The regulatory pendulum swings (but not far enough)

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Fourteen years ago, the Conservative government of Stephen Harper sent the regulatory pendulum swinging with wide-ranging changes that were aimed at securing the construction of major infrastructure such as pipelines, but ultimately had the opposite effect.

The tools that Mr. Harper created in 2012 with the Jobs, Growth and Long-term Prosperity Act – most notably the ability of cabinet to override regulatory decisions – were placed into Justin Trudeau’s hands in 2015, a solid entry in the encyclopedia entry titled “Unintentional consequences.”

Already, the pendulum was swinging back, with court decisions that rejected the Conservative government as failing in its duty to consult with Indigenous communities.

The Trudeau government pushed the pendulum even harder. First, the Liberals allowed the Northern Gateway pipeline project to die, declining to appeal a court ruling that quashed the 2014 approval by the Harper government. Then, the Liberal government announced “interim principles” in January, 2016, intended to guide regulatory decisions.

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One of those principles was that projects currently under consideration would not be required to restart the regulatory process. But that was exactly what happened to the proposed Energy East pipeline to the Atlantic coast. Revelations that some panel members had met privately with industry proponents led to the recusal of the original three-person board.

Not only was the board replaced, but its decisions were vacated. And, indefensibly, the government broadened the review to include greenhouse emissions not just from the pipeline, but from the upstream production of oil and downstream consumption. On a purely technical basis, that may not have counted as a regulatory restart. But the imposition of the broadest possible definition of emissions clearly violated the spirit of those 2016 principles.

Unsurprisingly, the Energy East project collapsed. The Liberals always claimed to have clean hands, but that is simply not true. At best, the government had a convenient alibi.

Similarly, the Trudeau government and its supporters consistently claimed that the Impact Assessment Act was no barrier to megaproject investment. The sharpest rebuttal to that argument came last week – from the current incarnation of the Liberal government, under Prime Minister Mark Carney.

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Previously, the Carney government had set up the Major Projects Office to expedite the regulatory approval for megaprojects deemed to be in the national interest. This space has consistently criticized that approach as too narrow, creating a system of hand-picked government-favoured initiatives, while avoiding the hard work of broader regulatory reform.

Last week, the Liberals began that hard work with changes that will do a great deal to create a stable regulatory climate in Canada, and keep that pendulum from yet another wild swing. (And it appears that the Major Projects Office may be something of a skunkworks for regulatory reform.)

Most important is the commitment that a federal review and decision will take no more than a year, a signal to the bureaucracy that slow-walking will not be tolerated.

That 12-month timeframe is aggressive, but there is substance to the government’s proposal, starting with a pledge to cement the changes in legislation. Federal permits and environmental assessments would take place at the same time.

Ottawa is also aiming to improve the consultation and accommodation process with Indigenous communities, creating “one clear and coordinated consultation process for each project.” That is a welcome move, both to speed regulatory decisions but also to ease the administrative burden on Indigenous communities.

A series of other reforms add up to a needed rewriting of the federal regulatory playbook. All decisions on certain types of projects would be issued in a single document by the Minister of Environment, Climate Change, and Nature. Overlap between regulatory bodies would be rolled back.

Those are all worthy and needed reforms. But the Carney government has not taken the biggest leap, and given up the power of cabinet approval that Mr. Harper created in 2012. (To be fair, Conservative Leader Pierre Poilievre told The Globe and Mail editorial board last week that he would not give up that power, either.)

So long as the cabinet remains the ultimate arbiter on approving projects, the regulatory process will be, unavoidably, politicized. That was the mistake that Mr. Harper made 14 years ago, and the mistake that Mr. Carney has yet to remedy.