Regulatory Delay and the One Project-One Assessment Proposal

Written By Marie H. Buchinski, Kelsey J. Drozdowski, and Celeste M. Hutchinson

In Canada, the federal, provincial and territorial governments have assumed a role in the development and operation of various energy projects, particularly those that have the potential to impact the environment. This separation of jurisdiction between the levels of government, arising in part from the division of powers under the Constitution Act, 1867, has demonstrably contributed to regulatory delays regarding project approvals because of the sometimes difficult task of coordinating the review of the project amongst the levels of government, and even within one particular level of government. Delays in the regulatory approval process can have significant and negative impacts upon industrial development in Canada, with impacts reaching far beyond the proponents of the particular project.

Take, for example, the oft-cited Mackenzie Valley Pipeline, the applications for which were filed with regulators in the fall of 2004 and spring of 2005. While the Joint Review Panel conducting the regulatory review of the project concluded its public hearings on November 29, 2007 – close to two years ago – after 115 days of hearings in 26 communities recorded on more than 11,000 pages of transcripts, and more than 5,000 submissions, the Joint Review Panel has not yet issued its final report, which must be submitted to the federal government and to the National Energy Board for their consideration before further regulatory decisions can be made and the project can proceed. This regulatory delay, along with rising costs and more recent concerns regarding demand for natural gas, has put the fate of the pipeline into question.

The impacts do not stop there. Calgary-based MGM Energy Corp. recently announced that it will cancel its Arctic drilling program this winter, resulting in a $10-million penalty to the Inuvialuit Regional Corp. in August 2010. MGM's press release indicates that the cancellation is due to the uncertainty regarding the Mackenzie Valley Pipeline.

In recognition of the difficulties that can arise from such delays in the regulatory process, recent efforts have been aimed at coordinating the federal, provincial and territorial regulatory processes. In January of this year, the Canadian Council of Ministers of the Environment (CCME) published Potential Models of a One Project-One Environmental Assessment Approach which identifies four potential models for streamlining the environmental assessment (EA) processes in Canada as identified by the Environmental Assessment Task Group. Three of these models (Joint Process Model; Delegation Model; Substitution Model) focus on achieving a single EA process by, in part, adopting a single set of information requirements. The fourth model – the Coordination (Harmonization) Model – contemplates either separate or combined information sets. All, however, are aimed at achieving a more streamlined regulatory process by creating a single, jointly implemented process, having a single jurisdiction or process to conduct the EA process, or by increasing coordination between EA authorities. While these proposals would not require a transfer in the ultimate, decision-making authority, each of these models would require changes to the current EA processes and to existing legislation, which in itself could involve lengthy processes.

The CCME is not the only impetus for change. Canadian federal, provincial and territorial ministers for the energy and mining industries recently discussed regulatory delays at the 2009 Energy & Mines Ministers Conference held on August 31 and September 1, 2009. There, the Canadian Mineral Industry Federation (CMIF) urged the ministers to take action to sustain Canada's exploration and mining sectors and to encourage economic recovery by undertaking regulatory restructuring. The CMIF identified several concerns with the current process, including duplicative regulatory systems, arguing that ambiguity in this and other areas could have the potential to stifle Canada's status as a destination for capital investment.

The current economic state in Canada and the goal of creating economic stability has created additional pressure upon governments to streamline their regulatory processes. Canada's energy and mines ministers agreed that to maintain prosperity and to fully recover from the current economic situation, Canada must continue to be at the forefront in developing and deploying new technologies, advancing research, and developing solutions to regulatory, social and environmental challenges. The ministers affirmed their commitment to immediate action that would improve Canada's regulatory system through the creation of a “one project-one assessment” approach to EAs that would support the competitiveness and sustained growth of the energy and mining industry.

So, what now? What we do know is that the ministers have agreed to task senior officials to work with their counterparts responsible for EAs and related regulatory approvals on fundamentally improving performance, and to report back to the 2010 conference. We also know that recent publications attempt to address the degree of uncertainty that often arises for projects requiring regulatory approvals, including the Environmental Assessment Scoping Guidance for Energy and Mining Projects (July 24, 2009). This document sets out 42 best management practices aimed at reducing the uncertainty that is attributable to the scoping phase of an EA. It is proposed that these best management practices be applied by decision making authorities and technical expert departments in relation to scoping, process management, relationship management, documentation, policy management and guidance. Of note are recommended best practices #24, #25, and #26 related to the establishment of EA agreements for joint panel reviews with other jurisdictions; the identification of one overall coordinator of the EA process; and encouraging the use of one scoping document for multi-jurisdictional EAs to detail the scope of the project and of the assessment for all of the decision making authorities involved. However, the specific ministerial commitments leave unanswered questions as to how the commitment to immediate action will be implemented.

Combined with existing federal-provincial protocols and existing provisions of the Canadian Environmental Assessment Act for governmental cooperation and harmonization respecting EAs, these recent attempts to improve process efficiencies may assist in reaching the ultimate creation of a “one project-one assessment” approach to EAs across Canadian jurisdictions. Considering however the potential fate of the Mackenzie Valley Pipeline and the recent MGM announcement of a $10-million penalty, the question is whether this recent push for regulatory reform will be “too little, too late”, at least for some participants in the Canadian economy.

The federal proposal for a “one project-one assessment” approach to EAs is not the only current initiative seeking to streamline regulatory approval processes. The Alberta Environment Ministry is considering an option that would remove certain in-situ oil sands developments from the mandatory list for environmental impact assessments. Rather, a “code of practice” would be developed that industry would agree to abide by, in an effort to create a more efficient and streamlined regulatory process, reducing the potential for lengthy regulatory delays.

Pending implementation of further rationalization/streamlining initiatives, it will continue to be critical for project proponents to utilize existing EA harmonization tools, and to develop project teams, including legal, that are able to advance projects on a multi-front jurisdictional basis. In other words, to the extent that there is potential for delay, ensure it is not self-inflicted.