Building big, ambitious projects has become increasingly difficult in Canada in recent years, particularly in the energy sector.
Whether it’s carbon-capture projects in Alberta, offshore wind turbines in Newfoundland and Labrador or hydroelectric dams in the James Bay area, getting a project off the ground is a Herculean task, especially if it requires governmental approval.
While the roadblocks are not all due to a single law, one looms larger than all others in its propensity to stall development — the Impact Assessment Act.
Since its adoption in 2019, approval for large infrastructure projects, like energy projects, has slowed to a crawl. Only a single project, Cedar LNG, has been approved in a process that took three and a half years. In comparison, 17 major projects were approved in the first five years under the previous law.
While that legislation focused solely on evaluating a project’s environmental impact to minimize its negative effects, the new law attempts to integrate assessments of a wide range of other factors — social, health and gender impacts, among others — into a single process. And this is just one of the many bureaucratic steps necessary before shovels can hit the ground.
Trying to thoroughly address all these elements at once unsurprisingly results in excessive delays.
Instead of taking the 300 days stipulated by law, for instance, the impact assessment for the Cedar LNG project stretched to 1,026 days.
Call it gridlock, regulatory limbo or just a bureaucratic nightmare, but this has not helped attract capital.
Since 2015, investment in the construction of extraction or pipeline transportation facilities in Canada has shrunk from $56.8 billion to $42.9 billion — a 24.4% drop.
But while investment dwindles here, the industry continues to grow elsewhere. Between 2009 and 2017, oil and gas investment rose by 51% in the U.S., while increasing only a meagre 1% in Canada.
In fact, since 2015, global investment in upstream oil and gas production increased 25% and is expected to reach an estimated US$603 billion in 2024. It’s forecast to keep increasing by a further 22% by 2030 according to a joint International Energy Forum and S&P Global Commodity Insights report.
So why isn’t that investment coming to Canada? Investors are crystal clear about their reasons for pulling out: overregulation.
According to survey data, 68% of investors cite environmental regulations as a key concern in Canada, far higher than in the United States. Even more tellingly, 54% of investors see regulatory duplication as a major issue in Canada, compared to just 34% south of the border.
Canada cannot afford this. The energy industry contributes substantially to our shared prosperity. In 2023 alone, it added more than $200 billion to Canada’s gross domestic product (GDP), representing 7.7% of the total.
Casualties of this growing disparity in investment won’t just be GDP, but also Canadian workers. When investment dries up, job creation evaporates and opportunities for higher wages slip away. For reference, the sector currently supports nearly half a million jobs, both directly and indirectly.
The federal government needs to go back to the drawing board and rethink its nebulous and drawn-out regulatory process.
For starters, it should return to a permitting process that focuses on compliance with clear environmental standards, as was the case under the old system.
To further tighten things up, a strict 18-month limit for the entire process should be implemented, with penalties if this timeline is not respected.
Finally, the federal government should automatically recognize provincial assessments as an acceptable substitute. Duplicate bureaucratic measures are unnecessary and only serve to drag out the costly process.
As global energy demand reaches record levels and the world clamours for reliable supply, Canada should be leading the way.
This is a wake-up call for policymakers: Simplify and streamline the impact assessment process or investors will continue to leave for greener pastures.
Krystle Wittevrongel is director of research at the Montreal Economic Institute, a think tank with offices in Montreal, Ottawa and Calgary