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A recipe for making Canada more competitive

Canada West Foundation finds ways to fine-tune environmental permitting
"Going forward, it simply cannot be the case that it takes up to 15 years to develop and bring into production a new mine," says Natural Resources Minister Jonathan Wilkinson. | Alexandre Tetreault

Whether it is a new LNG terminal, a new mine or large-scale solar project, Canada can have a hard time competing with the U.S. in getting big projects financed and built.

But it could gain a bit of an edge over the U.S. by coming up with a quicker, more streamlined way of moving projects through environmental reviews, says the Canada West Foundation (CWF).

“We can’t compete in dollars against the U.S. Inflation Reduction Act,” the CWF says in a new report, Competitive Canada. “Can an efficient, effective regulatory regime (with strong Indigenous participation) be our ‘secret sauce’ instead?”

The report notes there appears to be a growing recognition in Canada that regulatory sclerosis is holding the country back. It also notes that it's an issue in other countries, as well.

“Regulatory processes for authorizing major projects across the country are perceived as sluggish, duplicative, inefficient and subject to short-term political considerations," the report, Competitive Canada, says. "Not surprisingly, Canada has developed a reputation as a country where major projects can’t get built. The result has been decreased private sector investment in Canadian projects.

“This may jeopardize Canada’s ability to build the infrastructure needed to meet federal and provincial emission reduction targets and support a rapid and secure global energy transition.”

Canadian Natural Resources Minister Jonathan Wilkinson has, in recent months, conceded it takes too long to get new mines approved in Canada.

“Going forward, it simply cannot be the case that it takes up to 15 years to develop and bring into production a new mine,” Wilkinson said last year at a Prospectors and Developers Association of Canada (PDAC) conference.

Federal politicians now seem to be realizing that the same regulatory sclerosis that delays and inflates the costs of things they don't really like – coal mines and oil pipelines, for example – also may delay projects that they do like, such as critical mineral mines, hydrogen plants and renewable energy projects.

“The Canadian government has indicated a strong appetite to tackle the problem of regulatory efficiency and effectiveness,” the CWF report notes. “A policy window has opened -- and if we can fix this problem, we have the opportunity to become Competitive Canada.”

One improvement in the process would be to let proponents know, right up front, if their project is unwanted and unlikely to get approved.

The report says decisions on these “dealbreakers” should be “made early, not at the end of the long, expensive and resource-intensive IA process.”

“What is equally important is that determinations about the public interest need to stick," the report adds. "In other words, if these major dealbreakers haven’t been rejected by the end of the planning phase, they shouldn’t be used at the end of the assessment as the reason for rejecting the project.”

The report also says a final decision to approve or reject an environmental certificate should not rest with just one cabinet minister -- the Environment minister -- but three: Environment, Finance and whichever minister is in charge of the “category.” This would often be the minister of Energy and Resources, but could sometimes be the minister of Transport or Defence.

The federal government should also develop a clear policy on energy and GHG emissions, as there currently appears to be a bias against fossil fuel projects in general, the report says.

“GHG emissions aren’t the only issue an impact assessment looks at but they are a huge part of the conversation and a major factor in opposition to some projects."

It notes the numerous federal and provincial regulations that place “boundaries on GHG emissions” – an output-based pricing system, clean fuel regulations, the proposed Clean Electricity Regulations, proposed oil and gas emissions caps, methane regulations for upstream oil and gas, Alberta’s TIER program, B.C.’s Net-Zero New Industry Policy and B.C.’s Energy Action Framework, to name a few.

“However, project proponents considering submitting a project under the federal impact assessment system don’t have a clear sense of whether their project will be rejected as not being in the public interest on the basis of GHG emissions—even though the project would have to comply with all applicable regulations. This uncertainty is coupled with a belief that federal government has a bias against hydrocarbon energy projects and will use the IA process to pick them off one at a time.

“What would help is a clear and transparent policy at the federal level on the role of hydrocarbon projects in Canada’s energy future. Such a policy would help government and project proponents understand the direction of travel for future development, provide clarity to the Agency and the Minister in making decisions under the IA process, and also ensure the IA process is appropriately focused.”

One improvement recommended in the report is already being done in B.C: environmental review substitution. In Canada, one project may often be subject to two environmental reviews – one federal and one provincial.

“This duplication increases time, cost and burden for all participants," the report states. "However, there is no evidence that better outcomes are achieved.”

“The best solution for the problem of duplication and lack of federal/provincial coordination is to have only one assessment process used for any given project assessment.”

Under substitution, a provincial environmental agency is allowed to conduct the review, and the federal minister either signs off at the end or disagrees and refuses to sign off on the federal government’s behalf.

B.C. is the only province that has been doing substitution, the report notes. The Cedar LNG project is one recent project that went through this substitution process via the BC Environmental Assessment Office and managed to get through the process relatively quickly.

“So far, B.C. is the only province that has signed a substitution agreement,” the report notes. “Since the implementation of the IA Act in 2019, four projects have been assigned to the B.C. (EAO) under substitution, including Cedar LNG which progressed to an approval decision in just under 3.5 years.”

If no other province has yet opted for substitution, it may be because they are waiting to see the outcome of court challenges to the constitutionality of the Impact Assessment Act, which provinces like Alberta have criticized as federal government overreach.

“An interesting alternative possibility -- not explicitly provided for in the Act but theoretically possible -- is substitution in the other direction, whereby the province allows the federal government to lead the assessment process, but reserves its own decision-making at the end,” the CFW report suggests. “For provinces with fewer resources to conduct assessments, there could be gains in efficiency as they could devolve some of their work to the federal government.”

The report points to reviews the CFW conducted in the past of timelines for both the newer Impact Assessment Act and the previous Canadian Environmental Assessment Act (CEAA) that it replaced. It found that under the previous CEAA, it took an average of 3.5 for a project to be approved or rejected, and up to 10 years.

Since the new IAA came into effect four year ago, there appears not to have been much improvement, as projects in the IAA process are still in phase 1 or 2 of a four-phase process.

The report notes that some countries – like the U.S., UK and Australia – are flirting with the idea of fast-tracking major projects that are deemed to be in the national interest – major power transmission projects, for example. Tempting though that may be, the CWF report warns about the pitfalls of picking favourites.

“Fast-tracking may seem like (and indeed may be) a good idea, but leads to questions of procedural fairness for those projects that are not fast-tracked, many or most of which are also in some way in the public interest.”

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