On April 26, 2012, the federal government introduced its long-awaited amendments to key environmental and energy regulatory statutes that it has promised will speed the development of Canadian natural resources. Bill C-38, the Jobs, Growth and Long‑term Prosperity Act, was tabled on the heels of the March 2012 Federal Budget which promised to streamline and improve the processes for the environmental assessment and regulatory review of major natural resource projects. Through Bill C-38, the government appears to have delivered on its promises and the changes, if passed as is, should have far-reaching implications for resource development across the country.

The focus throughout the bill is on preventing regulatory duplication, ensuring the timely review of projects and consolidating decision-making powers where possible. Once the bill is passed into law, it is expected that the increased regulatory certainty associated with the proposed changes will encourage and expedite natural resource development across Canada. However, the bill also contains some potentially significant additions to the enforcement tools that may be used by federal regulators and the courts to encourage compliance and impose meaningful punishment on offenders.

The bill proposes to replace the Canadian Environmental Assessment Act (the Current CEAA) and make noteworthy changes to the Fisheries Act, Species at Risk Act (SARA) and National Energy Board Act (NEB Act).  

NEW ENVIRONMENTAL ASSESSMENT PROCESS

Bill C-38 proposes a new Canadian Environmental Assessment Act, 2012 (the New CEAA), which will establish a new federal environmental assessment regime to replace the existing regime under the CEAA. The proposed changes stem from long-standing concerns, addressed in the Budget, for a need to create a more efficient and timely environmental review process. The promised measures arise out of the federal government’s recognition that the current review process can often be complex, duplicative and difficult to navigate.

The overarching purposes of the proposed New CEAA and the Current CEAA are similar. Both are intended, prior to the commencement of a project, to identify and mitigate against significant adverse environmental effects and provide for meaningful opportunities for public participation. However, the way in which the New CEAA will implement these purposes is a significant departure from the current process.

The New CEAA includes new measures to strengthen and streamline the environmental assessment process. Key among these measures are the following:

  • Consolidation of the Review Process: The review process is reduced to three identified federal bodies: the Canadian Nuclear Safety Commission, the National Energy Board (NEB) and the Canadian Environmental Assessment Agency. Note that the New CEAA also provides that other federal authorities prescribed by regulation may be responsible authorities for the assessment of designated projects that are linked to those federal authorities. Given that this regulation has not yet been released, the impact of this provision on effective streamlining of the process remains to be seen.
  • Designated Projects: Activities subject to environmental assessment are “designated projects” which include those physical activities in Canada or on federal lands and that will be enumerated in a regulation and are linked to the federal authority identified in that regulation. This is a departure from the factors that trigger an environmental assessment under the Current CEAA. According to the speeches in Parliament on the Budget and the press releases from the government, the regulation (which has not yet been released) will likely narrow the number of projects subject to federal environmental assessment to larger projects or activities. Designated projects also include activities that are “incidental” to such physical activities. This may impact the ability of the regulators to determine what the “scope” of the project is for the purpose of the assessment. The term “incidental” is not defined in the New CEAA and it is anticipated that its interpretation may result in recourse to the courts.
  • Environmental Effects: The environmental effects of “designated” projects which will be subject to the New CEAA will be limited to those that come within federal jurisdiction, primarily for certain aquatic species, migratory birds and any other component of the environment as set out in a schedule. (The schedule is attached to the bill but at the moment has no additional environmental effects listed.) The New CEAA also contains specific requirements to review broader impacts on aboriginal communities, which is likely to bring in other effects upon the environment. The limitations of the effects to be considered may also be broadened in three other contexts: (1) if the activity occurs on federal lands, (2) if the activity has transboundary effects, or (3) if a federal authority is required to consider a designated project under an Act other than the New CEAA. It will be interesting to see how the interplay between the narrow versus broad approaches, coupled with any additional environmental components, ultimately gets resolved.
  • Enforcement of Conditions: The end product of a federal environmental assessment will include a “decision statement” to be issued under the New CEAA, approving a project and stipulating conditions that will mitigate any environmental effects that are directly linked or necessarily incidental to the power exercised by the federal authority. These conditions will be binding and enforceable and subject to a penalty for non-compliance of up to C$400,000 per day. This is a significant departure from the Current CEAA, which relies on subsequent permitting for enforcement of conditions. It is also noteworthy that one area that has not changed from the current regime is that the commitments in the environmental assessment of a designated project are not automatically imposed on the subsequent permitting of the same designated project under any other Acts. The addition of enforceable conditions stemming from the environmental assessment does not “cure” this problem, but does ensure that the conditions are enforceable in their own rights. In so doing, it essentially elevates the environmental assessment decision under the New CEAA to that of an independent, stand-alone approval or permit, which is a major change from the Current CEAA.
  • Time Limits for Review: Express time limits are provided for within which environmental assessments are to be concluded. Unless otherwise modified, a decision on a standard environmental assessment is generally required within 365 days from the issuance of a notice of commencement. In cases that involve a public review panel, unless otherwise modified, a decision statement from the Minister must be issued no later than 24 months from the date the review panel was established. Although no specific time limit is imposed for NEB review, the New CEAA does provide that a timeline may be set within which the review must be concluded, and, as discussed below, a 15-month time limit for NEB review is contemplated in the amendments to the NEB Act. These time limits are intended to make the review process for major projects more predictable and timely.
  • Delegation and Substitution: The role of provincial governments in the environmental assessment process has been expanded in certain circumstances to help avoid duplication and regulatory burden. The New CEAA explicitly allows for delegation of federal environmental assessment to provincial governments or agencies, the substitution of a provincial review process for a federal environmental assessment and the exclusion of a project from the application of the Act when there is an equivalent assessment by another jurisdiction.
  • Aboriginal Involvement: The New CEAA has, as a stated purpose, the promotion of aboriginal involvement in the environmental assessment process through communication and co-operation, and requires that the assessment consider specific effects on aboriginal peoples.

TRANSITION

One of the key questions on the release of the Budget was how the proposals to streamline the environmental assessment process would apply to current project applications, especially in relation to panel reviews. Bill C-38 includes transitional provisions to deal with this issue. An assessment by a review panel that was commenced under the Current CEAA will be continued under the process established in the New CEAA. In such a case, the Minister must establish the time limit within which the decision statement for that project must be issued and, if necessary, may extend the 24-month time limit set out in the Act by a maximum of three months.  

How this transition provision will work in practice is unclear. For example, in the context of the Enbridge Northern Gateway Pipeline proceeding that is underway, the joint review panel was established by an agreement dated December 4, 2009. The final hearings for that project are not projected to commence until September 2012, with a decision unlikely to be rendered until well into 2013. It is unclear how the proposed transitional provisions will be integrated into this proceeding given that the 24-month timeline for panel review has already passed.

FISHERIES ACT

Many of the changes to the Fisheries Act are also designed to streamline the number of approvals and authorizations that are required to be obtained under the Act. However, there are also several proposed changes that are potentially of key significance to business.

Significant changes (and potential changes)

There is a unique change to the provisions prohibiting the harmful alteration, disruption or destruction (HADD) of fish habitat (s. 35). The bill contains an amendment to the prohibition which is automatic upon passage by Parliament. This change does not significantly alter the prohibition itself but does expand the scope of the prohibitions from “works and undertakings” to include all activities, and clarifies the manner in which an authorization of a HADD can be obtained. However, there is a second clause which also alters s. 35, which will come into force at a future date if ordered by the federal cabinet. This second amendment would repeal the first change and introduce a different prohibition. As noted, this appears to be a rather unique way to amend legislation, as the federal government has essentially made one change but given itself the option for a further amendment without recourse to further legislation.  

As noted, the second amendment to s. 35, if enacted, would repeal the prohibition of HADD and replace it with a different clause which prohibits any work, undertaking or activity that results in serious harm to fish that are part of a commercial, recreational or aboriginal fishery or to fish that support such a fishery. The term “serious harm” is key to this prohibition, as it includes the “death of fish or any permanent alteration, or destruction of fish habitat”. So while the prohibition will still protect fish habitat, depending upon the interpretation of what constitutes “permanent alteration” or “destruction”, activities which cause disruption or alteration of habitat which are harmful but not permanent, will no longer be prohibited. Of course, as is always the case with impacts to fish habitat, the answer to whether alteration is permanent or not will rely upon the science, and to that end, we speculate that amendments to the federal government’s Fish Habitat Policy may be needed before this provision can be enacted. What is also unclear is how the courts will interpret the restriction of the prohibition to recreational, aboriginal or commercial fisheries. This may result in bodies of water no longer being caught by the prohibition.  

Another area of particular significance is the fines for offences under the Act. These have been amended to increase the maximum fines for large corporations to up to C$6-million for offences which are prosecuted under indictment and C$4-million for summary matters. Perhaps more significantly, there will also be requirements for the courts to impose minimum fines on corporations. In the case of large companies, the minimum fine for a first offence is C$100,000 for summary convictions and C$500,000 for matters that proceed by indictment. All maximums and minimums are doubled for subsequent offences. While the imposition of minimum fines can be varied if they will cause undue hardship, there is no ability for the court to reduce them in the case of minor spills or insignificant harm to the environment. In this respect, the bill takes away the ability of the courts to tailor the sentence to fit the offence. In the context of a statute which makes it an offence to deposit any amount of a deleterious substance into waters frequented by fish, regardless of the size of the spill or impact on the environment, this would appear to be very problematic, and, in our view, is likely to result in challenges to the legislation in the courts.

The prohibition against the deposit of deleterious substances in s. 36 has not been changed. However, the manner in which such deposits can be authorized has been clarified and expanded. Furthermore, the previous language regarding reporting of ‘incidents’, which is arguably currently restricted only to prescribed activities, has now been expanded to require every person to notify an inspector, fishery officer or an authority of a HADD or a deposit of the deleterious substance.

Streamlining

Similar to the changes to the environmental assessment process, the amendments to the Fisheries Act include provisions designed to improve the regulatory process. Key among these changes are the following:  

  • Delegation and Substitution: The bill allows for agreements between the federal government and a province to further the purposes of the Act, including co-operation and delegation of the roles, powers and functions of the parties. These provisions also allow for a declaration of equivalent provisions in provincial legislation, which would result in provisions of the Fisheries Act or its regulations not applying in a province.
  • Avoiding Multiple Authorizations: The habitat protection provisions have been changed to more clearly set out the manner in which a HADD can be authorized. Significantly, these include provisions which provide an exemption for a HADD that is produced as a result of doing anything that is authorized or otherwise permitted or required under the Act. This may capture activities which currently take place in accordance with regulations or authorization under s. 36 or s. 32 of the Act, and thus will negate the need for more than one form of Fisheries Act authorization for the same activity.

NATIONAL ENERGY BOARD ACT

Bill C-38 proposes several changes that would alter the powers and duties of the NEB. Some of the significant proposals include:

  • Approval of Certificate of Public Convenience and Necessity (CPCN): The proposed amendments would give the Governor in Council the power to decide whether or not a CPCN should issue. While the NEB would be required to provide a recommendation to the Governor in Council, the NEB would no longer be responsible for CPCN approval.
  • Time Limits for Review: The amendments to the NEB Act include the ability to establish time limits for review of a CPCN application which are generally not to exceed 15 months from the day a complete application is filed. The amendments proposed in the bill include enhanced powers to ensure that reviews are conducted in a timely manner.
  • Power with Respect to Navigable Waters: In accordance with the federal government’s intention to decrease regulatory duplication, the amendments to the NEB Act would exempt interprovincial and international pipelines and power lines from the operation of the Navigable Waters Protection Act, and give the NEB jurisdiction to issue authorizations where pipelines or power lines under its jurisdiction cross navigable waters.
  • Administrative Monetary Penalties: The proposed amendments give the NEB the jurisdiction to create regulations to establish administrative monetary penalties, not to exceed C$25,000 for an individual and C$100,000 for any other person, for contravention of designated provisions of the NEB Act, orders, decisions or approvals.

The proposed amendments to the NEB Act would consolidate the process to avoid duplication and impose time limits on review. If implemented, the amendments are likely to support the federal government’s goal of streamlining the regulatory review process.

SPECIES AT RISK ACT

Bill C-38 contains only one substantive change to the SARA but it is a significant one. The permitting provisions of the Act have been amended to remove the requirement that permits are limited to a maximum of five years. In place, the SARA permits themselves will set out the date of their expiry. A number of industry players had lobbied the government for changes to the permitting provisions which, thus far, have been virtually impossible to use for long-term operations. While this amendment is a small one, the significance of it cannot be understated as it may open the door for permits for long-term and existing operations.