Canada: Public Affairs

Last Updated: March 1 2019
Article by Michael Agosti

Government affairs and policy: 2019 issues overview

2019 will present a number of key policy and political challenges that are important for businesses to track and manage. This includes, in particular, a number of critical issues that will pit the Government of Canada, under Prime Minster Justin Trudeau, against provinces now led by Conservative premiers eager to take on the federal government in an election year. This includes pipeline politics (namely, construction of the Trans Mountain Expansion Project), implementation of pan-Canadian carbon pricing, regulatory modernization (Bill C-69 / National Energy Board (NEB) reform), the Alberta election and national Pharmacare.

This high-level overview considers these challenges in the context of the forthcoming 43rd Canadian federal election, scheduled to take place on or before October 21, 2019. The period between now and when the House of Commons rises on June 21, 2019, will be an important period for firms to manage their engagement with the federal government, as officials shift their focus from governance and policymaking to campaigning. 

Trans Mountain Expansion Project (TMX)

At the same time that Kinder Morgan shareholders approved the sale of the Trans Mountain Pipeline to the federal government in late May of 2018, the Federal Court of Appeal quashed the Governor-in-Council's Order under the NEB Act which directed the NEB to issue a Certificate of Public Convenience and Necessity (CPCN) (a permit which is needed to construct and operate federally regulated pipelines of this length) finding that federal government consultations with First Nations were inadequate and that the NEB failed to include marine shipping in the scope of the project. NEB will prepare a final report by February 22, 2019 that will include a recommendation to the federal government as to whether to issue a new CPCN and will consider the marine safety issue in BC to address concerns about the impact on all species including the Southern Resident Killer Whale. The federal government's Phase III consultation with First Nations will be based on the NEB Report. Public support for TMX has begun to crystallize; however, federal NDP leader Jagmeet Singh (who is running in Burnaby South - the location of the TMX terminus) will continue to oppose the project, using it as a wedge issue. TMX will remain front and centre in 2019 and will generally influence the public's level of support for fossil fuel and natural resource development.

Pan-Canadian climate framework: Carbon pricing

In October 2016, the federal government announced the Pan-Canadian Approach to Carbon Pollution, thereby setting a federally-mandated benchmark price on carbon. The price was initially set at CA$20 a tonne, which will increase to CA$50 a tonne in 2020. This policy has and will continue to face significant headwinds in 2019, particularly from Alberta, Ontario, New Brunswick and Manitoba.

Alberta implemented its own carbon price on January 1, 2018, under the Notley government's Carbon Competiveness Incentive Regulation (CCIR), which means the province will not immediately be impacted by the federal policy. The CCIR benchmarks emissions performance across all facilities producing the same products. Alberta's current price is CA$30 per tonne and its gasoline tax is 6.73 cents per litre. Notably, Alberta has permanently withdrawn from further increasing its price on carbon until the federal government makes progress on TMX. United Conservative Party (UCP) leader Jason Kenney has said that, if the UCP wins the forthcoming Alberta election (which must be held by May 31, 2019), it will repeal economy-wide carbon pricing, but will maintain a carbon price for large industrial emitters.

In October 2018, the Ontario government under Premier Ford cancelled the province's cap-and-trade regime and committed to fighting the federal government on carbon pricing. Shortly after, it delivered its 'Made-in-Ontario Environment Plan', which cites significant climate policy initiatives (such as a shutdown of coal-fired electric plants, previously implemented by the Wynne government), and focuses on 'climate resilience' measures (such as energy efficiency, land use planning, and disaster recovery) rather than carbon pricing. The Ford government has initiated a constitutional challenge to the federal pricing regime in the Ontario Court of Appeal. This follows an earlier court reference case launched by the government of Saskatchewan challenging the constitutionality of Ottawa's carbon pricing legislation. Last year, Manitoba initially agreed to a flat tax of CA$25 a tonne, but then backtracked on this commitment when it learned it would not be able to maintain that price level under the federal regime. Further, in late 2018, the federal government rejected New Brunswick's climate plan, making it subject to the federal benchmark, which that province opposes. Taken together, Alberta, Ontario, New Brunswick and Manitoba, are strongly incentivized to challenge the federal government's carbon tax this election cycle.

Bill C-69 (NEB modernization)

Bill C-69 seeks to overhaul both the National Energy Board Act and the Canadian Environmental Assessment Agency Act, changing how major infrastructure projects are reviewed and approved in Canada. This includes replacing the NEB with a new Canadian Energy Regulator and federal environmental assessments process, led by a new Impact Assessment Agency. The energy sector and energy-producing provinces, most notably Alberta, have heavily criticized the bill, which has passed through the House of Commons and is currently with the Senate for review. The federal government has expressed an openness to amend the bill, and the business community widely supports such a move. Modernization of the NEB and the ability to ensure major projects are approved and built under the new regime will be a major test for the federal government. This is particularly important for international oil market access and investment attraction.

Federal-provincial division: Alberta election

Alberta's 30th general election will take place on or before May 31, 2019. Rachel Notley's NDP will face stiff competition from Jason Kenney's UCP. The UCP has positioned itself as staunchly pro-energy industry in ways that contrast with the Notley and Trudeau governments. The following positions are worth highlighting:

  • If elected, Kenney will align with Ontario Premier Doug Ford, Saskatchewan Premier Scott Moe, and Leader of the Conservative Party of Canada, Andrew Scheer, to oppose the federally-mandated carbon pricing regime.
  • The UCP will continue to advocate for TMX. The federal government is currently undertaking indigenous consultations, as per the direction of the Federal Court of Appeal, and aims to have shovels in the ground before the federal election in October. The UCP would likely advocate for the development of TMX in ways that test the Trudeau government.
  • The UCP will oppose the federal government on its oil tanker ban in Northern BC (Bill C-48), which will further challenge the federal government on its willingness to support Alberta and the energy sector, attract investment, and manage the natural resource economy more generally.
  • The UCP will advocate / push for the withdrawal of Bill-69, to which, as noted above, industry is lobbying for amendments.

National Pharmacare

In the 2018 Budget, the federal government launched a yearlong consultation into the future of Pharmacare in Canada, led by Dr. Eric Hoskins, former Minister of Health in Ontario. These consultations will inform what broad-based institutional reforms might look like, and may be a focal issue during the federal election campaign. Without question, this process—and the recommendations of the Hoskins Council—will require close observation. Another aspect of the Pharmacare debate that is worth highlighting are reforms to the Patented Medicine Pricing Review Board (PMPRB), which will likely be decided on in the first quarter of 2019. These reforms will change the methodology for patented medicine pricing in Canada and will force cost reductions. It remains to be seen, however, how PMPRB reforms will align with the adoption of some incarnation of national Pharmacare, if at all.

The NDP, under leader Jagmeet Singh, is strongly advocating for sweeping reforms, and has sent a letter to Prime Minister Trudeau urging the government to implement a universal single-payer system immediately. The Conservatives have been significantly more muted on the matter thus far, though they will, without question, become more vocal in the coming months. If both the Liberals and NDP are advocating for increased coverage (for those approximately 10 percent of Canadians who do not have it), and lower costs, it will be difficult for the Conservatives to oppose reform to the system. Of particular importance is how Conservative leaders at the provincial level stake out their positions and engage with the federal government should national Pharmacare reforms be adopted.

Conclusion

While this list is not exhaustive, it highlights a number of key issues that will pit Conservative premiers and the federal Conservative Party against the federal Liberals this election year. In doing so, the federal government will be challenged on its management of the energy / environment portfolios, and its ability to bolster investor confidence and grow the economy. While Pharmacare is a bit of a wild card, as the public debate has yet to mature, it may also serve as a flashpoint between Conservative premiers and the Federal government. Taken together, and coupled with challenges surrounding the ratification of the Canada-US-Mexico Agreement (CUSMA), Steel and Aluminum tariffs, Brexit, immigration, housing availability, Canada-China relations, and international leadership more generally, this election cycle will no doubt be turbulent.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com

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. Specific Questions relating to this article should be addressed directly to the author.

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