More uncertainty is no remedy

One could argue that the degree of chaos and uncertainty that now exists in the Canadian energy marketplace, particularly for the pipeline sector, is directly proportional to the degree of political interference in energy regulation. One could also argue that the changes by the federal government to environmental and regulatory reviews related to major projects, particularly affecting the National Energy Board ( NEB), announced Thursday, in the name of “modernizing” regulatory approvals have probably just made matters much worse for investors, industry and Canadians.

Previous amendments made in 2012 by the Conservative government had changed the decision-making role of the NEB to recommending approvals, conditions or rejections of energy proposals while giving the federal cabinet full discretion to accept, reject or modify that recommendation. That process inevitably led to the politicization of a quasi-judicial, fully integrated environmental and regulatory process designed to adjudicate national energy applications. Under the Liberals, that politicization was only exacerbated. The obvious question is how making political footballs of important projects could possibly constitute balanced decision- making that truly reflects the national interest and provides clear rules for proponents, investors and the public.

A prime example was the Trudeau cabinet’s final decision on the Northern Gateway Pipeline proposal. After years of consultations and hearings and hundreds of millions of dollars spent by Enbridge, the project’s proponent, the government rejected the 1,200- kilometre pipeline. The decision favoured environmentalists’ arguments to protect the westernmost reaches of the Great Bear Rainforest and make permanent a tanker moratorium along the northern coastline of B.C. It also overruled the science, evaluations and conditions previously set by the joint National Energy Board/Canadian Environmental Assessment Agency panel in recommending approval for the project. Notable among the events surrounding that decision was a court ruling that effectively excoriated the federal government’s role, not the proponent’s, for certain deficiencies in Aboriginal consultations.

The Trudeau cabinet’s unilateral decision to reject Northern Gateway sent shock waves through boardrooms at the time. Today, that decision has been dwarfed by subsequent events. They include TransCanada abandoning its $ 1 5.7- billi on Energy East project last October, after incurring an estimated $ 1 billion after- tax non- cash charge, and the ongoing obstructions placed in front of the $ 6.8- billion Kinder Morgan Trans Mountain Pipeline expansion project, with B.C. vowing to use “every tool available to stop” the project. Such pipeline politics fly in the face of both the NEB and federal cabinet’s approvals for the project.

The Trudeau governments’ latest efforts to “modernize” the NEB largely ignore the fact that the events associated with Energy East were in large part due to regulatory-process blunders by the NEB while current and future circumstances associated with Kinder Morgan have the potential to contribute to a constitutional crisis in Canada.

T he Trudeau govern - ment asserts that the new Canadian Energy Regulator ( CER) it plans to create and put in charge of project approvals, in place of the NEB, will help to restore investor confidence, rebuild public trust and advance Indigenous reconciliation while advancing “good projects” to ensure energy resources get to markets responsibly. The announcement immediately and seriously undermined the regulatory authority of the NEB, previously affirmed by the Supreme Court, while providing only vague uncertainties and undefined responsibilities, including the future of appointments, roles and responsibilities of previously independent National Energy Board members and staff.

The new proposed legislation will do little to assuage demands from a host of jurisdictions, from provinces to municipalities, who will continue to presume, if not demand, a final say in the regulation of Canadian energy developments. The consequential upset from the proposed new legislation will continue to disrupt and erode the regulatory climate in Canada while reducing the pre- eminence of the regulatory powers of the NEB or the new, proposed CER. These regulatory changes will continue to pose fundamental uncertainties and will make even more problematic effective and efficient determinations of energy projects judged to be in the national interest. Regrettably, the federal government’s intentions to restore public confidence in the NEB by modernizing it have now been eclipsed by far more pressing concerns for the economy, the national interest and, perhaps, the ability of the Canadian energy sector to thrive in, or to survive, such disparate, concerted regulatory assaults from so many sectors.

Canadians would be justified in questioning whether the federal government in its attempts to create a “more robust, transparent and inclusive process” to more closely align with its energy and climate policies have actually increased the regulatory uncertainties that have done so much to drive crucial energy investment out of Canada.