Providing coverage of Alaska and northern Canada's oil and gas industry
February 2018

Vol. 23, No.7 Week of February 18, 2018

Shuffling the deck

Canada streamlines regulatory assessments for major natural resource projects

Gary Park

Petroleum News

The Canadian government has delivered on its 2016 election campaign promise to streamline the regulatory assessments of major natural resource projects.

The objective is to speed up the processing of hundreds of proposals worth more than C$500 billion that are planned for the next decade, said Environment Minister Catherine McKenna, in making the bold assertion that the administration of Prime Minister Justin Trudeau will show the world it can solve a growing polarization among Canadian interests in the economy, environment, climate change and Indigenous rights.

Unspoken is a sense of urgency within government circles that failure to succeed will drive even more capital away from the Canadian energy sector to friendlier jurisdictions, especially in the United States.

McKenna insisted that Canadians “understand that better rules will make us more competitive, not less.”

Agencies scraped

The first step is to scrap two regulatory agencies - the National Energy Board, which has gained international acclaim over 59 years for its expertise in evaluating projects based on their technical and economic merits, and the Canadian Environmental Assessment Agency, which has become increasingly scorned for its handling of environmental issues.

The role of the NEB will be drastically scaled back as it is transformed into the Canadian Energy Regulator, which will have a governance structure similar to that of the Alberta Energy Regulator, while shedding its role as judge and jury.

It will assess smaller developments and have responsibility for ongoing industry oversight.

The CEAA will be recreated as the Impact Assessment Agency of Canada, with an enlarged mandate to weigh economic, environmental, social and Indigenous issues and give proponents of larger ventures an early indication of how to obtain approval.

It will refer the largest, most controversial applications to panels named by the government.

Natural Resources Minister Jim Carr said the new framework will provide more certainty and be “far more transparent at a stage when heavy investment is required.”

He said the government will establish a list of “designated and non-designated” projects, with the major undertakings, such as interprovincial pipelines, falling into the designated category, making them subject to federal review within a 600-day time limit.

“When they are undesignated then the CER will determine (within a 300- to 450-day time frame) whether there will be an approval,” Carr said.

Reaction mixed

The initial reaction is far from the acclaim the government might have hoped for, with industry officials saying the legislation appears to erect new hurdles, while environmentalists say it fails to clearly rule out projects that would have significant adverse impacts on the environment.

Ed Fast, a member of Parliament from the opposition Conservative Party, said the new rules will bog down the review process and be the “death knell of major resource development in Canada.”

Chris Bloomer, chief executive officer of the Canadian Energy Pipelines Association, said the legislation will “introduce a whole bunch of broad public policy issues into the evaluation process and we need to understand how these are going to mesh and how they will impact the timing of the processes.”

Perry Bellegarde, national chief of the Assembly of First Nations, welcomed the “recognition of Indigenous peoples’ rights at every stage of the (approval) process,” but said there is “room for improvement.”

Industry concerns

Steve Williams, CEO of Suncor Energy, which produces 460,000 barrels per day from the oil sands, gave a tepid reception to the changes, arguing that “other jurisdictions are doing much more to attract business, so Canada needs to up its game.”

“We’re having to look at Canada quite hard. The cumulative impact of regulation and higher taxation is making Canada a more difficult jurisdiction to allocate capital in,” he said.

For now, Williams said, Suncor, even with a record C$3 billion from operations in 2017, will “look at Canada quite hard” before spending any of that money in its home territory.

Only four days later, on Feb. 15, Suncor did a quick about-face by acquiring Mocal Energy’s 5 percent stake in the Syncrude Canada oil sands operation for C$920 million. That raises to 58.74 percent Suncor’s stake in Syncrude which has a nameplate capacity of 350,000 bpd.

Tim MacMillan, CEO of the Canadian Association of Petroleum Producers, said “we are hearing from many sources that Canada is off the investment radar” since the cancellation of such mega-projects as Enbridge’s Northern Gateway pipeline, TransCanada’s Energy East pipeline and Petronas’s Pacific NorthWest LNG project.

He suggested the new regulatory framework “is an opportunity to make a step change on clarity and give confidence to investors.”

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