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Canadian resource legislation stirs up uncertainty, imperils investment

A looming overhaul of Canada's environmental permitting regime has stoked fears of delays and a slump in investment in the natural resource sectors, while some in the industry expect companies to adapt to the proposed legislation without major consequences.

Canada plans to reshape the federal permitting process for major natural resource projects through a new bill which was first outlined Feb. 8. Among key changes are requirements for more consultation with Canada's First Nations, assessment of climate change impact and analysis of gender balance. In addition, the Canadian government proposes to bring federal permitting under one roof in a new one-stop-shop permitting process with new timelines and a new list of the types of projects that will be assessed.

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Canadian Prime Minister Justin Trudeau
Source: Associated Press

Some in the resource sector expect the legislation to detract investment with added layers of environmental permitting. "Totally it's going to have an effect," Russell Hallbauer, President and CEO of Taseko Mines Ltd., said via email. "You can't tell how long this new process could take, what it may entail [and] what kind of uncertainties it will create."

Hallbauer echoes comments from Suncor Energy Inc. President and CEO Steven Williams, who in a recent earnings call, before the release of the legislation, underlined increasing regulation in Canada as an impediment to investment. Canada's natural resource sectors accounted for about 16% of the country's gross domestic product in 2016.

Hallbauer agrees. "Capital is like water flowing," he said. "It takes the easiest path. So I'm certain many, many projects will just grind down [to a halt]."

Hallbauer heads a company that failed under a previous government to get federal permitting for its New Prosperity gold project in British Columbia, which faces heavy opposition. He noted that Taseko, in light of the new legislation, "will focus our investment [dollars] in other more business-friendly places that have a process of how to get to 'yes' as opposed to how to get to 'no'."

Not so bad

But others in the mining industry are sanguine about the permitting changes on the legislative horizon. "From what we've seen in the legislation it's not going to affect it at all," said Rob McLeod, president and CEO of IDM Mining Ltd., referring to the company's ongoing permitting process for its Red Mountain gold project in British Columbia.

"It's tempting to complain about the voluminous material that needs to be submitted to develop a mine," McLeod commented. "But it is rigorous and it is fair and it is timely. I've worked in lots of other jurisdictions, and Canada is pretty tough to beat in terms of a reasonable degree of rule of law and [assessment of] impact."

McLeod says more public consultation may be good for industry, especially if it is proactive. "Rarely do people go out, unless they're absolutely against something, to provide commentary that they might not have experience on or understand the specifics," he said.

Another executive, in the middle of permitting a large mineral resource project in Canada, takes a similar stance. The executive, who preferred not to be named, said many companies already expend time and capital to consult on areas, in particular with First Nations groups, where the federal government wants to expand laws. The new legislation, for example, requires companies consider First Nation's traditional knowledge in project areas.

For companies with good relationships with First Nations, the legislation may not be a big deal, according to the executive. But, he noted, "Those that haven't had as good a relationship probably won't be as happy." He stressed that the legislation and its potential impact is also open to debate: "I think there are more questions than answers at this stage."

Devil in the details

A common theme experts and industry alike raise in passing — or deferring — judgment on the new legislation is they are taking a wait-and-see approach.

Meinhard Doelle, an environmental law expert at Dalhousie University, questions how the law might be implemented. Guidance documents and regulations among other things are still to come, he and others noted. "I stay away from saying this is a good bill or a bad bill because I think we have to understand how these things work before we start celebrating or trashing this bill," Doelle said.

Doelle noted that it is unclear how new mandated timelines would work in terms of information gathering. Would the clock stop and start as industry gathers information in areas that were not part of the old process, for example on climate change? The legislation proposes a maximum 180 days for the planning phase, 300 days for standard impact assessment and 600 days for review by a panel. The schedule, as is the final decision on major projects, is subject to government discretion.

The new process also plans to pull assessments under one roof with the proposed Impact Assessment Agency. Under current legislation, federal permitting of major resource projects is split between several agencies, such as the Canadian Environmental Assessment Agency, the National Energy Board, which is being renamed the Canadian Energy Regulator, and the Canadian Nuclear Safety Commission. It is a major structural change in the Canadian review process.

Yet the agencies will still play a part in advising the new single agency review process. Doelle says it is unclear in his read of the legislation how much power they would wield on panels that advise the Impact Assessment Agency.

Kevin Hanna, an environmental law expert at the University of British Columbia, likes the flexibility in the proposed law, describing its language as fluid. This may help industry argue its case in the face of new requirements on issues such as climate change and sustainability.

Still, like Doelle, Hanna reserves judgement. The flexibility might change with subsequent guidance documents, leading to a more prescriptive approach and making it harder for industry to argue its case.

"The question is going to be about implementation," Hanna said, flagging regulation-making as a key issue. "I think where it gets a little bit spicy is over the regulations," he said.

Hanna noted that the new legislation describes a need to consider sustainability. But in permitting a project it is not clear how the topic will be approached in industries that exploit non-renewable resources. "Sustainability itself is a very perfunctory and squishy concept and it has different meanings to different people," Hanna said.

Hanna expects the law will be harder for smaller companies to grapple with as they apply for federal approval of resource projects. On the other hand, "For big companies, they'll be able to breeze through this sort of stuff."