Canada: 2012 - A Year Of Unprecedented Energy-Related Regulatory Reform

INTRODUCTION

Prompted in part by the need to improve regulatory efficiency to ensure Alberta's energy industry is attractive to capital investment, 2012 saw an unprecedented level of energy-related regulatory reform, primarily environmental, both at the provincial and federal levels. What follows is a summary of some of the more significant developments.

PROVINCIAL REFORMS

At the Provincial level, these regulatory reforms included the following:

a) Bill 2, Responsible Energy Development Act (REDA)

REDA, which received royal assent on December 10, 2012 but which has not yet been proclaimed in force, provides for the appointment of a single regulator, the Alberta Energy Regulator (Regulator), which will assume the energy development regulatory functions currently administered by the Energy Resources Conservation Board (ERCB) and Alberta Environment and Sustainable Resource Development (AESRD). The Regulator is scheduled to be operational by June 2013.

Significantly, REDA provides that the Regulator has no jurisdiction with respect to assessing the adequacy of Aboriginal Crown consultation. As a result, the long standing debate on this issue with respect to the ERCB will effectively come to an end.

There are a number of significant matters with little or no mention in REDA. An example is the establishment of the Policy Management Office, which is to act as an interface between the policy development level of the new structure (comprised of the policy functions of Alberta Energy and AESRD) and the policy assurance level (i.e. the Regulator). Despite having been recommended by the Regulatory Enhancement Task Force in its December 2010 Report, and notwithstanding its reference in the Backgrounder which accompanied Bill 2, there is no mention of the Policy Management Office in Bill 2. Presumably this, as well as numerous other matters, will be addressed in regulations yet to be made.

It remains to be seen how effectively the objectives of environmental responsibility and resource development are co-managed under the new system. Once the Regulator has been in place, an assessment will be able to be made as to the legitimacy of the criticisms suggesting that the appointment of the Regulator will remove some or all of the current environmental checks and balances and shift the Regulator's role to one of permitting only.

The next step in the implementation of the Regulator will be the appointment of the Chair of the Transition Committee, which will be followed by a process that will lead to the appointment of the Executive Officer. Following the proclamation of REDA, the Chair and Executive Officer of the Transition Committee will become the Chair of the Board of Directors and Chief Executive Officer of the Regulator, respectively.

b) The Lower Athabasca Regional Plan

On September 1, 2012, the first of seven regional plans under Alberta's Land Use Framework and Land Stewardship Act (ALSA), the Lower Athabasca Regional Plan (LARP), came into force. Under LARP, which implements provincial policy at a regional level, there is a continued focus on cumulative effects management, requiring consideration of the combined impacts of existing and future activities.

As a result of LARP, six new conservation areas in the Lower Athabasca Region have been established. Future oil sands development will be precluded for these areas, which constitute roughly 22 million hectares (approximately 22% of the Region).

Through the use of management frameworks, LARP identifies and sets environmental limits or thresholds for air, land, water and biodiversity receptors in the Region, and establishes triggers to warn if any of those limits are being approached.

As set out in REDA, the Regulator, in carrying out its powers under REDA or any other enactment, must act in accordance with any applicable ALSA regional plan. As such, LARP will continue to guide all future resource regulatory development decisions in the Lower Athabasca Region.

c) The Alberta Environmental Management Agency

Building on LARP, on October 17, 2012, the Alberta Government announced the establishment of a new arm's length environmental monitoring agency, the Alberta Environmental Management Agency (Agency). The first of its kind in Canada, the Agency will utilize a science-based approach to monitor, evaluate and report on land, air, water and biodiversity. The data collected, which will initially be from the Lower Athabasca Region, will be scientifically credible, accessible and open.

The creation of the Agency follows work conducted and recommendations made by the Alberta Environmental Monitoring Panel, appointed January 2011, and the Alberta Working Group on Environmental Monitoring, Evaluation and Reporting, appointed March 2012, which culminated in reports dated June 2011 and June 2012, respectively.

A 6-member Management Board appointed by the Minister of Environment and Sustainable Resource Development, led by Chair, Dr. Howard Tennant and Vice-Chair, Dr. Ron Wallace, will oversee the creation of the Agency, and will operate until the Agency has been established. The Management Board will determine how the Agency will operate, including how it will be funded (the intention is that the costs will be industry funded to the tune of approximately $50 million annually). As set out in its Terms of Reference, the Management Board has also been tasked with establishing a Science Advisory Board to provide input and advice on monitoring efforts.

FEDERAL REFORMS

At the Federal level, regulatory reform in 2012 was equally swift and sweeping.

a) Bill C-38, the Jobs, Growth and Long-term Prosperity Act, and CEAA 2012

Bill C-38, the Jobs, Growth and Long-term Prosperity Act (Bill C-38), was first introduced in Parliament on April 26, 2012. An omnibus Bill in excess of 400 pages, Bill C-38 implements many of the initiatives set forth in the 2012 federal Budget, which included commitments to streamline the review process for major economic projects. To this end, Bill C-38 amended several federal environmental statutes including:

  1. the National Energy Board Act;
  2. the Fisheries Act; and
  3. the Species at Risk Act.

Most notably, Bill C-38 also repealed the former Canadian Environmental Assessment Act, and replaced it with the Canadian Environmental Assessment Act, 2012 (CEAA 2012), which has been in force since July 6, 2012. In summary, CEAA 2012: a) furthers the federal government's objective of "one project, one review"; and b) results in the federal environmental assessment (EA) process being: (i) more predictable and timely; and (ii) focused primarily on major projects having the potential to cause significant environmental effects by, among other things:

  • eliminating screening level EAs (only review and joint review panel EAs, and EAs conducted by Responsible Authorities (RAs), roughly equivalent to the former comprehensive studies, exist under CEAA 2012);
  • narrowing the definition of "Environmental Effects";
  • reducing the number of RAs to 3 – the Canadian Environmental Assessment Agency (Agency), the NEB and the Canadian Nuclear Safety Association (CNSA) (other RAs may be added by regulation or order);
  • identifying projects in areas of federal jurisdiction to which the EA process is applicable: a) by regulation (the Regulations Designating Physical Activities); or b) by designation by the Minister of the Environment (Minister) prior to the start of a project or exercise by a federal authority of a power or duty with respect to that project (as opposed to the EA process being "trigger based", which was formerly the case);
  • fixing the timelines for all EA processes – 1 year for EAs conducted by the Agency, 18 months for reviews conducted by the NEB and 2 years for panel reviews (subject to a 3 month extension by the Minister, a further extension by the Governor in Council and any time taken by the project proponent to respond to a request for further information, during which time will not run);
  • providing for the potential (in the case of Agency assessments, but not review panel EAs or EAs conducted by the NEB or CNSA) for significantly reduced federal involvement for matters requiring concurrent federal and provincial EAs, by the introduction of substitution provisions (where a provincial process, but not the ultimate decision, is substituted for a federal EA) and equivalency provisions (where a designated project is exempted entirely from the application of CEAA 2012); and
  • providing for federal regional studies, which may be used to streamline an EA or support a decision to not conduct an EA.

b) Bill C-45, the Jobs and Growth Act, 2012

Bill C-45, the Jobs and Growth Act, 2012 (Bill C-45), which builds on Bill C-38, contains certain housekeeping and other relatively minor amendments to the Fisheries Act and CEAA 2012.

Of greatest significance, however, Bill C-45 will rename the existing Navigable Waters Protection Act the Navigation Protection Act, and will repeal and replace the majority of its existing provisions. Most significant among the amendments, works will no longer be prohibited over all navigable waters, but only in respect of the relatively circumscribed list of navigable waters set out in a Schedule to the Act, which includes three oceans, but only 97 lakes, 62 rivers and a few canals. Approvals will not be required for works in respect of navigable waters not listed in the Schedule.

c) Idle No More Movement

The Idle No More movement, whose roots may be traced to a "teach-in" held in Saskatoon on November 10, 2012 following the Harper Government's introduction of Bill C-45, says it wants to "stop the Harper government from passing more laws and legislation that will further erode treaty and indigenous rights and the rights of all Canadians." While it has identified a number of federal Bills affecting native sovereignty, Bills C-38 and C-45 are at the forefront of the movement's concern.

On January 8, 2013, the Mikisew Cree and Frog Lake First Nations filed with the Federal Court, notices of application naming the Governor General in Council and various federal Ministers, seeking judicial review of the "ongoing course of conduct...intended to reduce federal environmental protection and environmental assessment" in the First Nations' traditional territories. The applications seek a number of declarations and orders, including that the federal government breached its duty to consult with the First Nations regarding the implementation of Bills C-38 and C-45 and the development of the environmental policies that led to the introduction of those Bills. An order is sought preventing the Ministers from taking any further steps that would limit Canada's role in any environmental assessment that may be carried out in their traditional territories, until adequate consultation is complete. If successful, the federal streamlining reforms under Bills C-38 and C-45 will be in jeopardy.

These proceedings are ongoing.

CONCLUSION

As is evident, industry is now faced rather suddenly with a considerable amount of new and very different regulatory requirements. In order to be able to effectively navigate its way through this uncharted territory, it will be forced to address a number of very challenging transitional and other issues.

We intend to continue to monitor the ongoing development of the provincial and federal regulatory reforms impacting Alberta's energy industry, including the introduction of numerous regulations which have yet to be passed in furtherance of the new and amended provincial and federal legislation.

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