This article originally appeared in the Hub.
By Michael Gullo and Heather Exner-Pirot May 27, 2024
“Getting major projects built means more jobs, in more regions across Canada, and more opportunities for the next generation of workers. Canada’s regulatory system must be efficient and quicker—it shouldn’t take over a decade to open a new mine and secure our critical minerals supply chains.”
These are not our words, though they could be. They come verbatim from Budget 2024. After almost nine years in office, the federal government is recognizing that slow, opaque, and duplicative regulatory processes are not good for anyone and they need to be fixed. We couldn’t agree more. But the first thing that needs fixing is the government’s credibility on the issue.
The government’s messaging is evolving on account of a shift in public opinion and a growing sense of frustration that Canada is a difficult place to build major projects. In Budget 2023, the government committed to releasing a concrete plan by the end of 2023 to improve regulatory and permitting processes. That plan was never released by the end of 2023, and the responsibility was punted to a new Ministerial Working Group on Regulatory Efficiency for Clean Growth Projects, led not by usual suspects Environment Minister Steven Guilbeault or Energy and Resources Minister Jonathan Wilkinson, but rather Labour Minister Seamus O’Regan, who has arguably been one of the stronger voices for energy and resource development at the cabinet table.
Perhaps recognizing the doubters, O’Regan posted on his social media that while “it sounds like just another government committee…this one has teeth.” Whether that will be proven true remains to be seen, but its early work as revealed in Budget 2024 is worth noting.
The government is establishing a Clean Growth Office to “reduce interdepartmental inefficiencies,” “prevent fixation on well-studied and low-risk impacts,” and “reduce redundant studies”; setting targets of five years for completing federal impact assessment and permitting, two years for non-federal projects, and three years for nuclear projects; building a federal permitting dashboard to increase transparency and accountability; and issuing a cabinet directive to drive culture change.
These initiatives suggest that the government would like to see the wheels of its own bureaucracy turn faster. A risk-averse public sector, unbothered by the mounting regulatory and fiscal costs borne by proponents, has indeed been a big part of the problem, and it’s encouraging to see it acknowledged.
But the implementation is still lacking.
The main lever that the government controls at a political rather than operational level is the Impact Assessment Act (IAA), also referred to as Bill C-69. The Liberals introduced this sweeping environmental legislation in 2019, despite a chorus of companies warning of its economy-stifling consequences, which have since been borne out. A majority of the provinces, led by Alberta, challenged it on the grounds that it impinges on their jurisdiction. The Supreme Court of Canada largely agreed in a decision in October 2023.
This forced the federal government to undertake amendments to the IAA to ensure it complies with the Constitution. But it also presented a genuine opportunity to bridge the gap between itself and the provinces and territories and improve the efficiency of the assessment process. Ministerial working groups, permitting targets, and dashboards are fine; but the IAA is where the rubber hits the road in terms of attracting investment and moving major projects along.
The opportunity has been missed. The amendments proposed for the IAA, announced in April, have been tacked on to the Budget 2024 implementation bill which, by fate or karma, is also numbered C-69. Based on an initial review, it appears the government has done the minimum possible to address the Supreme Court’s concerns, adding qualifiers to its areas of authority, but failing to correct the legislation’s negative impacts on the pace, cost, and efficiency of project approvals.
The amendments are likely to face challenges again from some provinces, and in the event that a different government is elected in 2025, they will no doubt undergo wholesale revision. Meanwhile, companies and the investor community will continue to wait for clarity and, until they receive it, many will keep their money on the sidelines, or spend it in other countries. Canada can’t wait and should be bold and more intentional in its effort to grow market share and respond to a world thirsty for more Canadian-made energy, food, and critical minerals.
The business community often says policy uncertainty is a major deterrent to investing in major projects in Canada. In fact, it seems the opposite is the real problem—there is a certainty that the regulatory and permitting process in Canada will be painful and costly and plagued by domestic politicking. In this respect, the amendments provided in C-69 version 2.0 do little to instill confidence that rules for approving and permitting projects in Canada are clearer and better off than what was initially proposed when the Impact Assessment Act came into force in 2019.
We are seeing improvement in the government’s rhetoric around getting projects built because we are seeing rising expectations in the broader Canadian public to see these changes happen. For example, a recent Nanos Research poll found that two-thirds of Canadians support building new export facilities for natural gas, suggesting that Canadians want to see their country’s influence in the world grow through increased energy production and trade.
The only metric that matters is getting more projects built faster. And the track record right now is not good. The number of energy and natural resource major projects completed in Canada dropped by 37 percent between 2015 (88 projects) and 2023 (56 projects). The ones that get done, like the Trans Mountain expansion pipeline or Site C hydroelectric dam, are often beset by cost overruns and delays. Critical minerals production is down, in many commodities by double digits since 2018. The average time to get from discovery to production for new mines in Canada is now 18 years.
As we’ve written in the past, much can be done to advance the principle of “one project and one assessment,” ie. reducing the duplication and redundancy inherent in our regulatory system. For starters, the federal government can use its Regional Energy and Resource Tables as places to work proactively with the provinces and territories to develop equivalency agreements over project approvals and restrict its role to permitting in areas of federal jurisdiction. Another option is to fast-track projects where consent and equity and/or benefit agreements with First Nations are already in place.
Because we are now reaching crisis levels, both in economic and supply chain terms, the federal government is taking the issue more seriously than it ever has before in its nine-year tenure. To show that it’s not too little too late, it will need proponents and investors to believe that government ambition can translate into implementation. Rather than saying what they will do, they should start doing what they say.
Heather Exner-Pirot is a Senior Fellow and Director of the Natural Resources, Energy and Environment program at the Macdonald-Laurier Institute and a Special Adviser to the Business Council of Canada.
Michael Gullo is Vice President (Policy) Business Council of Canada.
