Bank Blasts New Canadian Approvals Process
Canadian investment bank GMP FirstEnergy pulls no punches in a February 12 research note that blasts the federal government’s new regulatory structure for oil and gas projects for adding complexity and subjectivity to what was once a science-based process.
Under the new rules, which the government hopes to have enshrined in legislation by the middle of 2019, the globally-respected National Energy Board (NEB) will be replaced by the Canadian Energy Regulator (CER), but will be stripped of most of its powers to approve or deny major new projects. That responsibility will be shifted to a new agency, the Impact Assessment Agency of Canada (IAAC), which reports to the federal minister of environment and climate change.
Bill C-69, to establish the legislation and create both the IAAC and the CER, was given first reading in the House of Commons on February 8.
The IAAC will not only determine the socioeconomic and environmental impacts of proposed projects, but will also study wider issues concerning community and indigenous impacts, health and how new projects will fit with Ottawa’s climate change goals. The CER will retain the NEB's statistical and after-project review powers and will also continue to deal with issues such as tolling, smaller project reviews – like pipeline capacity additions – and safety and enforcement.
Effectively, GMP FirstEnergy says, decision-making for major projects will shift from Calgary, where the NEB is based and the CER will be headquartered, to Ottawa, home of the IAAC.
And while environment and climate change minister Catherine McKenna and natural resources minister Jim Carr touted the new regulations as bringing shorter review timelines for major projects, the proposed rules actually do the opposite, GMP FirstEnergy said in its research note.
“The proposed legislation appears to create significant new barriers to timely decision making and effectively prevent any major new project from reaching any form of positive recommendation, or to impose such a massive series of requirements under any such positive recommendation as to make the project untenable and cost uncompetitive,” it said. “A lack of hard timelines and a regulatory process that has been subject to dithering and near endless legal challenges will become the major stumbling block for domestic and international investor confidence in the Canadian energy sector.”
The only winners under the new process, GMP FirstEnergy says, will be the anti-development factions that have, in recent years, blocked crude oil pipelines to the west and the east of Canada and slowed the development of LNG export projects, primarily in the Canadian province of British Columbia.
It said: “The losers, as will become clear over time, are all Canadians as our competitive advantages as a resource superpower are sacrificed on the altar of political expediency and universal inclusiveness. We see nothing in these proposed changes that will attract incremental energy investment to Canada.”