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2011/128

Notes for a Speech by

The Honourable Joe Oliver, P.C., M.P.
Minister of Natural Resources

to the

Manning Foundation for Democratic Education
National Policy Dialogue: Strengthening Innovation in Canada

"Smart Regulation for Major Projects"

November 24, 2011
Ottawa, Ontario

Check against delivery


Thank you very much, and thanks to Preston Manning and the Manning Foundation for Democratic Education for inviting me to join the discussion on strengthening innovation in Canada.

For years, Mr. Manning has demonstrated strong leadership in a variety of areas related to a democratic Canada, and today’s impressive agenda is a testament to his continued commitment to Canada.

We are all well aware of the importance of innovation. It's fundamental to our progress and prosperity.

So it’s no coincidence that Canada is one of the most innovative and technologically advanced countries in the world and also one of the most prosperous.

We also know that we can always do better, and that gatherings like this can be catalysts for innovative thinking.

I'm sure you all join me in congratulating the Manning Foundation for fostering this dialogue on innovation — the innovation we need to press Canada's advantage in the global economy.

Innovation in natural resources

One of those advantages, of course, is our natural resources.

We have one of the greatest natural endowments in the world — but we are a long way from having the marketplace to ourselves.

As a result, innovation is critical to the sector. We need to maintain our competitive position in existing markets. We have to take full advantage of the opportunities offered by the rapid economic expansion we see in China and elsewhere.

And we must pursue our economic interests in an environmentally responsible way.

As one of the Government of Canada's five science-based departments, Natural Resources Canada plays a key role in supporting innovation in our resource industries.

This is what I'd like to focus on today — the innovation challenges for Canada's resource sector.

I say challenges, because it really is two-fold.

First, we need to innovate in the technological sense to ensure Canada's resource sector continues to be a leader in price, quality, reliability and environmental responsibility.

Second, we need to be just as innovative in our approach to resource policy, in particular, improving our regulatory regime for major resource projects.

No matter how advanced we are technologically, our resources are of little benefit if our regulatory environment acts as a deterrent to their development.

Technological innovation

To understand the importance of technological innovation, we don't need to look any farther than the oil sands.

Barely forty years ago, the idea of the oil sands as a cost-effective source of crude was a technological fantasy.

Today, the oil sands turn out 1.5 million barrels of oil a day and are the third-biggest proven oil reserve in the world.

Then there's shale gas — a decade ago, it was not a factor. Today, thanks to technology, it's a game-changer. There's enough shale gas in north-eastern British Columbia alone to meet Canada's needs for a hundred years.

Innovation is also crucial to our mining industry. Canada's supply of easy-to-access mineral and metal resources is being depleted.

Most new discoveries will likely be in the North and other remote areas. More and more, deposits will be found at depth, not at the surface.

In addition to a five-year, $100-million geoscience program for the North, our government has committed $25 million to the new Targeted Geoscience Initiative. This initiative is designed to develop the next-generation geoscience knowledge and innovative techniques that the industry needs to search more effectively for these deep deposits.

Environmental innovation

Innovation is also crucial to meeting the environmental challenges associated with resource development — challenges Canada is committed to meet.

In the oil sands, for example, greenhouse gases emitted per barrel of oil produced have been reduced by a third since the early 1990s. As much as 90 percent of the water used in oil sands extraction is now being recycled.

Scientists in my department are working with industry to develop and test innovative new tailings technologies. Instead of accumulating in ponds, tailings could be dried and stacked, allowing faster and more effective land reclamation.

I'm pleased to see industry is taking an innovative approach to innovation. For the past year, a consortium of seven oil sands companies has been working together to advance tailings technologies.

Since 2006, our government has invested more than $10 billion in innovation for a cleaner energy sector — from world-leading research in carbon capture and storage to efficiency and renewable energy.

We are fostering innovation for sustainability in other sectors with the Corporate Social Responsibility Strategy we launched in 2008 and with our Green Mining Initiative.

Innovation in regulation

Innovation in extraction and exploration and environmental technologies is crucial, but they mean little if we can't attract the investment we need to develop our resources in the first place.

Earlier this month, I came back from a visit to China and Japan.

China especially is hungry for energy — it's already passed the U.S. as the biggest energy consumer in the world.

Canada has the oil and natural gas China and other Asian economies want and need.

Investors see the potential: proposed projects like B.C.’s Northern Gateway and Trans-Mountain pipelines could put Canadian oil en route to the Pacific Rim.

Northern Gateway alone represents an investment of $5.5 billion.

It would create thousands of jobs during construction and many more long-term jobs across Canada.

That's just one project. Right now, we can see close to $500 billion in new investment in mining and energy projects over the next 10 years — leading to hundreds of thousands of new jobs and benefits right across the country.

But this kind of investment cannot be taken for granted.

We have to put and keep the right conditions in place — the conditions that encourage trade and investment and facilitate job creation.

Smart regulation for major projects

We have in place several key ingredients that attract investment: competitive taxes, a stable political environment and non-discriminatory policies. But when it comes to major resource projects, there's no question that another key factor is the regulatory process.

A regulatory regime that is objective, expert and effective is a basic ingredient of a stable, predictable investment climate.

Inefficient regulation leads to unnecessary and unpredictable delays that can impact on the economic viability of major projects because it creates higher costs and can impede industry's ability to secure capital. 

Furthermore, delays often have no bearing on environmental outcomes.

Many of the inefficiencies in the system can be blamed on its design — or more accurately, its lack of design. The existing regime was developed and added to over the course of many years and in numerous jurisdictions with little consultation among them.

As a result, it is complex. There are numerous instances of duplication and overlap.

There is a lack of clarity about who is responsible for what and when they are responsible for it.

There can be both federal and provincial environmental assessments for one project, and processes can be out of sync. 

This is why regulatory improvement has been a priority for our government from the beginning.

We have implemented a number of innovations to enhance the performance of the regulatory system for major projects, without compromising environmental protection.

Innovation 1: The MPMO

We took the first major step in 2008, with the creation of the Major Projects Management Office — the MPMO. Now into its fourth year of operation, the Office is managing more than 70 projects, representing a total of some $120 billion in investment.

With the MPMO, we’ve begun to untangle a daunting maze of legislation and regulation — dozens of different pieces of federal legislation — that can complicate and slow project approval.

 As you might imagine with such an array of legislation, a lot of time could pass before a dozen or more departments and agencies finally decided who should be involved and who was going to be in charge of reviewing a project.

The MPMO's whole-of-government approach eliminated all that.

Now, a committee of deputy ministers meets once a month to manage issues and resolve challenges on major projects.

Today, the average timeline for a project review has been reduced by more than half — what used to take more than four years is done in an average of 22 months.

Some question whether it is still too long, but everyone will agree it is a significant improvement.

And we now have a system-wide approach for major project reviews that is more accountable, predictable and transparent.

There are service standards for every step to ensure that reviews are timely and predictable. And the MPMO monitors performance to ensure projects remain on track.

In fact, the MPMO website has an online tracker, adding a new level of transparency and public accountability.

The same whole-of-government approach has been applied to Aboriginal consultations.

Rather than having to respond to requests from half-a-dozen departments, Aboriginal communities are being engaged by a single consultation co-ordinator, and their input comes much earlier in the process.

We're seeing improvement at every stage of the process.

Last year, for example, the MPMO worked with other federal departments to reach delegation agreements on a number of projects — the Line Creek Coal project in B.C. was one of them — so the Government of Canada would not have to replicate a thorough review already conducted by the province.

The MPMO is also mandated to facilitate additional improvements to the regulatory system for major resource projects — many of which require improving federal legislation and regulation.

Innovation 2: Budget 2010

For example, the MPMO helped to develop a number of targeted legislative amendments to the federal environmental assessment process — the EA process.

These amendments, included in Budget 2010, meant all comprehensive study EAs would be led by one of three agencies — the Canadian Environmental Assessment Agency, the National Energy Board or the Canadian Nuclear Safety Commission. 

As a result, instead of waiting months while a variety of interested departments sorted out who should be in charge, a federal review of a major project now starts right away.

These changes have also made it possible to better align federal and provincial processes.

We've had cases in the past where a provincial government had completed its EA before the federal review of the project even started.

Now, we can launch them at the same time and coordinate public consultations.

We're reducing duplication, saving time and money — all with zero impact on the thoroughness of the review.

We also established a regulated timeline for these reviews. The Canadian Environmental Assessment Agency is required to complete their reviews within 365 days, bringing additional certainty to the process.

As well, the routine public infrastructure projects that were temporarily exempted from federal EAs under Canada’s Economic Action Plan are now permanently exempt.

This allows us to put more of our resources where they are most needed: on major projects that have the potential for significant environmental impact.

Provincial and municipal governments can still initiate an environmental assessment for these routine projects, and the Minister of the Environment retains the authority to withdraw the exemption for any project and submit it to a federal assessment.

Innovation 3: The North

As you know, our Government has made the North a special priority.

There is huge potential for resource development North of 60, and the number of projects is growing quickly.

Energy, minerals and metals provide an unparalleled opportunity to build economic prosperity in the North and to contribute to the strength and sustainability of Aboriginal communities.

At the same time, we recognize that the northern environment may be especially sensitive to disruption.

The exceptional opportunities and unique challenges associated with resource development in the North require a special approach. So, in May of last year, our Government announced the Action Plan to Improve Northern Regulatory Regimes.

There is a lot of work to be done. A variety of jurisdictions have responsibility for regulating resource development in the North, and there are often differences in regulation between and even within jurisdictions.

As a result, regulatory processes in the North are often unnecessarily complex, costly, unpredictable and time-consuming.

The Action Plan is designed to enable us to work with all interested parties to address specific improvements to ensure strong, effective, efficient and predictable regulatory regimes across the North.

We are also moving forward with improvements to our own processes, including the opening of the Northern Project Management Office. It acts as federal coordinator for major projects in the territories, looking to replicate the success of the MPMO south of 60.

Of course, industry has a responsibility as well. It's not always the system and the bureaucracy that cause delays. Proponents have an obligation to do their homework.

The MPMO is also helping to address that part of the equation by offering pre-project services to let proponents know what is expected of them in terms of submissions and timing.

Complex challenges remain

Taken together, the improvements we've implemented are having a significant, positive impact in terms of reducing timelines and making the regulatory process more transparent and predictable.

Nonetheless — and as innovative as these changes have been — they are no more than first steps. 

The really fundamental modernization we need cannot happen without system-wide legislative changes.  

Literally dozens of federal departments still play a part in the implementation of environmental assessment. They all have different legislation and regulations that govern their activities, and all of that must be coordinated with provincial legislation.

CEAA review

As complicated as that may sound, I am confident we are getting closer to taking another major step forward.

As you may know, the Canadian Environmental Assessment Act is currently undergoing a parliamentary review, as required by legislation.

The House of Commons Standing Committee on Environment and Sustainable Development is hearing from interested parties, and they are raising some interesting questions — such as whether the potential benefits of a project should be considered in the EA process.

For example, the Lower Churchill Hydro Project is a massive project — it's going to have impacts.

It also represents an investment of $4.5 billion, and the clean hydroelectricity it generates will avoid millions of tonnes of GHG emissions — equivalent to taking more than three million cars off the road.

Other witnesses have suggested the Act simply covers too much ground — as many as 6,000 projects a year are subject to federal review.

The majority of these are small projects, and the Agency's own research shows that 94 percent of those small projects had no more than minimal potential to cause adverse environmental impacts.

It takes an average of almost two months to complete a review of even a small project — and there are thousands of them every year.

We have to ask whether the federal government could be allocating its assessment resources more effectively — for both our environment and our economy.

Sandra Schwartz, the vice-president of the Canadian Electricity Association, told the committee that Canada's electricity sector needs to invest nearly $300 billion in infrastructure over the next 20 years to meet the growing demand for electricity.

As she pointed out, it can take as long as 10 years to go from project proposal to connecting to the grid — and nearly half that time, four years, is spent in EA processes. 

Electricity is hardly a luxury, yet a cumbersome and needlessly complex regulatory process is putting our future supply at risk.

It's also putting our competitive position at risk. Here’s an example:
Canada is the second-largest producer of uranium in the world. It’s a highly competitive business, and Australia is one of our biggest competitors.

Australia recently approved a major expansion of a uranium mine in a process that took two years from start to finish. In this country, due to the additional complexities involved in the regulation of nuclear development, it can take as long as four years.

We cannot afford to give our competitors a two-year head start.

Conclusion

As we said in the Speech from the Throne, our Government is committed to developing Canada’s extraordinary resource wealth in a way that protects the environment.
We are committed to providing an innovative, effective and efficient regulatory regime in which all stakeholders can have confidence.

I believe the fallout from the U.S. regulatory decisions surrounding the Keystone XL pipeline makes the importance of timeliness and efficiency in the application of Canadian rules abundantly clear and urgent.

Building on our efforts through the MPMO, we will continue to work with the provinces, territories and industry on ways to reduce duplication, tighten timelines and make other improvements to the regulatory processes for resource projects.

We will ensure meaningful consultation with affected communities, including Aboriginal communities.

And, we remain focused on the ultimate regulatory innovative goal: one project, one review.

Above all, we remain committed to our number-one priority as a Government — jobs and economic growth for Canadians, while assuring the protection of our environment.

Thank you.