealing with the Environment Quality Act, I found that the MDDEP stills bases itself mainly on the information obtained in the media, on complaints received from citizens or on information arising from inspection activities to learn that a new firm has set up operations in a region. One would normally expect that the MDDEP would use all means to be informed of a new construction, for example, the examination of the permits issued by municipalities or other departments. Yet this deficiency was underlined 20 years ago in a report of the Auditor General dealing with this same subject Tardy Legislation Adaptation of a Changing Society Society, technologies, the nature of the pressures exerted on the environment and our scientific knowledge are all evolving very rapidly. Adapting to these changes is a major challenge for Québec s Administration. Report of the Sustainable Development Commissioner Highlights 7

14 1.47 Our laws and our regulations serve as the foundation for the operation of the machinery of government and our institutions. We must make sure that these laws and these regulations are adapted to the challenges of the 21st century. Furthermore, the Sustainable Development Act encourages the on-going revisions of laws, regulations, policies and programs in order to respect the government s sustainable development strategy and the underlying principles It is legitimate to wonder if laws such as the Mining Act, enacted at the end of the 19th century, are still adapted to reality. The objections expressed by numerous people regarding the precedence of mineral rights over private property and the opposition of municipalities to the development of shale gas underscore the pressing need to modernize this law. Incidentally, Ontario modernized its legislation in 2009, following similar objections by its population Thought should also be given to the environmental regulations currently in effect. I noted a few interesting examples in this respect: In 2006, draft legislation aiming to overhaul the Regulation respecting the quality of the atmosphere of 1979 was developed. As this draft legislation has yet to be passed, the standards in effect date back more than 30 years. The Industrial Waste Reduction Program, adopted in 1988, still only concerns two industrial sectors, whereas in Ontario a similar program applies to 16 sectors. The Regulation respecting petroleum, natural gas and underground reservoirs was enacted in 2009, yet had been drafted in Weak Measurement of Results and Accountability 1.50 The work carried out this year on the application of the Sustainable Development Act led me to once again ascertain the difficulty that government organizations have had in reporting on results. Yet meaningful reporting makes it possible to evaluate the degree of achievement of the results sought. This is a tool advocated by both the Public Administration Act and the Sustainable Development Act. I noted that the indicators are not always monitored. All too often, the reports submitted by the Department present a list of activities rather than results or tangible effects for society, the environment or the economy. What is more, I found that the targets initially set for different actions had been lowered Several studies have shown that the measurement of results is an essential factor to promote the success of a project. The absence of an analysis prevents authorities from determining in a timely manner the corrective actions that should be taken with respect to action plans that do not work or that do not work well. It is very difficult to judge the relevance and the performance of policies, programs and actions if their effects are not measured. Within the context of an on-going improvement process, it is imperative to choose the right indicators to evaluate the achievement of results, to regularly monitor and to publish the progress made. 8 Report of the Auditor General of Québec to the National Assembly for

15 Major Projects Requiring the Integration of Sustainable Development During the past year, a consultation committee was set up by the government to draw up a development plan for Northern Québec, known as the Plan Nord. While its content has yet to be made public, it is clear that energy and mineral resources will be among the main lines of development proposed. The development of this vast territory and of the resources that it contains is a major stake and a major challenge for Québec. Consultations were begun last year to modernize the Mining Act. It is very important that this new law incorporate the principles of the Sustainable Development Act. That way, Northern Québec and its resources can be developed by respecting the limits of its fragile ecosystems and the aspirations of local communities, while generating substantial economic spin-offs for Québec. A bill on hydrocarbons is also expected this year. It is essential that this bill incorporate the principles of the Sustainable Development Act to provide a framework for the development of this branch. This will make it possible to avoid the numerous social, economic and environmental problems that I raised in the audit dealing with the development of shale gas. By taking these principles into consideration, the government would also show that the Sustainable Development Act is being given tangible form in government actions. In this respect, it would be quite normal that clear requirements concern ing reporting be included in the two bills. Inspiration could notably be drawn from the guides developed by the Global Reporting Initiative. These guides are increasingly considered international standards for various industrial sectors. Moreover, last year, the 34 Ministers of the Council of the Organisation for Economic Co-operation and Development (OECD) directed the secretariat of this organization to develop the OECD green growth strategy. The objective is to identify the conditions under which countries can grow and develop at the economic level, while avoiding repercussions such as the degradation of the environment, climate change and the squandering of natural resources. In May 2011, the comprehensive report concerning the green growth strategy and a report on the indicators related to this growth will be presented at the meeting of the OECD ministerial council. These two documents will suggest a framework that countries will be able to use to guide their development, to do the necessary monitoring and to permit good reporting. The recommendations of these studies should be taken into account to implement the Plan Nord and to direct Québec s development. In addition, it would be highly recommended to take into account the latest advances concerning integrated land-use planning found in the literature and in the practices in place in various countries and in certain regions of Canada. Report of the Sustainable Development Commissioner Highlights 9

16 1.58 In Chapter 1 of last year s report, I cited the example of Sweden, a country where ambitious measures were adopted and put in place in the 1990s to tackle economic problems and to address new environmental stakes. In addition, the adoption of measures aiming for the implementation of sustainable development some ten years ago made it possible to complete the government reform. This country has had a very enviable economic performance since the mid-1990s while reducing the environmental impact of its development, notably its greenhouse gas emissions. Here is a convincing example that shows that environmental requirements promoting a good quality of life do not stand in the way of sustained economic development. Beyond Words 1.59 One of the challenges of public administrations is to remain on the forefront so that the legal foundations of our institutions and the services offered to the public rapidly adapt to current needs and can evolve to meet future ones. This is a major challenge given the various interests and differing opinions concerning the new stakes at play or development projects The principles set out in the Sustainable Development Act can contribute to the taking up of this challenge since they aim to support economic and social development while respecting the environment. They are very valuable tools to guide the development of new large-scale projects and the passage of new laws or to facilitate their adaptation Québec has succeeded in demonstrating leadership to the international community by passing the Sustainable Development Act, backed by an implementation strategy and various legal and administrative measures It is now time to lead by example and go beyond words, namely to make sure that the principles of the Sustainable Development Act concretely apply to all of our laws, regulations, policies and programs. It is only then that Québec society will embark upon a tangible approach toward sustainable development. 10 Report of the Auditor General of Québec to the National Assembly for

17 Application of the Environment Quality Act in the industrial sector 2 Audited Entity: Ministère du Développement durable, de l Environnement et des Parcs Audit Objectives The objective of this audit was twofold: Ensure that the Ministère du Développement durable, de l Environnement et des Parcs (MDDEP) rigorously enforces the regulatory framework surrounding the issue of certificates of authorization in the industrial sector, in compliance with the Environment Quality Act. Ensure that the MDDEP controls the enforcement of the Environment Quality Act and its regulations as they relate to industrial operations and takes necessary actions to ensure compliance, with regard for efficiency and effectiveness. This audit was conducted in three of the Department s regional offices serving Québec s most populated and most industrialized regions: Estrie/Montérégie; Lanaudière/Laurentides/Montréal/Laval; Capitale-Nationale/Chaudière-Appalaches. Highlights Lack of information in support of certificate of authorization (CA) analyses. In 23 of the 70 CA files audited, the basis for the evaluation was not sufficiently detailed. However, according to the information provided in the files, the remaining 47 CAs were issued in accordance with applicable standards regarding to the level of contamination. Lack of consideration of the support capacity of receiving environments. The MDDEP issues a CA whenever the project complies with regulatory standards, regardless of the sensitivity of the receiving environment. Since there is no mechanism in place to assess the impact of cumulative environmental pressures, human health, the quality of the environment and the sustainability of ecosystems could be at risk even though each individual project complies with emission control and effluent disposal standards. Inadequate monitoring of compliance with CA conditions. CAs are often issued with conditions aimed at ensuring that the project remains environmentally acceptable once implemented. Compliance with these conditions is monitored through inspections or document submissions. However, it is not always the case. No inspection was made in 19 files out of 45, and no information was forwarded to the Department in 10 files out of 27. Report of the Sustainable Development Commissioner Highlights 11

18 Risks inadequately considered during inspection planning. Inspections should be scheduled in accordance with a better-structured risk management process aimed at prioritizing major environmental concerns. At this time, inspections are scheduled according to a complaint prioritization system that does not take into account the environmental hazards involved, an arbitrary percentage of recently issued CAs and an annual selection of inspection programs targeting a specific sector. Difficult management of offenders. Offenders receive one violation notice after the other, but still they remain non-compliant. In fact, 41% of the 70 files audited are non-compliant, and one has been so for 12 years. In cases where compliance was achieved, the process often took a long time. In 44% of such cases, it took over six months for offenders to become compliant. In one specific instance, it took more than 17 years for the company to comply. In cases where the MDDEP demanded corrective plans, 43% of offenders did not provide them. Need to improve public access to information. The MDDEP must make it easier for people to access information allowing them to assess the environmental hazards to which they are exposed. Recommendations With regard to the issue of certificates of authorization, we recommended that the Department: Adequately document the analysis of CA applications with regard to standards compliance assessments; Implement mechanisms for better taking into account the cumulative impacts of the proposed activities and the support capacity of the receiving environment; Ensure compliance with the conditions for issue of certificates of authorization, for instance by clearly informing inspection authorities of the priority, nature and periodicity of the necessary follow-up actions; Implement more effective mechanisms for identifying new companies and changes in existing companies manufacturing processes (2.42). With regard to compliance monitoring, we recommended that the Department: Schedule all inspection activities on the basis of the overall risk, which includes risks specific to the industrial sector, environmental hazards and human health hazards; Measure the effectiveness of inspections, including compliance rates; Implement effective mechanisms for forcing offenders to become compliant without delay; Prioritize complaints according to the level of risk to human health and the environment posed by the activities in question (2.64). 12 Report of the Auditor General of Québec to the National Assembly for

19 With regard to information management, we recommended that the Department: Re-evaluate and modify the current information sharing mechanisms in order to provide the public with quicker and easier access to the information necessary for assessing the environmental hazards to which they are exposed, within the intent of the Sustainable Development Act; Ensure that the SAGO management information system provides accurate, reliable and comprehensive data (2.75). Department Comments The Department had the opportunity to comment on these recommendations; its comments can be found in paragraph We want to point out that it accepted all of the recommendations. The full French report is available at Report of the Sustainable Development Commissioner Highlights 13

20 Government Management of Shale Gas Exploration and Production 3 Audited Entities: Ministère des Ressources naturelles et de la Faune Ministère du Développement durable, de l Environnement et des Parcs Audit Objectives This audit focused on the Government s management of shale gas exploration and production. The objectives were as follows: Assess whether the Ministère des Ressources naturelles et de la Faune (MRNF) and the Ministère du Développement durable, de l Environnement et des Parcs (MDDEP) take the necessary actions to ensure that shale gas resources are developed in compliance with the Sustainable Development Act and related principles, and in a manner consistent with the Government s orientations and regional development priorities; Evaluate to what extent the current MRNF and MDDEP guidance mechanisms contribute to shale gas operations being respectful of the environment and taking public interest into account. Highlights MRNF and MDDEP actions show very little consideration for the principles of the Sustainable Development Act and for the recommendations included in the 2009 report on the mining sector. Their actions do not ensure sustainable development of shale gas resources, as they do not allow for achieving a fair balance between the interests of Québec society, local communities and industry. No clear alignment with priorities and territorial planning. When the energy strategy and the regional plans were established, shale gas production in the St. Lawrence Lowlands was not a priority. Further thought was required in light of the growing interest for the development of this energy source due to its long-term impacts. Late implementation of governmental mechanisms for public partici pation. Exploration licences were issued and drilling started without prior consultations with the public and municipal representatives to take into account their expectations with regard to shale gas development. 14 Report of the Auditor General of Québec to the National Assembly for

21 No clear evidence of benefits for Québec society. Analyses on economic benefits and royalties do not provide conclusive insights into how Québec intends to ensure that the benefits for Québec society outweigh the costs. Management of the economic return on shale gas exploration is crucial since the exploration stage poses environmental hazards, unlike mineral exploration. Regulatory measures that minimize company expenses. Exploration licence holders can allocate expenses made on one licence onto others. Expenses made on a hectare tract have been sufficient to fulfil minimum operation requirements for 16 licences totalling hectares. Interest transfers can also be made in order to redirect excess expenses to other licences. Barely any MRNF controls of operations. The Department does not check the eligibility of operation expenses submitted by companies. It does not verify whether the reported expenses are relevant to the exploration licences, and it does not require that companies submit annual reports on the amounts spent under their licences. In addition, the Department tolerates some situations that contravene applicable regulations. Examples include grouping of licences beyond the 40 kilometre limit and retroactive allocation of expenses to previous years in which the minimum operations had not been carried out. Lack of departmental controls. Some of the prerequisites for the issue of a licence, including a completion program certified by an engineer regarding work safety, were not included in the MRNF files. At the end of our audit, the MRNF and the MDDEP had conducted very few inspections at critical stages of the operations (i.e. drilling and completion) to protect the environment as well as human health and safety. Recommendations We recommended that the Ministère des Ressources naturelles et de la Faune: Clearly demonstrate how shale gas development fits in with government orientations and, if required, submit adaptations to align such orientations with the new reality (3.38); Reinforce coordination mechanisms required to ensure consistency between the development of new activities, such as shale gas drilling, and supralocal and regional planning (3.38); Implement mechanisms allowing for meaningful participation and involve ment of the public and other stakeholders (3.47); Analyze the economic, social and environmental benefits and costs of shale gas development for society, according to various scenarios based on realistic hypotheses, in order to support decision makers in their planning (3.72); Rigorously enforce the regulatory framework that applies to minimum operations carried out under exploration licences (3.72); Integrate Sustainable Development Act principles into the hydrocarbon bill in order to adequately regulate the industry with regard to the social, economic and environmental aspects (3.83); Report of the Sustainable Development Commissioner Highlights 15

22 Reassess the adequacy of regulatory requirements, including those related to guarantee and insurance amounts (3.83); Improve the licensing process in order to ensure compliance with the legal framework (3.93); Implement the required tools for assessing whether the projected work will be conducted according to recognized practices and in such a way as to ensure the safety of people, property and the environment, as well as resource sustainability (3.93); Define inspection-related activities, including the scope of inspections, documents and follow-ups (3.105); Clearly specify requirements for shale gas wells that are not currently being drilled or completed and that have not begun the temporary or permanent closing process (3.112). We recommended that the Ministère du Développement durable, de l Environnement et des Parcs obtain information regarding the characterization and disposal of drilling and fracturing water and muds in order to protect human health and the environment (3.106). We recommended that the Ministère des Ressources naturelles et de la Faune and the Ministère du Développement durable, de l Environnement et des Parcs: Continue with the interdepartmental work aimed at implementing an effective government action framework (3.53); Work together towards determining the relevant information and the necessary tools for carrying out their mandate (3.53); Conduct inspections in a timely manner in order to minimize environmental, health and safety hazards (3.104). Department Comments Both the MRNF and the MDDEP had the opportunity to comment on these recommendations; their comments can be found in paragraphs and We want to point out that they accepted all of the recommendations. The full French report is available at 16 Report of the Auditor General of Québec to the National Assembly for

23 Regional Development Actions 4 Audited Entities: Ministère des Affaires municipales, des Régions et de l Occupation du territoire Conférences régionales des élus Audit Objectives Considering the significant contribution of Québec s regions to the sustainable development of the province, we made it a priority to conduct an audit with the following objectives: Evaluate whether the Ministère des Affaires municipales, des Régions et de l Occupation du territoire (MAMROT) directs and coordinates the Government s regional development actions in keeping with communities needs and priorities and ensures effective implementation of these actions; Determine whether the Conférences régionales des élus (CRÉs) efficiently and effectively manage the regional development funds awarded to them with a view to increasing the sustainability and resilience of communities. Highlights The MAMROT s mechanisms for promoting stakeholder consultation and coordinated action will require major adjustments in order for the Government s actions to be aligned with communities needs and priorities and to have maximum impact. As for the CRÉs, tighter management of the Fonds de développement régional (FDR) will be essential in order for them to have more influence on regional development. Vagueness of government orientations and expectations. The establishment of CRÉs has not been accompanied with clear orientations that reflect government s priorities related to development in order to ensure consistent actions across the regions. Lack of knowledge on regional environments. The Department has access to large amounts of data, but the available information is not analyzed and organized in such a way as to be adequately used in the decision-making process. The information is also incomplete in some respects, including with regard to the effectiveness of organizations across the territory. Need to review the coordination mechanisms. The MAMROT s current coordination mechanisms do not allow the Department to adequately perform its role of coordinating government actions and ensuring their consistency. Report of the Sustainable Development Commissioner Highlights 17

24 Vague and overly broad five-year development plans. The five-year plans of the audited CRÉs are so broad that they cannot serve as regional planning tools. It is hard to look to these plans for specific guidance on the choice of projects. In addition, there is no formal process in place specifying how exactly the departments and other government organizations should contribute to the implementation of the five-year plans through their regional actions. Adaptation of programs with regional realities: the exception rather than the rule. Very few specific agreements resulted in program adaptations. The average time required to finalize an agreement is one year, which tries participant s motivation. Need to strengthen the funding award process. Some of the problems identified in FDR-funded projects include the weakness of criterias for awarding funds, the insufficiency of documentation in support of the projects and the lack of evaluation of projects effectiveness. A similar situation was observed for two other financial assistance programs managed by the MAMROT also aimed at supporting regional development. Lack of telling accountability reports. The annual reports of the audited CRÉs describe the year s achievements but do not measure the results achieved against the five-year plans. Therefore, the Department cannot assess the effectiveness of FDR investments nor the CRÉs contribution to regional development. Recommendations We recommended that the Ministère des Affaires municipales, des Régions et de l Occupation du territoire: Develop orientations that reflect the Government s regional development priorities and clearly communicate its expectations with regard to partners roles (4.50); Specify objectives and desired results for investments made through the Fonds de développement régional (4.50); Identify the relevant information that would allow the Department to coordinate government actions on a regional basis, collect such information, integrate it into its decision-making process and disclose it to the various stakeholders (4.50); Review the coordination mechanisms necessary for ensuring consistency in the Government s regional development actions (4.50); Clarify its expectations with regard to the scope and content of the five-year development plans and the objectives of this planning exercise (4.94); Ensure that planning and development organizations funded in whole or in part by the Government are evaluated (4.94); Analyze disparities in the operating costs of the Conférences régionales des élus in order to understand their nature and determine whether it is necessary to specify what should be included in operating costs (4.94); 18 Report of the Auditor General of Québec to the National Assembly for

25 Implement mechanisms for coordinating actions between the Department s various sectors with regard to the management of regional development programs (4.103); Establish criteria for the choice of projects to be funded based on the priority needs of the concerned regions and document the choice of projects according to these criteria (4.103); Obtain relevant information that would allow the Department to evaluate whether the Fonds de développement régional investments are efficiently and effectively used and to report on the results achieved (4.109). We recommended that the audited Conférences régionales des élus: Rework their five-year development plans in order to prioritize the actions most likely to benefit the region concerned on the basis of clear, common objectives and relevant indicators related to the desired results (4.95); Adopt or specify, as the case may be, rules of ethics and ensure their application to the management of direct, indirect or apparent conflicts related to the position occupied (4.95); Establish or specify, as the case may be, eligibility conditions and analysis criteria for project funding applications (4.95); Document their decisions on project eligibility and selection in order for them to be well justified, as well as the follow-up to such projects (4.95); Evaluate the results achieved against their five-year plans, including the relevance and effectiveness of their intervention tools, monitor these results on a regular basis and provide comprehensive reports (4.110). Entity Comments The entities had the opportunity to comment on these recommendations; their comments can be found in paragraphs and We want to point out that they accepted all of the recommendations. The full French report is available at Report of the Sustainable Development Commissioner Highlights 19

26 Application of the Sustainable Development Act: Assessment Objective At least once a year, the Sustainable Development Commissioner reports on the application of the Sustainable Development Act. This year, we looked at the accountability report on sustainable development action plans submitted by a sample of 35 entities selected from among the members of the Comité interministériel du développement durable (CIDD). The objective of our assessment was to ensure that the entities subject to the Sustainable Development Act provide a quality annual accountability report on the implementation of their sustainable development action plans. A quality accountability report must: Comply with the requirements of the Sustainable Development Act; Provide parliamentarians with information allowing them to objectively assess the results. Highlights As required by law, the entities whose accountability report were assessed have provided the information on their action plans in separate sections of their annual report. They generally reported on the specific objectives they had set and adequately proceeded with a follow-up of the Commissioner s recommendations. However, our assessment has highlighted a number of areas where accountability improvements are needed. Incomplete accountability report. Near the half of the indicators were not measured. In such cases, the entities either gave no information at all or provided a list of activities carried out. In cases where the entities did measure their indicators, only a quarter of the indicators were presented as compari sons between the actual results and the initial targets. Commitments too often changed without adequate justification. Many entities (22 out of 35) reported on an action plan that differed from the version originally submitted. In fact, in some instances the initial indicators and targets had been changed or even lowered without any rationale for these changes being provided (18 out of 22). Such practices are detrimental to the achievement of clarity and transparency. Lack of impact-oriented accountability report. Few entities provided information on the impacts of the actions included in their sustainable development accountability report. Similarly, last year we highlighted the fact that most actions and measurement indicators focused on the means rather than the ends. Significant efforts must be made in this regard in order to assess the Administration s actual progress towards sustainable development. 20 Report of the Auditor General of Québec to the National Assembly for

27 Need for the Administration to assess the situation. These first accounta bility reports on sustainable development action plans do not make it possible to clearly and objectively assess: The entities contribution to the implementation of the government s sustainable development strategy; The Administration s progress in this regard. Several findings from the last four years explain the accountability gaps observed this year. These findings related to the objectives of the government s strategy, the link between this strategy and the action plans, and the indicators featured in the plans, among other topics. The Act has been in force for five years. In our opinion, it is time for the Administration to adjust its current actions before it completes the implementation of the strategy. Suggested Improvements It would be important for entities subject to the Sustainable Development Act to improve their annual accountability report on their sustainable develop ment action plans in order to show tangible evidence of their contribution to the government s strategy. Accordingly, we suggest the following improvements: Include all of the actions of the sustainable development action plan in their annual report, as well as the related indicators and targets; Describe any changes made to the sustainable development action plan and explain the rationale for these changes; Clearly demonstrate to what extent the targets for each action were met and any impacts achieved; Explain any discrepancies between the actual results and the initial targets; Present comparative information from one year to the next. The full French report is available at Report of the Sustainable Development Commissioner Highlights 21

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29 Significance of the logo An easy-to-recognize building, Parliament, where the National Assembly sits. It is this authority which has entrusted the Auditor General with his mission and to which he reports. Three dynamic lines, illustrating: the three types of audits carried out by his staff, namely financial audits, audits of compliance with statutes, regulations, policies and directives, as well as value-for-money audits; the three elements that are examined during value-for-money work: economy, efficiency and effectiveness; the three fields social, economic and environmental related to the stakes concerning sustainable development. A truly distinctive sign, the logo of the Auditor General clearly illustrates that this institution, which is in constant evolution, aims to assist elected members in their desire to ensure the sound management of public funds, for the benefit of the citizens of Québec.

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31 Sustainable Development Commissioner Jean Cinq-Mars was appointed Québec s Sustainable Development Commissioner in September Before holding this position, he served as a consultant in the sustainable development, environment, natural resources and governance fields. He has carried out missions abroad, notably for the World Bank, the Organisation for Economic Co-operation and Development (OECD), the United Nations Development Programme (UNDP), the Food and Agriculture Organization of the United Nations (FAO) and various development agencies. During the course of his interventions, he has worked in several devel oped and developing countries. In this respect, he has been a member of environmental performance audit teams for the OECD in France, Denmark and Luxembourg. In Canada, Mr. Cinq-Mars has also served as an advisor to the Federal Commissioner of the Environment and Sustainable Development for various audit engagements. In addition, he has played an advisory role with various companies active in the natural resources sector. Before becoming a consultant, Mr. Cinq-Mars held the position of President of Wildlife Habitat Canada. He also served as President of the National Forest Strategy Coalition from 2004 to Moreover, in 2002, he coordinated a team from across Canada charged with the development of this strategy. From 1997 to 2001, he was head of the Pollution Prevention and Control Division of the OECD. His responsibilities dealt, among other things, with climate change, sustainable transportation, the management and international transfers of residual materials, environmental management systems and eco-efficiency. In this function, Mr. Cinq-Mars set up a group concerned with the analyses of policies dealing with sustainable buildings. As part of these duties, he participated in numerous international meetings, notably the Conference of the Parties on Climate Change of Kyoto (1997) and the Vienna Conference on Sustainable Transportation (2000). From 1984 to 1997, Mr. Cinq-Mars held the position of Director of the Canada Wildlife Service and that of Director of Environmental Protection for Québec with Environment Canada. His mandates focused, among other things, on wildlife management, endangered species, protected areas, industrial pollution, environmental technologies and emergencies, and the implementation of environmental laws. In the performance of these duties, he coordinated the conservation and environmental protection components of the St. Lawrence Action Plan. Mr. Cinq-Mars is a member of the Air and Waste Management Association and treasurer of the International Initiative for Sustainable Built Environment. He holds degrees in biology and public administration. Mr. Cinq-Mars speaks French, English and Spanish.