By Martha Hall Findlay
Published in the Globe and Mail
February 21, 2018
The federal government is putting a new face on the National Energy Board, now to be called the Canadian Energy Regulator, and the Environmental Assessment Agency is being replaced by the Impact Assessment Agency. One of the major promises being made is that these new rules will improve trust in the process and, in so doing, make it more likely to get major energy projects built, built sustainably and built in a timely way.
We commend many of the stated intentions and several of the proposed changes – some of which we had recommended. However, issues of major concern remain. One in particular is the fact that the process still allows for political veto by the minister or cabinet at the end.
If the problem in the old process is one of trust, how can politicians expect Canadians to trust this new process any more, if they don’t?
No matter how transparent the process, no matter how much engagement with Indigenous communities there is, no matter how thorough the impact-assessment process is, no matter how much time, effort and money is spent on the preapplication process or the actual assessment process and no matter whether a proponent is able to meet all conditions that may be put on a project – the minister of the environment and/or the federal cabinet can still, at the end of it all, just say, “Shucks, sorry, we’ve changed our mind.”
If there is a single aspect of what we had before that needed to be changed, that was it. But it’s still there.
Politicians say that they must ‘ensure that government is accountable,’ that ‘they are elected to make decisions that are in the national interest.’ We absolutely agree. It is a fundamental part of our democracy – we vote for people to make just those very decisions. Except that it should be done up front, where the vision, the strategy, the approach can be debated and confirmed. Leaving it to the end leaves it open to politicians to act, not necessarily in the national interest, but in their political interests. This ‘wait until the very end’ veto power, by just one politician or a small group of politicians, renders the whole system uncertain and subject to political whim.
Canada depends on investment, both domestic as well as foreign. Without investment, we die. If we can’t compete for that investment – if potential investment chooses to go somewhere else – we all suffer. This may offend some people, but it’s how the world works. It’s how most of us make a living. More investment means more prosperity. Less investment means less prosperity. No investment means … you get the idea. Canada would be in deep trouble.
But investors need one basic thing: confidence in achieving a return in a reasonable period of time. There is always some risk – will the price of a commodity go down too far? Will the price of an input go too high? But those are risks that the investors manage. The things that are beyond their control – the political and legal environments – need to be reliable. So-called banana republics of the past were mostly shunned by investors because they didn’t know if their investment would be nationalized or expropriated from one government or dictator to the next, or would be a pawn in another coup.
Because investors need certainty above all else, one of the key reasons for Canada’s prosperity is that it has been an attractive, reliable, rule-of-law kind of place to invest.
Unfortunately, that reputation has been disappearing. In the energy sector alone, we have seen several major projects cancelled by proponents because of the time and money our regulatory system costs. But most problematic are two examples of the uncertainty caused by political veto. The Northern Gateway project cost anywhere from $500-million to a billion dollars and took 10 years to be approved, with conditions, by the federal government, only to have the next federal government kill it, for politics, after more time and money spent in good faith to meet the first government’s conditions.
The NEB approved the Kinder Morgan Trans Mountain expansion (TMX) in 2016, with 157 conditions. TMX met the conditions and the federal government gave final approval. But then, the government of British Columbia issued five additional demands. Some argued that this requirement went beyond B.C.’s constitutional rights given that TMX is a federal undertaking – but Kinder Morgan agreed to comply with all five. Three of those were that TMX successfully complete B.C.’s own environmental-review process; that there be established world-leading marine oil-spill response, prevention and recovery systems for B.C.’s coastline and ocean, specifically to manage and mitigate the risks and costs of heavy oil pipelines and shipments; and that the systems to manage and mitigate the risks and costs of heavy oil pipelines. The other two involved Indigenous rights and economic opportunity and a financial commitment ostensibly to address risk viewed as borne by the province.
Another year passed with Kinder Morgan working diligently and in good faith to meet these extra conditions. In 2017, the B.C. government said, “Okay, you’ve met them.”
Then the B.C. government changed hands (like the federal government had in 2015) and now, the new gang are saying that having met all of those prior commitments is still not enough.
If, in Canada, the commitment of a government is worthless when that government changes, who in their right mind would spend years, and huge amounts of money, without some certainty that if they comply with all of the rules, they will be able to build? Particularly when other places beckon, such as Mexico, with its newly opened energy sector, or the United States, now with lower taxes, an effort to reduce regulatory burden and a far more welcoming attitude?
This may make certain activists happy. It most certainly makes U.S. oil companies very happy to pay half-price for Canadian oil because we can’t get it to any other market. But the majority of Canadians should be furious at how a small number of people are jeopardizing such an important part of our economic prosperity – our national interest.
Let our elected politicians make the decisions and the rules that we elect them to make – but up front. But if we are to trust those rules, we need to know that the politicians do, too.
Martha Hall Findlay is president and CEO of Canada West Foundation.