Canada: Canada's Natural Resources Paramount In 2012 Federal Budget

On March 29, 2012, the federal government released the 2012 budget (the Budget) which promises to streamline the environmental review process for major industrial projects. The government's pledge comes on the heels of its stated frustration over the increasing use of the regulatory review process to delay development.

The allocation of C$165-million over the next two years to improve the regulatory review system is welcomed by industry and is expected to accelerate investment in Canada, promote a viable export market outside the United States and create jobs.

Current Regulatory Review Process

The Budget acknowledges that the current regulatory review process is often complex, duplicative and inefficient. The regime as it stands is often difficult for industry to navigate, as well as being difficult for those stakeholders with legitimate interests in project proposals.

Not only can the current process delay major industrial projects, but it is often triggered by small, low-risk projects, diverting resources from major projects that have a higher likelihood of environmental impact.

Since 2006, the federal government has implemented some improvements to the regulatory review process. For example, amendments to the Canadian Environmental Assessment Act promoted timely environmental assessments and reduced duplication. In addition, the development of the Major Projects Management Office (MPMO) has shortened the average review time and improved accountability. Although these changes have helped, with more than 500 major economic projects planned in Canada over the next decade, Ottawa has recognized that more needs to be done.

Renewed Support for Responsible Resource Development

Introducing the Budget to the House of Commons, Finance Minister Jim Flaherty recognized that "Canada's energy and natural resources are massive assets to our country in the global economy." Measures in the Budget – including a streamlined regulatory approach, changes to tax rules that govern charities and changes to the Temporary Foreign Workers Program – are intended to capitalize on these assets.

The goal of the streamlined regulatory approach is "one project, one review, completed in a clearly defined time period." Four areas of improvement are proposed to meet this goal:

1. Making the review process for major projects more predictable and timely: The government has pledged to consolidate responsibility for review, with C$54-million over two years proposed to renew the MPMO initiative. The promised legislation sets deadlines for review from the time an application is filed: 24 months for panel reviews, 18 months for National Energy Board hearings and 12 months for standard environmental assessments.

2. Reducing duplication and regulatory burden: Because the federal government shares regulatory responsibility with the provinces, major industrial projects are often reviewed more than once. The Budget proposals would eliminate unnecessary duplication by allowing provincial environmental assessments to be substituted for federal assessments and for decision-making to be transferred between federal departments and to other jurisdictions.

3. Strengthening environmental protection: Although the Budget proposals will speed up the review process, those efficiencies are not anticipated to be at the expense of the environment. New measures to support responsible energy development include enhancing the inspection and safe navigation of oil tankers (C$37.5‑million over two years), strengthening pipeline safety (C$13.5-million over two years to be funded by industry) and funding of the Northern Pipeline Agency which oversees planning and construction of the Alaska Pipeline (C$47-million over two years to be funded by industry).

4. Enhancing consultation with Aboriginal Peoples: Aboriginal consultation will be integrated into project review with a designated lead federal co-ordinator and co-ordinated consultation between federal and provincial regulators. To support improved aboriginal consultation, the Canadian Environmental Assessment Agency will receive C$13.6-million over two years.

Proposed changes to tax rules that govern charities will also work to streamline resource development. Increasingly, foreign-funded environmental groups that have a charitable designation are using the regulatory process to delay development, especially in the oil sands. The proposals for increased monitoring and disclosure requirements will ensure that charities are operating in accordance with the tax regime that limits political activities.

Changes to the Temporary Foreign Workers Program will also support resource development by improving program responsiveness and matching labour markets that have high unemployment with those experiencing labour shortages. These proposals will help ease areas with rapidly growing labour demands, especially in the Alberta oil sands.

Implications of a Streamlined Regulatory Process

While the Budget proposals regarding resource development are widely regarded as positive, there are possible impacts that should be considered. For example, fixed timelines put the onus on project proponents to ensure that development applications are thorough and correct prior to filing. There is also some question as to whether the streamlining measures in the Budget will or can apply to existing applications. For instance, the government has indicated the new process will apply to the Enbridge Northern Gateway Pipeline proceeding, which was filed nearly two years ago and is in the process of a panel review. There has been little suggestion, however, as to how the proposed process will be integrated into an existing proceeding that is nearing the 24-month timeline.

Under the Budget, initiatives to strengthen pipeline safety and fund the Northern Pipeline Agency will be funded by industry. There is little discussion in the Budget as to how the costs of this funding will be allocated or whether industry will have any input in the funding scheme.

Finally, it will be interesting to see how integration of aboriginal consultation into the regulatory review process will meet the Crown's duty to consult with First Nations. While this duty can be delegated to governmental agencies, those agencies must be given the authority to undertake the required consultation for the duty to be effectively discharged.

These uncertainties are likely to be addressed and resolved as the Budget proposals are implemented. On the whole, the proposals appear to be a positive step towards a more efficient regulatory review process. If the proposed changes are implemented and the goals achieved, the anticipated result is increased jobs and more money invested back into Canada through new development and increased royalty revenues. The ultimate test, however, will be whether the regulatory efficiencies contemplated in the Budget are achievable without sacrificing effective and appropriate environmental review.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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