Canada: Environmental, Regulatory And Aboriginal Developments In The Canadian Energy Sector: Federal Government Announces Interim Measure For Pipeline Reviews

Last Updated: March 6 2016
Article by Emily Denstedt

On January 27, 2016, the Government of Canada ("GOC") introduced interim measures for pipeline reviews. The new GOC made an election promise to overhaul the current regulatory system for major natural resource projects. Recognizing that an undertaking of that magnitude cannot be done quickly, the GOC released interim measures for two major pipeline projects currently under review by the National Energy Board ("NEB"). The GOC is of the opinion that the Canadian public has lost confidence in the NEB and as a result implemented these interim measures until the GOC can introduce a new regulatory system that will restore Canadian's confidence in the NEB and their review process.

The GOC outlined 5 principles that will guide its discretionary decision making powers on major natural resources projects in the interim until they can properly introduce new legislation. The 5 principles are:

  1. No project proponent will be asked to return to the starting line – project reviews will continue within the current legislative framework and in accordance with treaty provisions, under the auspices of relevant responsible authorities and Northern regulatory boards;
  2. Decisions will be based on science, traditional knowledge of Indigenous peoples and other relevant evidence;
  3. The views of the public and affected communities will be sought and considered;
  4. Indigenous peoples will be meaningfully consulted, and where appropriate, impacts on their rights and interests will be accommodated; and
  5. Direct and upstream greenhouse gas emissions linked to the projects under review will be assessed.

The GOC specifically outlined the measures they will take to ensure consistency with these principles for the two current pipeline reviews, the NEB reviews of Trans Mountain Expansion and of Energy East Pipeline.

For Trans Mountain Expansion, the GOC will:

  • Undertake deeper consultations with Indigenous peoples and provide funding to support participation in these consultations;
  • Assess the upstream greenhouse gas emissions associated with this project and make this information public; and
  • Appoint a Ministerial Representative to engage communities, including Indigenous communities potentially affected by the project, to seek their views and report back to the Minister of Natural Resources.

For Energy East Pipeline, the GOC will:

  • Undertake deeper consultations with Indigenous peoples potentially affected by the project and provide funding to support these consultations;
  • Help facilitate expanded public input into the National Energy Board review process, including public and community engagement activities. The Minister of Natural Resources intends to recommend the appointment of three temporary members to the NEB; and
  • Assess the upstream greenhouse gas emissions associated with this project and make this information public.

To accommodate for these additional measures, the GOC extended the legislated review time limit by six months (to 21 months in total) and seek an extension to the legislated time limit for the GOC cabinet decision by three months (to six months in total), for a total of 27 months.

Impact of the Interim Measures

It is too early to know what the impact of these interim measures will be. These interim measures, besides the greenhouse gas emissions consideration, are already, to a degree, part of the NEB review process and are implemented in a manner to ensure certainty in timelines and to review a project in the most efficient and effective way. It is unclear what the additional measures will require of project proponents and the NEB in conducting deeper consultation and expanding public input.

The GOC is of the opinion that the Canadian public wants an expanded role in project reviews. The risk of expanding the public's role is to create a process where a project undergoes a lengthy approval process with multiple cycles of public hearings and results in an obsolete project by the time approval is granted. That is what happened to the Mackenzie Gas Pipeline project, a project that took over ten years to obtain project approval by which time it was uneconomic. Current pipeline review projects have hundreds of intervenors and receive thousands of letters of interest from the public, granting further participation and input may create a process that simply is ineffective and lengthy. There is a risk that expanding public input will result in a review process that is protracted; on the other hand it may regain the Canadian public's confidence in the NEB review process which the GOC believes is necessary. The GOC will need to ensure they spend time reviewing the history of the NEB review process before implementing further guidance on the interim measures or any new legislation.

While the NEB already undertakes, along with the project proponent, meaningful and fulsome consultation with Indigenous peoples, the GOC has identified that further consultation is required during the project review process. Further funding will be provided to Indigenous peoples that are affected by either Trans Mountain Expansion or Energy East Pipeline in order to continue the consultation process. It is unclear what "deeper consultation" means and how the GOC will determine that the additional measure of deeper consultation is met. Regardless of the interim measures, the GOC has made it clear that Indigenous peoples are to have a larger role in the approval of natural resources projects.

There has been no guidance regarding how the GOC, under the Ministry of Environment and Climate Change, will assess the upstream greenhouse gas emissions, an assessment conducted separately from the NEB review process. Adding an additional regulatory mechanism outside of the NEB's jurisdiction suggests that any new legislation may move away from the one project and one regulator approach that was introduced in the 2012 amendments to the National Energy Board Act and the introduction of the new Canadian Environmental Assessment Act, 2012.

The interim measures and the uncertainty of the promised new legislation for major natural resources projects, coupled with the current commodity price run off, may impact project proponents' willingness to apply for approval of new natural resources projects.

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Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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