FINANCIAL POST
OTTAWA SET TO PUT ITS STAMP ON ENERGY PROJECTS.
Major reforms of environmental and regulatory reviews of big energy projects — one of Prime Minister Justin Trudeau’s most anticipated policy changes — are due to be announced in days.
They are so significant they could encourage a return of capital to the Canadian energy sector — or continue to push it away to more welcoming jurisdictions, particularly the United States. They could also have big political ramifications in energy producing provinces — and not good ones — if they layer excessive regulation on top of already onerous carbon reduction policies.
“This is a very big moment,” said Chris Bloomer, president and CEO of the Canadian Energy Pipeline Association. “This is serious policy and hopefully we get it balanced right.”
The federal government has been consulting for two years to reform the National Energy Board Act, the Canadian Environmental Assessment Act, 2012, and the Fisheries Act and the Navigation Protection Act to fulfil Trudeau’s promise to restore public trust in project reviews.
Canada has struggled for years to get big new energy projects to the finish line. The result is that existing infrastructure is full, there is no outlet for exports to new markets, and Canadian oil and gas is heavily discounted. Major investments were cancelled amid opposition from environmentalists, Indigenous communities and the public. The Northern Gateway and Energy East oil pipelines, and the Pacific Northwest LNG project, are among those scuttled by delays, regulatory changes and new political priorities. Other projects, like the Trans Mountain oil pipeline expansion and the Line 3 oil pipeline replacement, are behind schedule because of regulatory and legal delays.
T he B. C. go v e r nme n t piled on Tuesday, when it announced new rules to restrict the shipment of bitumen across the province, even as the federal government has said it wants the pipeline built.
For their part, project opponents have complained they don’t trust Canada’s authorities, particularly the National Energy Board, to make unbiased decisions.
The Prime Minister’s Office is expected to put its stamp on the package of legislative changes, after Natural Resources Minister James Carr and Environment Minister Catherine McKenna integrated input from various constituencies.
Bloomer expects the reforms to introduce a twostep review process, which industry would welcome. An initial step would reveal a project’s scope and design, gauge whether it meets political priorities, and clarify Indigenous consultation requirements. A full project review with hearings would only go ahead if the proponent is confident the project can be successful and before any big spending is made.
“With clarity, and trust, and clear processes it should enable everybody to make decisions before — certainly in the proponents’ side — committing hundreds of millions without knowing exactly what the outcome is going to be,” Bloomer said.
Of course, such change would scuttle a major strategy used by those targeting pipelines to choke production of fossil fuels — lengthen regulatory reviews until proponents run out of money.
More broadly, industry is looking for a regulatory sys- tem that is workable, durable, fair and that is subject to fixed timelines and process clarity, Bloomer said.
The reforms will drive decisions for future projects, he said. Oilsands production continues to grow and requires additional transportation capacity, while Western Canada’s large shale deposits will need pipelines to transport natural gas to liquefied natural gas terminals and light oil and condensate to new markets.
“Everybody is going to look at that and say: ‘ How is that going to fit with my view of the future and is that going to enable me to invest in that future, or is it going to be problematic?’” Bloomer said. “One of the things that we hope doesn’t happen is that it’s subject to a lot of interpretation, that it’s not clear.”
Carr has previously said that the reforms will increase regulatory certainty, result in clear and predictable timelines, and spell out how to conduct appropriate Indigenous consultation and accommodation.
Industry also hopes the changes are not applied to projects already in operation.
“We have a huge system, it’s dynamic, it changes, it grows, it gets replaced and it gets upgraded and that works well,” Bloomer said. “If we try to impose some of the things that are coming down as major project stuff under the existing system, that would potentially make a more challenging operating environment.”
Environmental advocates have their own wish list. It includes elevating the federal environment minister to the be final decision maker in project assessments, evaluating projects based on whether they meet Canada’s international carbon reduc t i on commitments and on whether they hinder a transition to a clean economy, apart from removing restrictions on who is allowed to participate in reviews.
“For Canadians to be confident that decision- making on projects like pipelines and mines is credible and consistent, all assessments must be led by the revamped assessment authority — not industry- captured regulators like the NEB,” Patrick DeRochie, climate an d energy program manager at Environmental Defence, said in a statement.
They are also worried that the reforms will fall short “in addressing major flaws in Canada’s assessment regime.”
Still, it’s a regulatory regime that was widely praised internationally until Trudeau stood alongside environmental advocates in claiming it lacked public trust. Fixing it will be hard because there are so many conflicting views on what needs to be done.