Panel looks to overhaul Canadian oil and gas project approvals

In its recent first-quarter financials, Enbridge Inc. (TSX:ENB) revealed plans for a $1 billion expansion to its B.C. natural gas mainline, which runs from northeastern B.C. to Huntington-Sumas in Washington state.

But is the plan in Canada’s best interests? And by how much would it increase Canada’s carbon emissions?

Under a new two-part approval process recommended last week by a National Energy Board (NEB) modernization panel, those would be among the first questions asked, even before such a project is referred for an environmental assessment.

Only after a project got a conditional yes or no from the federal government would it enter a two-year environmental review.

In other words, companies would no longer have to spend millions of dollars going through an environmental review process only to be refused at the end. They would get a conditional yes or no up front.

The government would first decide if the proposed project met Canada’s national energy strategy. That would include addressing First Nations rights and title and climate change impacts.

“Those studies have been done on major projects, but in today’s world they have been done at the very, very back end, as opposed to being done at the front end,” said Brenda Kenny, one of the NEB Modernization Expert Panel panellists.

The panel, which was struck by Prime Minister Justin Trudeau’s government in response to concerns that the NEB had been overly politicized under the Stephen Harper regime, is recommending splitting the NEB into two separate entities.

One would be a Canadian equivalent of the U.S. Energy Information Administration, which would be independent of a new regulatory body: the Canadian Energy Transmission Commission (CETC).

Under the proposed changes, a plan for a new pipeline or power transmission line that crossed borders would take at least three years to get approved: one year to determine if it would be consistent with Canada’s energy and climate strategies and two years to pass a joint review panel of the Canadian Environmental Assessment Agency (CEAA) and the new CETC.

“That’s not a bad thing to have an early signal whether your project is going to be approved or not because it is or isn’t in the national interest,” said Mark Pinney, manager of markets and transportation for the Canadian Association of Petroleum Producers (CAPP).

“I’d rather know sooner rather than later, after a multi-year process, that the project wasn’t in the national interest.”

But Pinney is concerned that the initial process would take 12 months.

The current NEB approval process is supposed to take no more than 15 months. The panel’s recommended process would take 36 months.

By the time the overhaul is complete, the most contentious pipelines – ones that would move bitumen from Alberta’s oilsands – could be a thing of the past.

Most of the major pipeline projects proposed to move Alberta bitumen to the U.S. or the West Coast have already been either approved (Trans Mountain, Line 3) or rejected (Northern Gateway).

Many energy experts say Alberta’s oilsands growth curve is headed for a plateau, with investment already shifting to light oil, which is cleaner, less capital intensive and easier to develop.

In Canada, the chief regions for light oil exploration and extraction are the Montney and Duvernay formations in B.C. and Alberta.

“It certainly has come to a point where future developments on the scale that we’ve witnessed over the recent past is questionable,” Chris Bloomer, president and CEO of the Canadian Energy Pipeline Association, said at a recent conference of energy regulators and utilities in Vancouver.

“In B.C. and Alberta, in the Montney and Duvernay formations, we have gigantic resources that are just being developed. They are competitive today – they’re going to be a force in the future. They’re not bitumen. They’re gas, NGL [natural gas liquids] and light oil. They are going to need new infrastructure. It’s going to be huge.

“So the question really is, ‘Are the debates of today going to lead to better policy in the future to allow us to realize the value of those resources in a time frame that’s meaningful?’”

Bloomer was among the speakers on a panel on pipelines at the Canadian Association of Members of Public Utility Tribunals annual conference held in Vancouver earlier this month.

Eugene Kung, a lawyer with West Coast Environmental Law, who also spoke at the conference, said a two-phase approval process might help prevent legal challenges like those sparked by the NEB process that approved the Trans Mountain expansion.

Kung said the Trans Mountain pipeline expansion project alone has generated 19 legal challenges still making their way through the courts.

Kung told Business in Vancouver that his biggest concern with the expert panel’s recommended overhaul is that the first phase would not involve the CEAA.

In the coming months, the federal government will be receiving feedback from the public on the panel’s recommendations.

The public comment period ends July 14.

The panel’s recommendations and an online feedback forum can be found here.

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