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Three of the Alberta Energy Regulator’s top executives have left the agency as it deals with the fallout from damaging revelations about its previous chief executive officer’s role in a pricey side project.

The departures come after the AER suspended a long-planned reorganization while the provincial government’s new hand-picked board dissects the body’s inner workings after three public investigations into the diversion of the regulator’s resources into the project. The details of the reports have shaken the confidence of the industry, the public and staff.

In an e-mail to staff on Wednesday, interim chief executive officer Gord Lambert said the AER had parted ways with Mark Taylor, executive vice-president of the operations division; Carol Crowfoot, executive vice-president of the strategy and regulatory division; and Stacey Schorr, executive vice-president of the stakeholder and government engagement division.

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“The board was clear last week that our culture needs to evolve,” Mr. Lambert said in the e-mail, which was obtained by The Globe and Mail. “The board and I will work with leaders in the organization to bring about these changes. We want to move efficiently and thoughtfully as we chart the future path for the AER.”

The cuts to the senior executive ranks, and suspension of the internal reorganization, show how the United Conservative Party government of Premier Jason Kenney is exerting more control over the watchdog, which is responsible for ensuring that the province’s dominant industry operates safely and within environmental regulations. It has struggled with a massive buildup in environmental liabilities as the energy sector’s fortunes has suffered.

It was also dealing with a major distraction. In early October, Alberta’s Public Interest Commissioner, Auditor-General and Ethics Commissioner issued reports describing how former chief executive officer Jim Ellis and a handful of allied senior AER officials had diverted a portion of the regulator’s funds, staff and other resources into an affiliated unit called the International Centre of Regulatory Excellence (ICORE), and deceived the board as they went about doing so.

ICORE was touted as a not-for-profit unit aimed at instructing other jurisdictions on how to oversee their energy industries. However, the investigators concluded that the executives’ real aim was to create future work and contracts for themselves.

Energy Minister Sonya Savage had previously announced the government’s own review of the AER, saying the approval process for projects takes too long compared with other jurisdictions. With that, she named an interim board that includes two former senior Alberta government officials – the chairwoman, Bev Yee, and Grant Sprague. Both were deputy ministers.

In a brief statement, the AER confirmed that the three executives, who had reported to Mr. Ellis, were no longer with the regulator. It also said the board was continuing its work with the government on its review.

Late last week, Ms. Yee told the regulator’s 1,200 employees that the board was “hitting pause” on the reorganization, dubbed “AER 2.0,” to rethink what changes are needed.

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“Your board will be taking a deeper dive into how the AER operates and where we can make improvements to ensure any changes we make are made for the right reasons,” Ms. Yee said in a staff e-mail. “We will be working with the Government of Alberta to manage the budget implications from taking this extra time.”

Ms. Savage said on Wednesday that the province’s review includes studying the AER’s mandate, organization and how to prioritize and place staff. It is also conducting round-table discussions with interested parties as well as reviewing online submissions. These will “obviously then feed into how the AER should be organized,” she said.

It is not known how long the work will take, or how much of a cut in budget and staff might be in the offing. The AER is funded by levies charged to oil and gas companies, and its new budget is expected to be presented as part of the provincial budget, to be tabled on Thursday. Mr. Kenney has said the levies are “unacceptably high.” Previously, the agency had been redesigning plans based on a budget cut of 18 per cent, according to AER documents.

Work on AER 2.0 was entering its final stages. Just last week, Mr. Taylor told employees he believed that the government and the AER were on the same page regarding the makeover, according to internal documents.

The agency planned to trim the number of directors and vice-presidents and had already decided who would fill the positions that remained, Mr. Taylor explained. The AER planned to announce these changes at the end of the month. Further, these executives would then appoint managers, with staff announcements to follow. The AER expected the shakeup to wrap up next month.

Mr. Lambert held a town-hall meeting with staff on Oct. 9 to discuss conclusions of the probes into the ICORE controversy. During that call, he said a new structure was expected before year end.

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The AER has been widely expected to undergo cuts after the departure of Mr. Ellis, who resigned late last year amid the probes. Investigators described a toxic work environment under his leadership, in which employees who questioned ICORE activities faced the threat of dismissal. They also said said the regulator was distracted from such priorities as dealing with growing environmental liabilities tied to aging oil and gas wells.

Meanwhile, Ms. Yee confirmed in her e-mail to staff that Mr. Lambert is not in the running as the AER seeks a new CEO. He stepped into the job after Mr. Ellis left.

With a report from Emma Graney

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