How to Fix the CSA

October 23rd, 2017

The following article was featured in Energy Processing magazine under the title Regulatory Turnaround; Why and How?

Outages and shutdowns at industrial plants are awfully expensive.  Unscheduled stoppages are technically called “incidents,” but are otherwise known as massive screw-ups.  The scale of the screw-up is the scale of the cost, usually.  Keeping costs down means keeping production up.  And that’s where Turnarounds come in.

A deliberate, scheduled stoppage for maintenance or reconfiguration is called a turnaround.  These are expensive too but, like most maintenance, they improve efficiency, reduce operating costs, they make outages a lot less likely, and they’re a lovely way to clean-up an industrial operation.  A turnaround is a fresh start.

The energy sector could surely use a fresh start in regulatory, especially in the heavy-handed, bureaucratized, blithering burden that is Industry Canada’s Canadian Standards Association (CSA). 

The CSA is a government Agency mandated with drafting and amending >2,000 laws in Canada, mainly related to industrial activity (electrical laws, engineering standards, HS&E, etc.).  Like the industrial plants they regulate, the CSA can get screwed up and bloated without regular cleanup.  And they haven’t had a cleanup in decades.

The CSA suffers us with the usual industrial ailments;  a top-heavy, hugely expensive management, an under-utilized, under-productive staff, a collection of disparate, unrelated and unsupervised operations units, most with mandates overlapping those of other units, further overlapping with other Government Agencies, and redundantly -and expensively- producing services and standards duplicating those already available throughout industry. 

It’s accountability that’s lacking.  The CSA’s been given a wide range of immunities and exemptions, such as from the Accountability and Transparency Act and the Access to Information Act, they enjoy immunities from civil litigation, exemptions from reporting requirements, etc.  With no-one watching, professional standards at CSA have dropped ever lower, and their flaunting of law ever more brazen, with every legitimization of any claim of exemption.  The CSA is also beyond the reach of the RCMP’s Commercial Crimes Unit and Industry Canada’s Competition Bureau.  With so many immunities and exemptions, the CSA has been untouchable for decades. 

Being above the law is convenient, and profitable.  The CSA was caught running an eight-year long counterfeiting operation, selling fake certifications to get non-compliant products across the Canadian border.  When they were caught in 2010, there were no prosecutions -they didn’t even repay their ill-gotten gains.  Worse, and elsewhere in their empire, the CSA has been granted governmental Accepted-as-Amended provisions, empowering them to change laws to their liking through their own legislative processes.  And that’s a valuable power to have, they routinely monetize that power in the sale of votes at legislative committee.  The CSA makes $70MM per year in these influence peddling activities.  That’s illegal of course, but at CSA it doesn’t matter.  The same goes for CSA’s falsified safety testing, their sales of blank certifications for electrical equipment, or their claims to privately own the law and their resulting shakedowns of business and industry.  The list is long, and every dodgy item is a CSA profit centre.

Money flows like water at CSA.  They spend $89k / day on travel, for instance.  That’s enough money to travel from Toronto to Chicago, and return, 304 times per business day, every day, for a full year.  That’s rich, but it’s also a drop in the bucket.  The lion’s share of taxpayer’s money is spent purchasing foreign corporations to expand the CSA empire.  Lately, the CSA’s been acquiring three or four foreign corporations per year.  With more than a third of a billion in annual revenues, they’ve got lots of our money to play with.

Think of CSA as an old industrial plant, itself constituted of a dozen reconfigurations and additions, all in different purposes, all to different codes and standards, and each addition with different equipment, and measuring like a scene from Mr. Bean, as half in metric; half in Church of England.  Nothing matches, nothing works together, nothing fits properly, so it’s no small wonder that their productivity is so poor while their costs are so rich, or why they so quickly stray from law and mandate.

The CSA needs a turnaround.  That’s hardly a revelation, and it’s widely agreed that CSA should be cleaned up and restored to its mandate.  In Ottawa in particular, the ever increasing liabilities of this government Agency are a source of consternation.  Like sitting on a time bomb, every government knows that CSA will someday politically explode, causing carnage all around.  Yet successive governments have sat on it, hoping for the best, and hoping to pass the problem onward to some other Prime Minister.  They fear a cleanup will make a mess.

Yet actually, as reorganizations go, a turnaround at CSA will be pretty neat and painless.  The Federal Government was recently presented with a comprehensive turnaround plan for CSA.  It looks like this;

First, the CSA’s standards activities are decoupled from their commercial ventures, essentially dividing their government role from their private interests.  Next, CSA’s financing and specialized operations are grouped for dissolution and their foreign subsidiaries are sold or wound down.  Divestiture revenues are directed to an Operations Trust.  Revenues from the Operations Trust fund ongoing CSA regulatory activities, such that the government role of CSA going forward will be a zero cost to the taxpayer.

In this plan, the CSA is restored to the focussed Federal Agency that it once was, with no commercial distractions, no illicit activities, with an annual budget of ~$4.5MM and a staff of 7 - 10FTE.

Necessary legislative and regulatory activities will continue unmolested, yet without the extortionate revenues, the shady deals, and the sky-high costs for sub-par services that have come to typify CSA.  The public Agency becomes again the public servant of the sector.

It’s an easy turnaround because, unlike most corporate reorganizations, the CSA has no shareholders to pacify, no financial markets to reassure, no debt to manage or a jittery customer base to protect.  And it’s fast, a 6 - 8 month recovery.  The plan’s quick, neat and painless.  And it’s been handed to government on a platter.

Ottawa is once again pondering a cleanup of CSA.  Rightly so, with more than 2,000 laws submerged in the CSA slush box, and with so many of them negatively affecting the energy sector.  We would all be better off with one less encumbrance, one less extravagance, and one less rogue regulator.  That’s the beauty of a turnaround; it’s a fresh start.

The government now has a workable plan for recovery.  Let’s see what they do with it.