Shocks to Canada’s natural resource sector should be the real cover story – not Trudeau

John Ivison: Shocks to Canada’s natural resource sector should be the real cover story

As the prime minister graces the cover of Rolling Stone, the real news this week is how two major natural resources projects have been scuttled by government and the courts

The National Post

John Ivison

July 26, 2017
6:39 PM EDT

Pacific Northwest
Petronas considered building the Pacific Northwest LNG project on Lelu Island near Prince Rupert, B.C.Handout/Pacific Northwest LNG

 

The fawning front cover of the latest Rolling Stone, which features Justin Trudeau and wonders wistfully, “Why can’t he be our President?” also touts a headline promising to explain how the Trump administration is destroying the U.S. Environmental Protection Agency.

Many Canadians will rejoice at the contrast — and, it’s true, few would exchange Trudeau’s golden aura for Trump’s tangerine tincture.

But the idea that Trudeau is getting everything right — particularly when it comes to balancing environmental protection and growing the economy — is fallacious.

The government is touting the International Monetary Fund’s forecast that Canada will lead the G7 in growth this year. But there is a lag before government action affects the economy. The warning this week from the Chamber of Commerce that Canada’s climate-change plan and other measures are raising the cost of doing business in this country to breaking point is a canary in the coal mine, gasping from exposure to the toxic gases of too many taxes and too much regulation.

This has not been a good week for the reputation of this country’s natural resource sector. On Tuesday, the $36-billion Pacific NorthWest liquefied natural gas project was cancelled, ostensibly because of poor global prices but really because of the reduced attractiveness of the Canadian market for investment.

This was compounded Wednesday by a Supreme Court of Canada decision to block seismic testing in Nunavut because of opposition by local Inuit, who said they had not been consulted adequately before the National Energy Board gave oil companies permission to search for oil and gas in northern waters.

There was some good news for industry in a companion Supreme Court decision that suggested the courts do not equate the constitutional duty to consult with a veto over development.

The court looked at a claim by the Chippewas of the Thames First Nation in southwest Ontario, who claimed they had not been consulted adequately over the reversal of the Enbridge-owned Line 9 pipeline between Sarnia and Montreal.

The court judged that the Chippewas were informed the National Energy Board would hold hearings; were granted funding to participate; and subsequently filed evidence outlining their concerns about increased ruptures and spills.

The NEB approved the project, on the basis that the impact of the reversal of an existing pipeline would be minimal and mitigated by conditions imposed on Enbridge. The Supreme Court agreed.

While the Court ruled the Chippewas were consulted, it said the Inuit of Clyde River were not given adequate opportunity to participate in the NEB process into offshore seismic testing for oil and gas in Nunavut.

The Court said the Inuit had a constitutional right to harvest marine mammals like whales, seals and polar bears. It said it was undisputed that the testing could negatively affect hunting rights and that the proponent of the project did not make clear to the Inuit what the impact might be, nor give sufficient opportunity for participation in the process. Unlike in the Line 9 case, there were no oral hearings and no participant funding.

“These cases demonstrate that the duty to consult has meaningful content but that it is limited in scope. The duty to consult is rooted in the need to avoid the impairment of asserted or recognized rights that flow from the implementation of the specific project at issue; it is not about resolving broader claims that transcend the scope of the proposed project,” the court concluded.

The Supreme Court appears to have struck a legitimate balance between rights and development that benefits Canadians. Ottawa, on the other hand, is still searching for symmetry.

In its most recent survey the Canadian Association of Petroleum Producers forecast that oil and gas capital expenditure in Canada will fall to $44 billion this year, nearly half the $81 billion spent in 2014.

CAPP blamed the dramatic change, in part, on “continuing uncertainty” in Canada’s policies and regulations, which are seen as “increasingly more stringent and costly.”

While politicians blamed poor global LNG conditions for the Pacific NorthWest decision, similar projects have gone ahead in Australia and the U.S.

The situation is likely to be compounded by changes to federal environmental assessment legislation being contemplated by the Trudeau government. The aim is to “restore trust” in the assessment process, according to the government but industry fears reviews will become the venue to implement broader public policy — notably on Indigenous reconciliation and climate change.

The expert panel that submitted its recommendations to the government urged that assessments move beyond the “bio-physical environment” to encompass all impacts likely to result from a project, according to the “five pillars of sustainability” — environmental, social, economic, health and cultural impacts.

Chamber of Commerce president Perrin Beatty said the changes would make the system “unworkable” and end of investment in Canada’s natural resources sector.

Beatty is not some swivel-eyed loon, bent on rapacious exploitation of the environment. His organization has backed carbon pricing while calling for the government to countervail cost increases with relief elsewhere.

But the balance of environmental protection and economic growth that Trudeau trumpets has been weighed heavily in favour of the former.

In addition to new carbon taxes, businesses find themselves facing rising electricity costs, federal government fee increases, Canada Pension Plan hikes, richer minimum wages and higher Employment Insurance rates than would have been the case had the government not increased EI costs.

Such is the flighty nature of international capital, Beatty’s warning may have come too late — the Canadian system may already have been judged unworkable and investment in new major energy projects reallocated to other jurisdictions.

The experience of Pacific NorthWest suggests projects can be approved and built elsewhere in the world more quickly and cheaply, with far less uncertainty than in Canada.

The Liberal government is going to have to create a more focused, predictable regulatory regime or Canadians will face a future of lower living standards, higher taxes and bigger debt. Glossy profiles in the house organ of middle-aged Democrats are poor compensation for that.

 

 

 

About prosperitysaskatchewan

Consultant on Saskatchewan's natural resources.

Posted on July 28, 2017, in economic impact, miscellaneous, oil, other minerals, political. Bookmark the permalink. Leave a comment.

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