Opinion: Ottawa's delay of Alberta’s gas pipeline: Building back slower

The promise of a 'modernized' and streamlined Canada Energy Regulator appears not to be materializing

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Last year the federal government passed hotly debated legislation to “modernize” the National Energy Board (NEB) and replace it with the Canada Energy Regulator (CER). Despite this change ultimate responsibility for national-interest determinations about energy projects continues to be lodged entirely with the federal cabinet.

So where are we now? One important yardstick is the application by TC Energy to build the final segments of an expansion of the NOVA Gas Transmission Ltd. (NGTL) pipeline in Alberta, at a cost of $2.4 billion, part of a private-sector investment that will approach $9 billion in total. The project is to construct approximately 344 kilometres of natural gas pipeline and associated facilities in northwestern Alberta to “loop” (i.e., add new pipeline sections running parallel to existing lines) to enhance natural gas transmission from northwestern Alberta and northeastern B.C. With a planned startup in April 2021 the project was to employ 5,500 workers in its construction phase, with implied additional upstream spinoff benefits of $1.5 billion.

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Beginning in February 2018 with the submission of a project description under the NEB Act, TC Energy completed extensive public hearings, which included the participation of affected Indigenous leaders in a process that concluded with the presentation of formal oral arguments subject to cross-examination. The new Canadian Energy Regulator released its recommendation report to cabinet in February 2020, a step that triggered a 90-day requirement for a decision by government. However, Ottawa eventually chose to extend the review by another 150 days, reportedly to accommodate further consultations with Indigenous communities near the route.

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Though a final decision from cabinet is due Oct. 19, TC Energy last week announced that, in view of logistical and supply lags, the extra delay in getting a go-ahead has caused it to miss next year’s summer-fall construction season. Despite being vital to Alberta gas producers, the project now cannot be completed until April 2022. As a result, the pipeline bottlenecks it is meant to help clear will continue to limit natural gas deliveries and curtail further drilling.

The loss of these jobs comes at a time when the oil and gas sector, like many parts of the economy, has been hit by its largest employment losses ever. The federal government announced in its throne speech that it plans to “create” one million jobs in the recovery from the economic recession caused by the pandemic. Economically sound private-sector investment in Canada’s natural gas sector is clearly an important potential avenue for offsetting the effects of the recession. Given the sector’s importance to the Canadian economy, it arguably should be viewed as a priority avenue for recovery.

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The Crown’s obligation to consult with affected Indigenous communities is clear and undisputed and has been demonstrably respected by TC Energy in its dealings first with the NEB and then with its successor CER. The current roadblock turns on why the federal government considered it necessary to enact a 150-day extension and why it waited to initiate new consultations until the entire regulatory process had been completed. If the government really were as concerned as it says it is about the possible spread of the SARS-CoV-2 virus from camp workers to local communities, it could have moved ahead decisively by adopting the proven procedures for protecting construction workers and nearby communities used on its own Trans Mountain pipeline, which is currently under construction. The delay, which all but ignored the extensive consultations undertaken since early 2018, has dealt yet another multibillion-dollar blow to Alberta’s economy. Ironically, the economic damage will almost certainly also impact many Indigenous businesses.

Once again, proponents and investors are being confronted, after years of regulatory processes that have culminated in an affirmative recommendation by the CER, with the whims of a final cabinet decision. Many must be considering whether to invest time and capital into major project proposals when confronted by continuing uncertainties in the Canadian regulatory process, in which timelines and procedural fairness are increasingly in question. Worse, the system continues to be demonstrably “back-end” loaded: after years of front-end work by firms, communities and the regulator, cabinet may delay its approval or even outright dismiss an application. It is no surprise that investor confidence in Canada may be becoming a pipe dream while, alarmingly, the federal government appears convinced that the loss of private-sector investment can simply be offset by increased public-sector borrowing.

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The promise of a “modernized” and streamlined Canada Energy Regulator appears not to be materializing. Assuming cabinet does finally approve NGTL by the Oct. 19 deadline, TC Energy will have paid a heavy price for this delay. The transfer of national-interest determinations for energy projects from a previously independent, quasi-judicial, technically sophisticated and experienced NEB to an arena governed entirely by the political interests of cabinet is proving to be a costly proposition for proponents, Albertans and Canadians.

Ron Wallace retired from the National Energy Board in 2016. He is an executive fellow of the Canadian Global Affairs Institute and a board member of the Canada West Foundation in Calgary.

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