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Regulatory Approval for Energy Projects

Oct 4, 2022 11 MIN READ
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clean energy
Authors
Sander Duncanson

Partner, Regulatory, Indigenous and Environmental, Calgary

Richard J. King

Partner, Regulatory, Indigenous and Environmental, Toronto

Zander McGillivray

Associate, Construction, Infrastructure and Energy, Toronto

Joey Chan

Associate, Regulatory, Indigenous and Environmental, Calgary

Updated October 2022

Depending on the scope and location of the project, proposed energy projects in Canada may require a range of regulatory and environmental approvals from the federal and/or provincial/territorial and/or local governments.  Consultation with Indigenous peoples often plays a significant role in the approvals process.

This chapter is an introduction to the primary federal energy regulatory agency (Canada Energy Regulator), federal environmental legislation that may apply to energy projects that have inter-provincial or international characteristics and Alberta, British Columbia, Ontario, Québec, and the Northwest Territories’ regulatory regimes and governing legislation.

Canada Energy Regulator

The Canada Energy Regulator (CER) replaced the National Energy Board (NEB) on August 28, 2019 as Canada’s federal regulatory agency for energy projects. Pursuant to the Canadian Energy Regulator Act, the CER regulates energy development in Canada that involves:

  1. the construction, operation and abandonment of:
    1. interprovincial and international pipelines and associated traffic, tolls and tariffs;
    2. interprovincial and international power lines;
    3. offshore renewable energy projects;
  2. acquisition, lease, or taking of lands for the purposes of a pipeline, and associated compensation; and
  3. the importation and exportation of oil, gas and electricity to and from Canada.

The CER also regulates and oversees oil and gas development projects in the Northern territories and offshore under the Canada Oil and Gas Operations Act and the Northwest Territories’ Oil and Gas Operations Act.

The purpose of the CER is to ensure that pipelines, energy development and trade are done in the Canadian “public interest” (a balance of economic, environmental and social interests that change as society’s values and preferences evolve over time). The CER ensures that the projects it regulates are constructed, operated and abandoned in a manner that is safe, secure, efficient, and that protects people, property and the environment.

Federal Environmental Legislation

In Canada, jurisdiction over environmental matters is shared by the federal and provincial governments. A number of key federal laws typically apply to energy projects. For example, the Fisheries Act applies where a proposed project would cause the harmful alteration, disruption or destruction of fish habitat or death of fish. Energy project proposals must also comply with provisions of the federal Migratory Birds Convention Act, 1994 and the Species at Risk Act. Additionally, where equipment is to be erected or placed in navigable waters, approval under the Canadian Navigable Waters Act may be required. The federal government also manages a multitude of regulations affecting energy projects under the Canadian Environmental Protection Act, 1999.

The Greenhouse Gas Pollution Pricing Act (GGPA) imposes an output-based carbon pricing system on large industrial emitters where similar regimes are not in place at the provincial level. Currently, the GGPA’s output-based pricing system applies in Manitoba, Prince Edward Island, Yukon, Nunavut, and partially in Saskatchewan. The application of the GGPA across the provinces may change depending on provincial policy and whether provinces meet the federal standard. The most recent update to the federal benchmark indicates that the price per tonne of CO2 equivalent emissions will rise from $65 in 2023 to $170 in 2030. The Clean Fuel Regulations, Emissions Reduction Fund and a new carbon capture, utilization and storage Investment Tax Credit are federal initiatives that are also likely to impact future energy projects.

Additional federal regulations relevant to energy projects, including regulations to reduce Canada’s greenhouse gas emissions from the oil and gas sector and a new clean electricity standard, have been announced but are not yet in place.

Impact Assessment Act, SC 2019, c 28

Certain types of major projects may trigger a federal impact assessment under the Impact Assessment Act (IAA). The Physical Activities Regulation, a regulation made under the IAA, describes designated projects that will require an impact assessment. If a project is not listed under the Physical Activities Regulation, the Minister of the Environment and Climate Change may designate a project to require an impact assessment. In some cases, a review panel may be appointed to conduct the impact assessment. It is also possible for an impact assessment to be conducted with other jurisdictions, such as provincial governments and agencies, Indigenous governing bodies, and territorial agencies.

The impact assessment process consists of three phases: Planning, Impact Statement, and Impact Assessment. The whole process can take four-to-five years or more depending on how long it takes to finalize the Impact Statement and whether the Impact Assessment is conducted by the Impact Assessment Agency or a Review Panel. Once the Impact Assessment has been completed, the Impact Assessment Agency sends its report to the Minister, who then has 30 days to issue a decision with reasons about whether the proposed project is in the public interest. Alternatively, the Minister may ask the federal Cabinet to make the public interest determination, in which case the Cabinet has 90 days from the posting of the report to issue a decision. For Impact Assessments conducted by a Review Panel, the public interest decision must be made by Cabinet, not the Minister.

Although each phase has statutory timelines, the IAA allows for timeline extensions in certain circumstances, so the actual timeline to obtain approval may be longer.

Major Projects Management Office

The Major Projects Management Office (MPMO), housed within Natural Resources Canada, provides overarching project coordination, management and accountability for major resource projects as they progress through existing federal regulatory review processes. A “major resource project” is a large resource project that is subject to an impact assessment as defined under the IAA.  Major resource projects may include federally-regulated pipelines, electrical transmission lines, oil sands mines, and water management facilities handling large quantities of water.

Provincial/Territorial Regulatory Regimes

Each province and territory maintains its own regulatory regime for approving energy-related projects. The majority of oil and gas-related activities under provincial jurisdiction are located in the provinces of Alberta and British Columbia, although there are also significant oil and gas activities in Saskatchewan, Newfoundland and Labrador, Nova Scotia, and the Northwest Territories.

Alberta

The Alberta Energy Regulator (AER) and Alberta Utilities Commission (AUC) are Alberta’s primary energy regulators. These tribunals regulate upstream energy projects, intra-Alberta electricity transmission and pipeline projects, and local distribution utility matters. The AER and AUC’s mandates are to ensure the safe, responsible and efficient development of Alberta’s energy resources, and to regulate the pipelines and transmission lines required to move these resources to market.

All significant steps in proposed energy projects require AER and/or AUC approval. Where a project is approved, a licence, order or permit is issued.  Energy development applications are processed as either routine (applications may be processed in as little as one day) or non-routine (applications may take months or years to process and may involve public hearings). In a routine application, there is no stakeholder or Indigenous opposition and all technical, safety, public consultation and environmental requirements have been met. Landowner objections, Indigenous, community or environmental concerns, or objections from competing companies give rise to a non-routine process.

Larger energy projects require an environmental assessment and review under the Environmental Protection and Enhancement Act (the EPEA). The AER and AUC consider the results of the assessment process in determining whether and on what conditions to approve projects in the public interest.

Alberta Land Stewardship Act

The Alberta Land Stewardship Act (ALSA) provides the Lieutenant Governor in Council (Cabinet) with the authority to make and implement land-use plans for seven regions within Alberta. The seven regions are identified in Alberta’s Land Use Framework and are based on major watersheds with boundaries aligned to best fit municipal boundaries and natural regions. As of 2022, two land use plans are in effect.

  • The Lower Athabasca Regional Plan (LARP), covering the Athabasca oil sands region, was the first regional plan released by Cabinet pursuant to the ALSA. The LARP introduced an additional layer of environmental scrutiny and compliance into the Athabasca area of Alberta. It is now undergoing its ten-year review. The LARP identifies several specific outcomes for the Lower Athabasca region, including improved integration of industrial activities on the landscape, designation of new conservation, recreation and tourism areas, and inclusion of Indigenous peoples in land-use planning. The LARP includes both regulatory and non-regulatory strategies to implement the identified outcomes for the Lower Athabasca Region.
  • The Government of Alberta approved the South Saskatchewan Regional Plan (SSRP) in 2014. The SSRP touches on, among other things, strategies for responsible energy development, sustainable farming and ranching, recreation, forest management, and nature-based tourism. The SSRP was amended twice, including in May 2018 to reflect the creation of two new Public Land Use Zones and the corresponding landscape and recreation management plans.

British Columbia

British Columbia’s Oil and Gas Activities Act (OGAA) regulates the majority of oil and gas activities in British Columbia. The Oil and Gas Commission (OGC), a Crown corporation, is primarily responsible for the regulation of oil and gas activities and pipelines in British Columbia. The OGC reviews applications; ensures that applications are in the public interest, having regard to environmental, economic and social effects; encourages the participation of First Nations; participates in planning; and educates and communicates with the public.

The British Columbia Environmental Assessment Act (EAA) requires an environmental assessment review process for project proposals that exceed thresholds established by the Reviewable Projects Regulation (RPR). All such proposals must receive a certificate before they may proceed. The Environmental Assessment Office is responsible for conducting the environmental assessment process and may coordinate with other governmental agencies, including the OGC or the federal Impact Assessment Agency, as applicable.

If a project proposal does not exceed the thresholds set out in the RPR, the OGC has jurisdiction over associated environmental matters pursuant to a variety of statutes.  The Environmental Management Act, for example, guides the OGC in discharging its responsibilities. Other applicable legislation includes the Forest Act; the Forest and Range Practices Act; the Provincial Forest Use Regulation; the Water Sustainability Act; the Water Users’ Communities Act; and the Heritage Conservation Act.

Québec

In Québec, large projects with the potential for environmental impacts, including the construction of power plants and facilities, the opening of mines and the construction of roads and other infrastructure are subject to public assessment.  The Bureau d’audiences publiques sur l’environnement (BAPE) investigates and advises the provincial Minister of Environment on the environmental, social and economic effects of these projects. The BAPE must hold public hearings whenever required to do so by the Minister. During the 30-day public information period, the BAPE is charged with making any document relating to the project public, and any person, group, organization or municipality may request a public hearing, in which any member of the population may participate. Following the hearings, the BAPE conveys to the Minister the concerns of citizens as expressed during the public assessment.  These large projects are approved by the government, on the recommendation of the Minister. As occurred in the case of shale gas in 2011, the BAPE may also conduct industry-wide evaluations in certain cases.

Ontario

The Ontario Energy Board (OEB) regulates the province’s electricity and natural gas sectors. For electricity, the OEB sets transmission and distribution rates; licenses all market participants including generators, transmitters, distributors, wholesalers and retailers; and monitors markets in the electricity sector for efficiency, fairness and transparency. The OEB also regulates Ontario’s natural gas utilities, makes and enforces consumer protection rules, and licenses all marketers who sell natural gas. In addition, the OEB regulates the construction of natural gas pipelines, electricity transmission lines, and the use of geological formations for natural gas storage.

Major electricity projects are also subject to the Electricity Projects Regulation under Ontario’s Environmental Assessment Act. The Regulation provides for a self-directed “screening” form of assessment for most energy projects, and a full assessment for the most environmentally significant projects, which can result in a hearing before the Ontario Land Tribunal. Renewable energy projects in Ontario are subject to a special approvals process administered by the Ontario Ministry of Environment. The Renewable Energy Approval (REA) process is aimed at expediting the approval of renewable generation via aggregating numerous provincial approvals into a single REA.

Northwest Territories

In 2014, the Government of the Northwest Territories became responsible for managing public land, water, and resources in the Northwest Territories (NWT). The Government of the NWT’s department of Industry, Tourism and Investment is responsible for the regulation of onshore oil and gas development in the NWT. The Government of Canada retains its responsibility for offshore resources in the NWT through the CER.

For major energy projects, environmental assessment approvals may be required under the Mackenzie Valley Resource Management Act and/or, depending on the location of the project, the Inuvialuit Final Agreement. Other applicable legislation includes the Environmental Protection ActForest Management ActForest Protection ActSpecies at Risk (NWT) ActWaters ActWater Resources Agreements Act, and Wildlife Act.

Federal-Provincial Cooperation

Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Ontario, Québec, Saskatchewan and the Yukon have entered into environmental cooperation agreements with the federal government to provide for a single, cooperative environmental assessment process where an environmental assessment of a proposed project is required under both federal and provincial/territorial environmental assessment statutes. These agreements are intended to minimize the duplication of efforts and ensure that an environmental assessment is conducted as efficiently and effectively as possible. 

Cooperation between governments can include coordination, delegation, substitution, or a joint review panel (JRP). Coordination involves joint activities, timelines and documents where possible. Delegation is where the federal government delegates specific tasks to the provincial government while remaining responsible for the overall process. With substitution, the federal government allows a provincial process to replace the federal process, and then the province and Canada both make their own decisions based on a single assessment report. For example, British Columbia and the federal government have agreed to substitute the provincial regulatory process for the federal process for several major projects that trigger both federal and provincial environmental assessment reviews. A JRP is where Canada and the province jointly appoint panel members and agree on terms of reference for a joint panel to conduct the impact assessment. The IAA also allows the federal Minister to assemble a JRP through agreement with an Indigenous governing body.

Regulatory Approval for Energy Projects

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