Revamping Canada’s Environmental Process

Clients are hoping for a clear process to come out of the changes in Bill C-69

On February 8, 2018, Catharine McKenna, the federal Minister of Environment and Climate Change, tabled a 341-page omnibus bill in Parliament to significantly revamp Canada’s environmental assessment processes. The proposed legislation followed up on an election promise by Prime Minister Justin Trudeau to restore public trust in an approval system for major projects, such as pipelines, that he felt had been eroded and overly politicized under the previous government that made decisions based more on politics than science.

“Canadians want a modern environmental and regulatory system [with a] clear, predictable and timely process,” McKenna said. “We believe we’ve built a much better system. We need to show the world that we will protect the environment, and that we will attract investment.”

Among the highlights of Bill C-69, An Act to enact the Impact Assessment Act and the Canadian Energy Regulator Act, to amend the Navigation Protection Act and to make consequential amendments to other Acts, would be the creation of the Impact Assessment Act (IAA) and the Canadian Regulator Act (CER). The Bill would replace the National Energy Board (NEB), which was established in 1959 and was located in Calgary, with the CER, to be located in Ottawa. The NEB of late had come under considerable criticism for its handling of issues such as public participation in the Trans Canada pipeline expansion project.

The proposed legislation followed 14 months of extensive consultations with interested parties on all sides of the often heatedly debated issues involving major oil and gas projects, especially pipelines. As is often the norm when faced with controversial initiatives, the government likely hoped the new Bill would be a compromise solution that all key players could live with.

For some lawyers working in the Oil & Gas sector, to whom the need for certainty is their clients’ consistent mantra, that goal does not seem to have been accomplished.

“These are not what I would call changes that are going to address regulatory certainty and the process uncertainty that industry has raised concerns about, in my view,” says Gord Nettleton, co-head of the National Environmental, Regulatory & Aboriginal Group at McCarthy Tétrault LLP. “What I see more than anything is a rearrangement or a shuffling of the particular sections of the existing legislation as opposed to substantive and concrete ways to improve the regulatory process.”

Although Marie Buchinski, a partner in the Calgary office of Bennett Jones LLP, said she believes some changes were required, she adds that Bill 69 “has some real, significant implications for Canadian energy projects.” The impetus to create “a modern environmental and regulatory review process that [is] inclusive and open and that will get good resource projects built, is the tailwind driving the proposed legislation.” But she is concerned that the Bill “has the real potential to create regulatory headwinds for projects going through the development stage.”

Although the Bill proposes quicker legislated timelines for the government to make decisions on major projects — the current maximum of 365 days for assessments led by the review agency would drop to 300 and the current maximum of 720 days for assessments led by a review panel would be 600 days — there is no guarantee the process will actually be faster, says Martin Ignasiak, a partner in the Regulatory, Environmental, Aboriginal and Land practice at Osler, Hoskin & Harcourt LLP in Calgary.

“The government has hung its hat on the timelines,” he says. “The reality is that the timelines in many cases are extended and under this proposed legislation there is an ability to extend them. For example, the timelines stop when the proponent is providing information. And what we have seen recently on a number of projects is that a regulator would review the material filed and then submit an information request, which may take several months to respond to. They [might] provide 50 [or as many as] 300 information requests. I don’t think the timelines will shorten the review periods. I think that in reality they will get longer.”

Matthew Keen, a partner in the Vancouver office of Norton Rose Fulbright Canada LLP, is also concerned about the potential for timing delays. “There’s an additional amount of work planned for the front-end of a project and that additional work isn’t captured by any of the legislative timelines,” he says. He, too, thinks the overall process “is going to be longer,” primarily because the new regulator has the ability “to stop the clock” once it has requested information.

While Buchinski likes that meaningful engagement and transparency are enshrined in the proposed Bill, she notes that, ultimately, “the Minister retains a lot of discretion on how the processes play out. There seems to be a lot of government involvement.”

A regulator, Nettleton says, must be independent and act in a way that has credibility. “I think that the National Energy Board, both historically and in its current form, has demonstrated both of those traits,” adding that he saw no reason to scrap the NEB.

One aspect of the proposed Bill that does seem to get support from lawyers in the oil and gas industry is the greater emphasis on taking into account the interests and traditional knowledge of Indigenous peoples. “It’s appropriate and I think a lot of the effort in modernizing the Act and the language in the Act is laudable,” says Keen.

Less well received, he says, is the proposal to eliminate any test for standing or interested party requirements. “Certainly the industry is opposed to [and] concerned about that. It presents practical difficulties when you manage a large, controversial project.” He supports public participation unless “the intent is to derail an otherwise orderly administration process.” Nettleton adds his concern that the process can become “a forum for public debate over socio-economic issues.”

Osler’s Ignasiak, however, says the new standing rules could be an improvement on past experiences with this dicey assessment-process component. “There are a number of people who complain about the more flexible standing rules [and think] leaving it to the discretion of the panel can be dangerous. I think the flexibility now exists in which the panel can say we’re going to have a town hall type of day where all groups can come. But these eight groups [for example] that are right in the vicinity of the project and are going to be directly affected are going to be entitled to file evidence and cross-examine the proponent, and so forth. I think that’s helpful discretion provided the panel exercises it properly.”

A confusing aspect of the Bill has been wording that calls for “the intersection of sex and gender with other identity factors,” when assessing a project.

“I’m not exactly sure how a regulator will interpret that requirement or how it will get applied to any particular case,” says Buchinski. Keen says the writers of the legislation, in reference to this clause, don’t understand that the industry already takes such matters into consideration. He cites, as an example, a project where some 500 workers, some 90% male, live in a work camp for, say, four years, in close vicinity to a small community. “Our clients make sure they have a world-class kitchen and recreational facilities and a gymnasium attached to the camp so their workers will not be incentivized to go into that local community. Those are already looked at.”

The major question for lawyers, of course, is whether the final legislation (it has gone through second reading and has already been presented with numerous suggested amendments), will have a negative effect on project development. The Canadian Energy Pipeline Association, as one industry proponent, certainly believes it will. “It’s really hard to imagine that somebody is going to propose a major new project to ensure that those resources get developed,” says association President Chris Bloomer. Laura Estep, a partner in the Energy Regulatory practice group in the Calgary office of Dentons Canada LLP, says less investment “is certainly a concern. Even without these changes to legislation, we’ve been seeing a reduced number of projects in Alberta in the last couple of years compared to where we were a couple of years before that. This regulatory uncertainty, along with a difficult business climate, just adds more challenges to the whole situation.”

All parties, however, are waiting to see what the final legislation will encompass.

“The devil will be in the details,” says Buchinski. A critical issue, to Keen, is that whatever the final outcome, there’s a clear decision-making process, not one governed by discretion. “Nobody wants to think that if they spend a billion dollars developing a project and think they’ve followed the rules,” he says, “one of the new criteria invoked at the last minute [can be] a reason to stop the project going forward.”

As for what possible effects a reduction in projects can have on the legal community, Keen says that if the changes are such that investment declines, “then it’s less work for lawyers. There’s a real concern that if investment dries up so does the need for lawyers to help pursue new projects.”