On June 20, 2016, the Federal Government launched a comprehensive review of Canada's environmental and regulatory approval process. The announcement comes on the heels of the Government's new interim rules for natural resource projects, which included more community and indigenous consultations and a commitment to assess and publish upstream greenhouse gas emissions.
As part of the review, the Government will appoint two expert panels to examine the environmental assessment process, the role of the National Energy Board (NEB), the Fisheries Act, and the Navigation Protection Act. There will also be a 30-day window for the public to comment on the mandates of the two expert panels. The Government has indicated that consultations will be at the core of this process and that the expert panels will be given a January 31, 2017 deadline to render their recommendations. Until then, the interim rules for resource projects will guide decision making on existing projects such as the Energy East pipeline.
The Government's announcement and the impending overhaul of Canada's regulatory laws stem from the 2015 Liberal Party campaign commitment to restore public trust and credibility in the approval process for energy projects. The Government has committed to reviewing the previous Government's changes to the Canadian Environmental Assessment Act, the Fisheries Act, and the Navigable Protection Act and, will likely seek to restore and enhance regulatory measures in those statutes.
However, the Government has not provided details on what these changes may look like or when they will be implemented. While it will take until 2017 for the expert panel to release its recommendations, there will be significant time needed for the Government to prepare and implement legislative changes. Given the priority of this campaign commitment, the Government will likely introduce legislation prior to the next federal election.
The chief implication of this announcement is the increased delays and uncertainty that the review process will create. Additional delays and increased regulatory hurdles – the scope of which are largely unknown – send a signal to the energy sector and investors that uncertainty, delays, and more process can be expected for large resource projects.
It is further unclear whether the interim rules, review process, and eventual overhaul will have the desired effect of restoring public confidence in the approval process for pipeline projects like Energy East. Will more regulation in the environmental assessment process and the NEB lead to more confidence in the regulatory system?
Another important implication for current and future projects is what role the NEB will be given in what has become a politicized process. As of now, Cabinet currently holds the authority to approve or deny projects, regardless of the NEB's recommendation. Recently the NEB recommended approval of the Kinder Morgan Trans-Mountain pipeline (Trans-Mountain), subject to 157 conditions. Cabinet is expected to make a decision on this project on December 19, 2016. The question then is whether Cabinet will accept the NEB's recommendation or reject the project on political grounds? With the recent legal challenge by the City of Vancouver and First Nations groups to the Trans-Mountain approval, Cabinet's decision in the face of legal battles and public opposition may be an indication of the Government's approach to large interprovincial resource projects. Will it be politics or due process?
The finer details of this review should become clearer once the expert panels release their recommendations. In the interim, project proponents and investors are advised to participate in the review process and follow the panels' activities closely.
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