Dive Deeper – update on Federal Energy issues

Regulatory uncertainty and limitations to market access in Canada has resulted in a chill on foreign investment, caused international companies to divest from Canada, and have negatively affected Canada’s business environment by eroding our global competitiveness. In this month’s Dive Deeper, we take stock of some of the sources of uncertainty that fall under the federal government’s jurisdiction. First, we discuss the current state of the Trans Mountain Pipeline Expansion project, provide an overview of Bill C-69, and conclude by discussing Bill C-48, the Oil Tanker Moratorium Act.

This is a topic of great importance for all Canadians. To initiate essential conversations across the country, eight Chambers of Commerce and Boards of Trade have come together under the banner of the Canadian Global Cities Council to lead a National Resource Dialogue. This dialogue will be launched at the annual Federation of Canadian Municipalities conference and trade show in Quebec City at the end of May. The goal of this conversation is to be a unifying voice in all regions of Canada, highlighting that we can be world leaders in all forms of energy.

Trans Mountain Pipeline Expansion

One of the more contentious issues falling under the federal government’s jurisdiction is the Trans Mountain Pipeline Expansion (TMX) project. The frequently discussed project has taken on broader significance as a symbol of Canada’s inability to build major infrastructure projects. To date, the project has embodied issues with: interprovincial disagreements and trade barriers in Canada, government intervention in the private sector, and uncertainty in Canada’s regulatory processes. The combination of which have stalled the project despite receiving approval from the National Energy Board (NEB) in 2016, when the regulatory body concluded that the project was in the best interest of the public.

Despite the approval and the purchase of the project in May 2018 by the Government of Canada, aspects of the recommendations report around the applications of the Canadian Environmental Assessment Act and the Species at Risk Act to project-related marine shipping was referred back to the NEB for reconsideration in September. The reconsideration, yet again, increases the time required to receive approval. The February 2019 report from NEB brought forward 156 conditions on the project for the proponent, instead of the original 157. The report also introduced 16 new non-binding recommendations for the federal government on matters falling outside the NEB’s regulatory mandate but within the federal government’s.

This decision started the clock on the 90-day deadline for cabinet’s decision on whether the project should proceed or not. However, on April 18, the Minister of Natural Resources extended this deadline to June 18, 2019 in order to complete Phase III Crown consultations. Although it adds to the overall timeline, it is important that the federal government ensure they take the necessary steps to fully consult with impacted Indigenous communities.

The negative effects on jobs and investments in Canada as a result of uncertainties around getting major projects built have harmed all households from coast to coast. Getting TMX built will be a step in the right direction in demonstrating that Canada is open for business. It will also allow companies in Alberta to get our responsibly-produced resources to global markets and once built, help alleviate some of the takeaway constraints that oil producers are currently facing. Reducing regulatory uncertainties and providing certainty around review timelines must be a priority for the federal government going forward if we wish to retain and attract investments in our country.

For a summary of the Chamber’s work and timeline of the project leading up to the reconsideration request click here.

Status of Bill C-69 and Senate Hearings

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, has been referred to the Standing Senate Committee on Energy, the Environment and Natural Resources for review following its second reading in the Senate in early December last year.

The Committee announced in February that it would hold hearings across Canada for input from impacted parties on the project assessment bill. During the Hearings, taking place between February and late April, the Committee heard from a broad range of perspectives. This included provincial governments, industry groups including: the Canadian Association of Petroleum Producers, Railway Association of Canada, Canadian Nuclear and Electricity Associations, multiple chambers of commerce, national and international corporations, environmental advocacy groups, and think tanks across the country. Scheduled stops for the Hearings were in Ottawa, Vancouver, Calgary, Fort McMurray, Saskatoon, Winnipeg, St. John’s, Halifax, Saint John, and concluded in Quebec City.

A full list of participants for all hearings can be found here.

These hearings stem from concerns of industry and government officials alike around the lack of clarity and complicated regulatory changes that Bill C-69 would put in place. The bill, first introduced in February 2018, would establish two new regulatory bodies responsible for completing environmental impact assessments, The Impact Assessment Agency of Canada and the Canadian Energy Regulator, with the latter replacing the National Energy Board.

The federal government’s intention when passing the bill was to create a regulatory environment where the approval of major projects in Canada is streamlined. However, in its current form C-69 would have the opposite effect. It would create uncertainty around timelines, assessment factors and remove predictability. It would also leave the final decision in the hands of the federal cabinet leading to further politicization of the regulatory system.

The current uncertainty around building major projects in Canada is resulting in a chill on foreign investment, international companies divesting from Canada, and contributing to an overall lack of competitiveness for Canadian businesses. The Chamber along with other industry groups have been vocal in their advocacy about the need to amend Bill C-69.

The Calgary Chamber had the opportunity to voice its concern with the bill directly to the federal government in late January when President and CEO Sandip Lalli met with the Minister of Environment and Climate Change and the Minister of Natural Resources. The meeting was attended with five other big city chambers and boards of trade across the country with similar concerns.
The meeting follows a submission to the Senate Committee that the Chamber filed in October last year with recommendations to improve the bill.

The Calgary Chamber has also combined efforts with the Alberta Chambers of Commerce (ACC) in December to increase advocacy capacity for this issue. Together the recommendations include:

1. Increase certainty around review timelines;
2. Emphasize science-based decision making;
3. Ensure those most impacted by a project are heard;
4. Create confidence with a federal backstop (reduce financial risk for project proponents);
5. Clarify the project criteria and eligible projects.

The Calgary and Alberta Chambers are not the only groups concerned with Bill C-69. The Canadian Energy Pipeline Association, Canadian Association of Petroleum Producers, other business associations, and companies across the country have also been vocal in their concerns around the impacts of the bill. These groups have expressed similar concerns to the federal government through the Senate hearings and advocacy of their own. All parties are aligned on one glaring concern: Bill C-69 erodes Canada’s global competitiveness and reduces investor confidence in our country.

With the clock ticking on the final session of Parliament before this year’s federal election, the time left to see meaningful amendments to Bill C-69 is dwindling. Without major amendments, Bill C-69 will continue to erode investor confidence and harm Canada’s global competitiveness.

Status of Bill C-48

Bill C-48 was referred to the Standing Senate Committee on Transport and Communications, following a second reading. The Oil Tanker Moratorium Act, passed by Parliament in May last year, would prohibit any tanker carrying more than 12,500 metric tons of crude or persistent oil from stopping or unloading at ports or marine installations from the norther tip of Vancouver Island to Alaska’s border.

If passed the bill would prevent Canadian petroleum products from getting to international markets and directly harm Alberta, Saskatchewan and British Columbia’s economies. The ban, that targets the oil and gas industry specifically will also have impacts across the country by further constraining exports of responsibly-produced Canadian energy products. The proposed legislation does not address tanker traffic in any other part of the country and does not address tanker traffic from the United States that sail down from Alaska regularly. It targets a specific commodity in a single region.

A lack of consultation before passing the bill is also evident in this case. Along with resistance from industry, several Indigenous communities have vowed to pursue legal action against Bill C-48 and expressed serious concerns around the lack of consultation before it was passed. If it receives Royal Assent the bill would effectively kill the Eagle Spirit Energy Corridor Project, as the prospective port for the project is within the moratorium zone. This would harm the economic development of the 35 First Nations along the pipeline’s proposed corridor who would otherwise directly benefit from the project. Without tankers, there can be no pipeline, drastically harming the economic development in these communities.

The narrow scope of the Oil Tanker Moratorium Act unfairly targets one region and will harm our province’s economy. It also disproportionally represents Indigenous interests by not fully consulting and representing all viewpoints. The bill must be scrapped to allow our energy products to get to global markets and ensure that Alberta can compete globally.

Moving Forward

Canada’s natural resource and energy sectors has faced an uphill battle in recent years due to price differentials and market access issues, harming investor confidence. This has been further amplified by regulatory uncertainty that was added through the introduction of Bills C-48 and C-69, as well as the ongoing fight to get Trans Mountain Pipeline Expansion built.
The Government of Canada must make the amendments necessary to ensure that it provides a fair and clear regulatory environment which in turn will attract investments to our country.