Can a broken Canadian regulatory system get any worse?

If the Canadian regulatory system is broken and gives serious pause to oil and gas investors, the passing of federal Bill C-69, as currently written, will slam the door shut on investment, an audience heard at Natural Gas World’s Canadian Gas Dialogues conference April 23 in Calgary.

“Bill C-69 is clearly the federal government’s biggest intrusion into provincial resource management and ownership since the National Energy Program (NEP) of 1980,” said Rowland Harrison, energy consultant, arbitrator and former National Energy Board member who moderated the conference’s final panel discussion focused on Canada’s regulatory framework.

Political intrusion in the energy sector regrettably runs in the family in Canadian history. The NEP, referenced by Harrison, coincided with the collapse in oil prices and crippled oil and gas investment in the 1980s. It was brought in by the Liberal government of the day, led by Pierre Elliott Trudeau, the father of the current Liberal leader, prime minister Justin Trudeau, who is responsible for Bill C-69 and Bill C-48, proposed legislation that will implement an oil tanker ban off BC’s northern coast.

“Most significantly and ominously, Bill C-69 would transfer all authority for approval or rejection of [major interprovincial infrastructure] projects to the federal minister or cabinet, with no effective accountability for final decision-making,” Harrison said.

Bill C-69 rejects the very concept of an independent, expert and transparent quasi-judicial decision-maker. It proposes to disband the current national energy regulatory, the globally-respected National Energy Board (NEB) and replace it with a new government body, potentially resulting in a loss of important regulatory expertise.

According to panellist Sander Duncanson, a partner with the Calgary law firm Osler Hoskin & Harcourt whose practice involves helping clients navigate Canada’s regulatory process, Bill C-69 moves away from any sort of standing test to limit participation in impact assessments to parties that are actually affected by a project.

It also removes timelines and introduces concepts, such as “gender-based analysis,” that require further interpretation.

“You’re adding more opportunities for politicians to get involved and make decisions that are more based on policy rather than the merits of a specific project,” Duncanson said. “In all, based on the current reading of the bill, it’s going to make the regulatory process less certain and more difficult to invest in this country.”

The impact of Bill C-69 will extend beyond the oil and gas industry to all resource development, also putting at risk investment into mining, forestry and renewables, said panellist Martha Hall Findlay, CEO of independent policy think-tank Canada West Foundation.

“Canada seems to have lost the understanding that we are actually a resource country. That’s what has provided the prosperity that we enjoy now, and we should be proud of it,” she said.

Criticism of Bill C-69, which passed in Canada’s House of Commons last spring and is currently being debated in the Senate, has been vociferous and widespread but has largely fallen on deaf ears, Harrison said.  

In Duncanson’s view, the proposed legislation is “difficult to tweak,” but he and his colleagues expect some version of the bill to be passed in the next few months.

The first of what is planned to be a series of Canadian Gas Dialogues hosted by Natural Gas World, the day-long conference featured nearly two dozen industry, regulatory, First Nations, and consulting experts. Wide-ranging discussions on topic’s ranging from Canada’s LNG potential to new domestic markets for a growing surplus of shale gas followed each session as panelists fielded questions from an audience of about 140 delegates.

“Canada’s LNG export potential is actually an amazingly powerful good news climate story,” said panellist Richard Laszlo, president of consultancy Laszlo Energy Services, in the opening panel discussion focussed on the public’s understanding of the value proposition of natural gas development.

“I don’t think we’re doing enough to really hammer that message. It’s really a singular message – that Canadian LNG exports to China are the single biggest GHG reduction project that we have,” he said.

Clean air 'exports' should be recognised

This theme was picked up in a panel discussion on natural gas export markets, where it was pointed out that GHG reductions in foreign jurisdictions that result from Canadian natural gas exports need to be recognized under Article 6 of the Paris Agreement (the United Nations Framework Convention on Climate Change). This is one of the complex issues that still need to be delineated within Canada’s Paris Agreement commitments.

“I think that negotiating Article 6 is crucial,” said panellist Tim McMillan, CEO of the Canadian Association of Petroleum Producers. “If it isn’t negotiated properly, or if natural gas offsets are not enabled, I think it sacrifices the agreement itself.”

Without the ability to earn offset credits by helping foreign jurisdictions like China reduce their own GHG emissions by displacing coal with imported LNG, Canada has no hope of reaching its Paris Agreement emissions reduction commitments, McMillan said.

The impact of Canadian LNG exports globally can be even greater, according to BC deputy energy minister Dave Nikolejsin, if projects on the west coast continue the all-electric model taken by the 2.1mn mt/yr Woodfibre LNG project at Squamish or the recently expanded Chevron-Woodside Energy Kitimat LNG project, a 12mn mt/yr terminal – expandable to 18mn mt/yr – that will be powered entirely by clean electricity from BC Hydro, the province’s Crown-owned electricity utility.

A lunch keynote presentation by Andy Calitz, CEO of LNG Canada, told the story of how LNG Canada’s proposed 14mn mt/yr liquefaction terminal in Kitimat, BC, is set to become Canada’s first world-scale LNG export facility.

Calitz assembled virtually his entire leadership team to tell the story of how each contributed to the C$40bn (US$31bn) project that reached a final investment decision in October 2018. The presentation served as a powerful counterpoint to the challenges that have beset the Canadian gas industry in recent years.

“Canadian gas from the Montney will flow through this project to China, to Korea, to Japan. There is nothing that will stop it. I hope you heard from us today that it is no longer the project being planned. It is a project under construction,” Calitz said.

Calitz also highlighted the ambitious collaboration that made the west coast LNG project a success. This included extensive work with contractors and all levels of government, including First Nations.

Not surprisingly, in light of First Nations’ challenges to the Trans Mountain Expansion oil pipeline project from Alberta to BC’s Lower Mainland near Vancouver, and more recently to Coastal GasLink’s pipeline project to supply natural gas to LNG Canada, indigenous consultations were a recurring theme among several panel discussions during the day.

Jason Majore, CEO of Haisla Nation Council, reiterated that First Nations today are, in fact, a level of government in Canada.

“There’s the provincial government, the federal government and the First Nations governments that need to be talked to. It’s not a box to check to do good for the community. It’s a requirement by law and established through numerous court cases,” Majore said.

“As a level of government, we need the help of industry to address our [socioeconomic] needs. We need the tax revenues just as the federal and provincial governments need revenues, if you want to look at it that way.”