[NGW Magazine] Canada reaches for the red tape

Legislation touted as fixing all that has ailed the Canadian energy regulatory process is seen by many critics as making things worse by seeking to accommodate an even wider range of views and ticking more boxes.

 New environmental review legislation proposed by the Canadian government in early February to address several perceived shortcomings in the current process has not been welcomed with open arms. Critics doubt if it will be any better than the old.

On February 8, the government introduced, and the House of Commons gave first reading to, Bill C-69, An Act to enact the Impact Assessment Act and the Canadian Energy Regulator Act. The former would essentially replace the Canadian Environmental Assessment Act, 2012, while the latter would replace the National Energy Board (NEB), the body that has been ruling on major energy projects for decades.

The Canadian Environment Assessment Agency would be replaced by the Impact Assessment Agency of Canada (IAAC), headquartered in Ottawa, while the NEB would be replaced by the Canadian Energy Regulator (CER), headquartered in Calgary but without restrictions on Calgary residency for commissioners.

Better rules, cleaner environment, stronger economy

“We heard from a wide range of Canadians that previous reforms to environmental laws put our environment, fish and waterways at risk and eroded public trust,” environment and climate change minister Catherine McKenna said, introducing the legislation. “We listened and took action to fix this. With better rules for major projects, our environment will be cleaner and our economy stronger. Making decisions based on robust science, evidence and Indigenous traditional knowledge, respecting Indigenous rights, and ensuring more timely and predictable project reviews will attract investment and development that creates good, middle-class jobs for Canadians.”

The new assessment structure, McKenna and federal energy minister Jim Carr said, would produce faster, more robust approvals that would be less affected by the kind of challenges from environmental groups and First Nations that have delayed – or led to the cancellation of – a number of major energy projects, primarily pipelines designed to move Canadian crude oil to international markets.

Under the proposed rules, the IAAC will determine not only the socio-economic and environmental impacts of a proposed project but will also consider wider issues concerning community and indigenous impacts, health, and how the project fits with the federal government’s climate change goals. It would also include gender-based analytics for each project.

The CER will not have the project review powers of the NEB – those will be shifted to the IAAC, which will collaborate with the CER in its review – but its statistical and post-approval monitoring role will be retained. It will also review smaller projects and deal with issues such as tolling arrangements, safety and enforcement.

The bumpy road

Early planning, beginning with the filing of a project outline with the IAAC, would bring Indigenous knowledge into the process, establish impact statement guidelines tailored to the project, set a permitting plan and create avenues for future public involvement in the review process.

The early planning phase would take up to 180 days, after which the project proponent would prepare and file a draft impact statement, which would be open for review by affected agencies and the public.

Once the draft impact statement had been reviewed, the IAAC, working in conjunction with the CER, would assess the IS and either prepare an assessment report or refer the project to a joint IAAC/CER review panel. The IS review, absent referral to a review panel, would last up to 300 days; referral to the panel would extend the process by another 300 days.

The IAAC or a review panel would then file a report on its findings with the minister of environment and climate change, who would determine public interest and either approve or deny the project. Alternatively, the federal cabinet, acting in its legal capacity as Governor in Council, would determine public interest and render a decision.

Timelines for the decision-making phase were set at a maximum of 30 days for a decision from the minister and 90 days for a decision from cabinet. In either case the cumulative timeline, from early planning through to a decision, could approach 2.5 years; the timeline for major projects, however, is capped at two years.

Source: Government of Canada

Only certainty is uncertainty

Reaction to the proposed legislation was swift: on the day it was released, the Canadian Energy Pipeline Association (Cepa) expressed concern that the changes “may not achieve the level of certainty required for Canada to be a competitive jurisdiction for investment.

“It is absolutely critical that the regulatory reform initiatives announced today do not add to the significant obstacles already facing our energy industry,” Cepa said. “Our country’s ability to be competitive now, and in the future, depends on finding an appropriate balance between environment and economic objectives.”

Cepa said it was pleased to see the government’s commitment to legislated timelines for project reviews, and to the concept of “one project, one assessment” which would avoid duplication in the review and approval process.

But it said that the scope of the process was concerning, taking in as it does a full spectrum of issues, from socio-economic and environmental through how a project would impact First Nations or how it would fit with existing federal climate change policies.

“From the outset, Cepa has stated that individual project reviews are not the appropriate place to resolve broad policy issues, such as climate change, which should be part of a Pan-Canadian Framework,” the association said. “Including these policy issues adds a new element of subjectivity that could continue to politicise the assessment process.” 

Politicising the process

Law firm Osler, Hoskin & Harcourt expressed similar reservations regarding how politics might influence a regulatory outcome. It said its concerns were focused on the fact that a review panel will not recommend a project’s approval, but will only set out the potential effects of a project and indicate the extent to which they might be adverse.

“This means the government – rather than an independent tribunal – will be responsible for weighing the costs and benefits of a project and making a decision as to whether it should proceed,” the firm said in a brief to clients. “This is likely to enhance the politicisation of major projects.”

Four days after Bill C-69 was introduced, investment bank GMP FirstEnergy released a blistering criticism of the planned changes, which it said would be perceived as negative for any future proposals involving the movement of energy across provincial or international boundaries.

“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,” GMP 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.”

Literature provided by the government explaining the proposed changes, GMP said, is vague as to exactly how the responsibilities of both the CER and the IAAC would be broken down, and appeared to be more concerned with assuring political correctness than with providing clarity and direction.

“It also contains a good deal of political posturing and seems to lean to the side of attempting to please the most extreme critics of the current energy review and regulatory process,” it said. “We do not see this as being a good basis for making informed, fact-based decisions when it seems the entire proposed legislation is already front-loaded with certain ideological viewpoints.”

'More work needed'

A day later, the Montreal Economic Institute (MEI) echoed GMP’s concerns, and said the new legislation will only add to the negative signals being sent by Canada to investors. And later in February, the Canadian Association of Petroleum Producers (Capp) also worried about how investors would perceive Canada in light of the proposed changes.

“We are less and less competitive. Investors are already starting to turn away from Canada in favour of the US. Now, this structural change adds an extra layer of uncertainty that will push them away even more,” MEI CEO Michel Kelly-Gagnon said. “These new rules are just a bunch of wishful thinking and contradictory objectives that do nothing to reassure those who want to invest in the country. The government must absolutely remedy the situation, and soon. Because for the moment, the message could not be clearer: Do not come here to do business.”

Capp CEO Tim McMillan, at an Ottawa news conference on February 26, said that international investors are looking to Canada to “fix the challenges we have of getting projects not just approved, but built.”

“The reviews coming out about what has been tabled thus far I think doesn’t reposition us for success,” he said. “We need a step change to the positive and we need to work with government to ensure that that, in fact, happens. From what I see, there is more work to be done.”

Green groups lukewarm on new regulatory path

While the federal government’s new regulatory plan did not win much support from oil and gas producers, it also fell short of what environmental groups were hoping to see. Here are some of their comments:

West Coast Environmental Law Association

“The legislation falls short of implementing the United Nations Declaration on the Rights of Indigenous Peoples (Undrip) and appears to codify a consultation regime in which aboriginal rights and title are just one factor to be considered, and thus potentially subject to override by a ‘public interest’ determination.

“We are also concerned that the spirit of Undrip is undermined by the absence of an Indigenous consent requirement, by reducing constitutionally protected aboriginal rights to one factor in a broad ‘public interest’ determination, and making the recognition of Indigenous jurisdiction to conduct assessments discretionary,” said Jessica Clogg, executive director and senior counsel for WCEL.

Environmental Defence

“Bill C-69 makes progress in restoring public confidence in Canada’s energy and environmental decision-making process, but the legislation does not go far enough. Without improvements, the federal government’s commitment to bring credibility to the energy project review process is on thin ice.

“The commitment to consider climate change, as well as impacts on social and health outcomes, in all energy project reviews is a welcome development. But, it remains unclear how the government would factor a project’s carbon emissions into a final decision. And it’s still uncertain if all high-carbon projects will receive a federal impact assessment, including new in situ tar sands projects.

“The legislation leaves the door open to energy project reviews still being dominated by panel members from the new Canadian Energy Regulator.”

Pembina Institute

“High-quality, independent energy data is a critical component of a credible assessment process. Building on today’s legislation, we would like to see progress towards the establishment of an independent Canadian Energy Information Agency to ensure that project reviews include Paris Agreement-compliant supply and demand scenarios for coal, oil and gas.” 

Yellowstone to Yukon Conservation Initiative 

Aerin Jacob, a conservation scientist at the Yellowstone to Yukon Conservation Initiative, applauded some aspects of the proposal, but she was disappointed that the new regulatory plan is vague about how it will promote the use of high-quality and transparent research. “You can have very strong science that’s not transparent, and you can have very transparent science that’s not strong, but you need both of them together to fix the problem,” she told sciencemag.org in an article published February 9.