Competitiveness of Canada’s regulatory framework for the oil & gas sector Much debate has occurred in Canada about the effectiveness of the various regulatory reviews of energy projects, large and small. The debate illustrates a tension between those stakeholders wanting a concerted stewardship of our natural environment with those that seek to create private and public benefits from energy project investments. Recently, Canadian Energy Research Institute (CERI) published a report, the purpose of which was to provide facts and evidence so that stakeholders can consider these observations as they move forward with individual oil & gas project reviews and conversations regarding improvements in the process. To that extent, the study assesses the competitiveness of Canada’s regulatory frameworks at the federal and provincial levels compared to the United States. It was also intended to show how regulatory matters compare with other investment factors such as market conditions and project economics. This article provides a summary of the study findings, readers are encouraged to download the full study .
Background In Canada, responsibility for the regulation of energy and natural resources is shared by the federal and the provincial/ territorial governments. The ownership of oil and natural gas resources is split between the provincial/federal Crown (governments), holders of the majority of Canada’s mineral rights, private freehold ownership, and Indigenous peoples (ICLG 2019; Lawson Lundell LLP 2019). Federal and provincial jurisdictions can overlap, so some energy projects are subject to both regulatory regimes. In those cases, projects may be jointly reviewed by a federal-provincial panel or may be a subject for a substitution process (the federal review is substituted for the provincial review process). In some cases, oil & gas projects may be regulated by a number of different government agencies in different jurisdictions. (NRCan 2016; Stikeman Elliott LLP 2019). While there is no single federal regulatory agency or department overseeing oil and natural gas resources in Canada, there are
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two principal federal regulators, namely the Canada Energy Regulator (CER former the National Energy Board (NEB) and the Impact Assessment Agency of Canada (IAAC former the Canadian Environmental Assessment Agency (CEAA). Other important regulatory authorities and departments include but are not limited to Environment and Climate Change Canada (ECCC), Natural Resources Canada (NRCan), Fisheries and Oceans Canada, Transport Canada, Crown-Indigenous Relations and Northern Affairs Canada, etc. (Blake, Cassels & Graydon LLP 2019; ICLG 2019; NRCan 2016). Each province has multiple acts, regulations, and policies in place for energy and natural resources management, environmental management, Indigenous consultation, and climate change (NRCan 2016; Lawson Lundell LLP 2019). While many regulations related to oil & gas activities are similar between jurisdictions, some of them are specific and unique for each province, such as LNG exports in British Columbia, oil sands operations in Alberta and Saskatchewan, or offshore oil production in Newfoundland and Labrador. Economic regulations relevant to the oil & gas industry in Canada include taxes and other fees imposed on industrial activity. Taxes and fees will increase the cost and risk of an investment. Income is taxed by both federal and provincial governments under various legislations. For the oil & gas industry, other regulations, such as royalties, production taxes, and administrative levies, have an economic impact. In addition, related to environmental taxes/fees, social fund contributions, and industry sectorspecific taxes also have an impact. Study Scope The scope of the study includes a review of relevant key legislation and policies for nine jurisdictions in Canada and the United States at the federal (Canada and
