Report recommendations would politicize decision-making of energy projects

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Appeared in the Calgary Herald, May 20, 2017

This week, a panel of experts submitted a report to the federal government, laying out a deep restructuring of energy transmission regulation in Canada. The report, published on the National Energy Board’s website, is titled Forward, Together: Enabling Canada’s Clean, Safe, and Secure Energy Future.

A quick scan of its 100 pages suggests a more honest title would be Putting Politics First.

In the world as we knew it, energy companies, seeing a potential for selling energy and services and making a profit, would attract private investors, then submit a proposal for what they wanted to do to the National Energy Board. The NEB would then assess the project on its technical merits, ensuring it complies with Canadian laws, would hold public consultations, and then, assuming the project was largely compliant with existing law, grant its approval, often with a list of conditions that must be met before the project could commence. That approval would then be sent to the prime minister’s office for final approval, which, if granted (as it usually was), was the end of the story.

But if the Forward report’s recommendations are implemented, the process outlined above will look very different. The biggest change is a reversal of the standard regulatory model—now, political approval will be granted or denied before much of the detailed study of proposed projects is completed.

This means that non-market considerations will play a larger role in determining what the private energy sector can do.

In Forward, Together world, pipeline companies, for example, must first apply to the federal cabinet (via the Minister of Natural Resources) for a political determination of whether or not any given activity is “in the national interest.” Cabinet will “typically” have a year to make this determination.

If granted approval by the cabinet and minister, the proposal will go to a new regulatory entity, built partly from the bones of the National Energy Board, to be called the Canadian Energy Transmission Commission, which will have (again, “typically”) two additional years from the approved filing of a detailed proposal to review the proposal on its technical merits. Unlike today’s NEB, which is run out of Calgary, the new CETC will be managed by an Ottawa-based board of directors, and an Ottawa office of the CETC, which will coordinate with government. They’ll also collaborate with another newly-minted agency, the Canadian Energy Information Agency (CEIA), modelled on the United States Energy Information Administration. This agency, too, will migrate its functions and staff to Ottawa and publish reports on “projected energy demand, energy sources (including renewables), progress in implementing innovative clean energy technologies, climate change, international benchmarking, and performance against Canada’s policy objectives.”

According to Forward, Together, CEIA will ostensibly be neutral and credible because it will have no influence on determining or administering energy policy or infrastructure regulation.

Clearly, the Forward, Together report suggests a major politicization of decision-making over energy projects, moving that decision-making far from the markets and environments the decisions will affect. It introduces a new political test that can approve further regulatory hearings, but can kill a project before it undergoes detailed technical review.

As the report says, under the new rules, after the cabinet issues its verdict on whether a project advances:

“At this stage “yes” means “yes, subject to further regulatory approval after a detailed project review” and “no” means “NO.”

It will be interesting to see how Canada’s premiers take this new allocation of decision-making power when a remote federal government will now determine how provinces can develop and transport much of their own energy resources. “Forward, Together?” Not so much. “Putting Politics First” is more like it.

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