In Canada, en­ergy projects on the line

National Post (Latest Edition) - - FRONT PAGE - JOHN I VI S ON

Brad Wall is wor­ried the en­vi­ron­men­tal rules Ot­tawa is set to in­tro­duce this fall will strain na­tional unity in the re­source-de­pen­dent West.

“The cu­mu­la­tive ef­fect of this and the car­bon tax mean we are head­ing to­ward an un­healthy de­bate, just as we did when an­other Trudeau in­tro­duced his en­ergy pol­icy. How is this dif­fer­ent from a Na­tional En­ergy Pro­gram, in terms of the re­al­ity of what it will do to jobs and pipe­lines and so on? That is start­ing to sink in,” the Saskatchewan pre­mier said in an in­ter­view.

The Lib­er­als are putting the fin­ish­ing touches to what will be one of their most con­tro­ver­sial poli­cies go­ing into the next elec­tion – the en­vi­ron­men­tal as­sess­ment reg­u­la­tions that will gov­ern nat­u­ral re­source devel­op­ment.

Stephen Harper’s in­tended legacy was to keep govern­ment from grow­ing much big­ger.

Justin Trudeau’s be­quest to the na­tion will be govern­ment that is not only big­ger but, he hopes, bet­ter.

The Lib­er­als have taken the ap­proach t hat t he Con­ser­va­tives messed up the ap­proval process for big en­ergy projects in their en­thu­si­asm to ram them through, and the Trudeau govern­ment needs to re­store the faith of Cana­di­ans.

Govern­ment of­fi­cials claim that the new leg­is­la­tion will in­crease cer­tainty by cre­at­ing an en­vi­ron­men­tal as­sess­ment where prob­lems are ironed out early in the process, avoid­ing pro­longed court bat­tles that pro­po­nents in­vari­ably lose.

Busi­ness groups like the Cham­ber of Com­merce say Ot­tawa’s pro­posed changes will cre­ate an “un­work­able” sys­tem that could ef­fec­tively end in­vest­ment in Canada’s nat­u­ral re­sources sec­tors.

Cap­i­tal spend­ing in oil, gas and min­ing projects is fore­cast to be down 50 per cent this year from 2014 lev­els, in part as a con­se­quence of fall­ing com­mod­ity prices.

But in­vestors say govern­ment pol­icy has ex­ac­er­bated the prob­lem by cre­at­ing head­winds that are mak­ing Canada unattrac­tive for new spend­ing.

Wall pointed out that $34 bil­lion in cap­i­tal spend­ing has moved from Canada to the U.S. since March 2016. “The price is the same in Texas. What’s dif­fer­ent is the govern­ment ap­proach and the in­creased risk,” he said.

It prom­ises to be one of the most im­por­tant po­lit­i­cal tilts be­tween now and the elec­tion.

The govern­ment re­leased a dis­cus­sion paper con­tain­ing the changes it is propos­ing and in­vited pub­lic com­ments — a process that ends this month. Of­fi­cials will start writ­ing the draft leg­is­la­tion in Septem­ber.

In a speech to the Assem­bly of First Na­tions last month, Cather­ine McKenna, the fed­eral en­vi­ron­ment min­is­ter, made clear that the Lib­er­als in­tend to have the new sys­tem of reg­u­la­tion in place long be­fore the 2019 elec­tion. “I like to think we’ll win, but you never know,” she said, in­di­cat­ing how im­por­tant to the Lib­eral legacy the changes are viewed.

In a bizarre re­dux of the spat in 2012, when Harper’s govern­ment elim­i­nated en­vi­ron­men­tal re­views f or many in­dus­trial projects, forces pro­mot­ing the en­vi­ron­ment and the econ­omy are lin­ing up in op­po­si­tion — only this time, it is the en­vi­ron­men­tal­ists who are in the as­cen­dancy.

The Lib­er­als claim to be even- handed bro­kers, pro­mot­ing both en­vi­ron­men­tal and eco­nomic in­ter­ests. But a glance at the sub­mis­sions made to the govern­ment on the en­vi­ron­men­tal as­sess­ment process makes clear the pen­du­lum has swung.

Green groups like the David Suzuki Foun­da­tion ap­plaud the pro­pos­als made in the govern­ment’s dis­cus­sion paper, say­ing ev­ery­one, in­clud­ing Indige­nous Peo­ples, should be able to say no to en­vi­ron­men­tally dam­ag­ing projects in their com­mu­ni­ties.

Mean­while, busi­ness groups like the Ex­plor­ers and Pro­duc­ers As­so­ci­a­tion of Canada say there are few ma­jor re­source in­fra­struc­ture projects un­der devel­op­ment in Canada be­cause of a lack of busi­ness con­fi­dence in the en­vi­ron­men­tal as­sess­ment process.

The Ex­plor­ers and Pro­duc­ers claim the pro­posed changes would aban­don cer­tainty on time­lines, would re­move qual­i­fiers on peo­ple seek­ing stand­ing as in­ter­ven­ers in project re­views, would hand Indige­nous groups a veto on projects — which they say is in­com­pat­i­ble with Cana­dian law — and would re­sult in con­fus­ing ju­ris­dic­tional over­laps.

“It’s not a ques­tions that the reg­u­la­tions are t oo tough, it’s that the reg­u­la­tions are too un­cer­tain,” said Martha Hall Find­lay, a former Lib­eral MP who is now chief ex­ec­u­tive of­fi­cer of the Canada West Foun­da­tion in Cal­gary. “Ev­ery time you have a flip- flop on poli­cies that af­fect for­eign in­vest­ment there are re­ally, re­ally big con­cerns.”

She said she has par­tic­u­lar wor­ries around the fi­nal de­ci­sion on ma­jor projects re­main­ing de­pen­dent on “po­lit­i­cal whim,” since cabi­net has the cast­ing vote.

The Lib­eral start­ing point is that the reg­u­la­tory process they in­her­ited is fun­da­men­tally bro­ken and it needs to be re­designed, in co- oper­a­tion with those who op­posed the old sys­tem.

As McKenna put it in her speech, the new sys­tem would be pro­duced in a “code­vel­op­ment process” with an Assem­bly of First Na­tions com­mit­tee that would “guide and in­form poli­cies and guide­lines that will un­der­pin the en­vi­ron­men­tal as­sess­ment and reg­u­la­tory re­view process.”

The dis­cus­sion paper’s guid­ing prin­ci­ple is that re­views will go far be­yond as­sess­ing the en­vi­ron­men­tal im­pacts and will also con­sider the so­cial, health and eco­nomic as­pects of a project, as well as re­quir­ing a gen­der­based anal­y­sis. Wall called the in­clu­sion of new im­pact as­sess­ment cri­te­ria “sub­jec­tive” and “neb­u­lous.”

“Pro­po­nents of ma­jor projects are go­ing to read that and ask: ‘ What does it mean?’” he said.

Some as­sess­ments will be Indige­nous-led and lean heav­ily on Indige­nous knowl­edge.

Ot­tawa’s plan is to es­tab­lish a sin­gle govern­ment agency, with the aim of one project, one as­sess­ment.

The em­pha­sis is on con­sul­ta­tion and trans­parency, with each project re­quir- ing an early plan­ning phase be­fore de­sign el­e­ments are even fi­nal­ized.

Se­nior of­fi­cials say de­vel­op­ers would find out what is ex­pected of them early in the process, be­fore they have com­mit­ted mil­lions of dol­lars, or be­fore they end up in court. Pro­po­nents would have to rec­og­nize Indige­nous rights and in­ter­ests from the out­set.

The govern­ment seems pre­pared to go far­ther than even the courts, which have been clear that the con­sti­tu­tional duty to con­sult does not equate to a veto over devel­op­ment. In a judg­ment just last week in­volv­ing the Chippe­was of the Thames First Na­tion, the Supreme Court said specif­i­cally that Indige­nous groups must be con­sulted and given op­por­tu­nity to par­tic­i­pate in the reg­u­la­tory process, but there are lim­its to the scope of that con­sul­ta­tion.

Ul­ti­mately, de­ci­sions will be made by the fed­eral cabi­net, based on whether projects are deemed to be in the pub­lic in­ter­est.

What seems to be f ar down the list of pri­or­i­ties is gen­er­at­ing wealth, cre­at­ing jobs and get­ting projects ap­proved in a timely fash­ion.

Busi­ness ap­pears to be hav­ing se­cond thoughts about in­vest­ing in Canada, in part due to l ow com­mod­ity prices, but also be­cause the in­vest­ment cli­mate cre­ated by fed­eral and pro­vin­cial gov­ern­ments is con­sid­ered dif­fi­cult, if not hos­tile. Petronas can­celled its $ 36- bil­lion Pa­cific North-West liq­ue­fied nat­u­ral gas project two weeks ago, while Shell re­cently di­vested its oil­sands as­sets. The prospects for other big LNG de­vel­op­ments in Bri­tish Columbia are also in doubt.

Eric Nut­tall, a fund man­ager at Sprott As­set Man­age­ment, re­cently shifted the bulk of his Sprott En­ergy Fund re­source in­vest­ments from Canada to the U. S., cit­ing “pro­found sen­ti­ment head­winds” caused by fed­eral and pro­vin­cial gov­ern­ments — car­bon taxes, roy­alty regimes, lack of pipe­line in­fra­struc­ture.

“We as a na­tion have to fix this — it’s a large part of our over­all econ­omy. Cap­i­tal is flee­ing. My cap­i­tal is flee­ing,” he told BNN. “When you look at the ma­jors sell­ing out the oil­sands, Petronas not go­ing ahead with LNG projects, th­ese should be shock­ing warn­ing sig­nals to fed­eral and pro­vin­cial gov­ern­ments. But there is to­tal ap­a­thy that is be­yond my imag­i­na­tion.”

Nut­tall’s po­si­tion re­flects a dis­quiet com­mon in fi­nan­cial cir­cles. But he is wrong about “ap­a­thy” — there is a zeal in po­lit­i­cal cir­cles around Trudeau for more re­stric­tive en­vi­ron­men­tal rules. The Lib­er­als cam­paigned on pro­tect­ing the en­vi­ron­ment and grow­ing the econ­omy. The more com­plex ap­provals process the govern­ment is set to usher in may mean prom­ise made, prom­ise kept on the former, but at the ex­pense of the lat­ter and, con­se­quently, har­mony be­tween Ot­tawa and the West.

PRO­PO­NENTS … ARE GO­ING TO READ THAT AND ASK: ‘WHAT DOES IT MEAN?’

CHAD HIPOLITO / THE CANA­DIAN PRESS

While Justin Trudeau’s Lib­er­als have dis­cussed changes to the en­vi­ron­men­tal re­view process, re­source firms have can­celled projects in Canada.

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