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A Crisis of Our Own Making: Prospects for Major Natural Resource Projects in Canada

Grant Bishop and Grant Sprague
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Grant Bishop: C.D. Howe Institute
Grant Sprague: Miller Thomson LLP

C.D. Howe Institute Commentary, 2019, issue 534

Abstract: Announcements of new energy and mining projects slowed after 2015, and, between 2017 and 2018, the planned investment value of major resource sector projects has plunged by $100 billion – an amount equivalent to 4.5 percent of Canada’s gross domestic product. Many projects in Canada have faced environmental assessments that take much longer than in comparator jurisdictions: Canadian timelines for mining projects are substantially longer than in Australia, and Canadian pipeline approvals are protracted relative to those in the United States. Environmental assessments play a critical role in mitigating negative externalities on the environment and human well-being and resolving asymmetric information between project proponents and affected stakeholders. Assessment processes, however, should not discourage socially beneficial projects by imposing excessively high regulatory costs, protracted review timelines and excessive uncertainty around the finality of approvals. Under Canada’s federal legislation for environmental assessments, most project approvals since 2012 have withstood court challenges. However, courts’ findings that federal governments failed to fulfill their constitutional duty to consult affected Indigenous peoples has resulted in the quashing of three approvals, including those for the Northern Gateway pipeline and Trans Mountain Expansion. The Minister of Justice and Minister of Crown-Indigenous Relations should update guidance for federal officials to ensure consistent consultation of Indigenous peoples – particularly prior to Cabinet’s decision – that satisfies the requirements from the past decade of case law on the duty to consult. With investment in Canada’s resources sector already depressed, the federal government’s proposed Bill C-69 could further discourage investment in the sector by congesting the assessment process with wider public policy concerns and exacerbating the political uncertainty facing proponents with a highly subjective “public interest” standard that would likely apply to every project subject to an assessment. To address fundamental problems in Bill C-69, legislation for impact assessment must: specify considerations for assessing projects that can be scoped and applied with reasonable consistency and predictability; preserve the role of independent and expert lifecycle regulators (specifically, the National Energy Board/Canadian Energy Regulator and Canadian Nuclear Safety Commission) in leading assessments; require a ”significant” standard for a project’s effects before involving political decisionmakers in approving the project; and specify a standard for “standing” that ensures review panels can focus proceedings on relevant submissions. The federal government should undertake to compile and annually report on timelines for federal environmental assessments across major projects in Canada, as well as regularly and publicly benchmark performance relative to timelines for provinces and other countries – such as the United States and Australia.

Keywords: Energy and Natural Resources; Capital Projects Costs and Benefits; Electricity; Environmental Policies and Norms; Oil and Gas; Regulatory Burden; Resources Rights and Management (search for similar items in EconPapers)
JEL-codes: Q58 (search for similar items in EconPapers)
Date: 2019
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