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