Natural Resources Committee on Nov. 18th, 2013

[The Vice-Chair, Liberal, Geoff Regan]

The meeting is called to order.

Ladies and gentlemen, welcome to this meeting of the Standing Committee on Natural Resources. Pursuant to Standing Order 108(2), today, we are holding a briefing on the Major Projects Management Office.

We are welcoming two witnesses from the Department of Natural Resources: Jim Clarke, Director General of the Major Projects Management Office; and Terence Hubbard, Director General of Policy at the Major Projects Management Office.

Ladies and gentlemen, we will start with a presentation by the representatives of the major projects management office, which will be followed by a period of questions.

We do expect the arrival of the regular chairman sometime over the next few minutes, at which point he will wrestle me to take over the chair, I'm sure.

Gentlemen, welcome. Please go ahead.

[Jim Clarke, Director General, Major Projects Management Office, Department of Natural Resources]

Thank you for the opportunity to address the committee today.

Our opening remarks, as outlined on slide 2, will provide a brief overview of Canada's natural resource sector and the importance of major projects, then outline the role of the major projects management office, and then provide a brief update on the responsible resource development plan.

Turning to slide 3, natural resources have always been a cornerstone of the Canadian economy and remain so to this day. Currently, the natural resource sector represents 18% of nominal GDP and supports 1.8 million direct and indirect Canadian jobs. The sector also attracts nearly one-third of new capital investments, valued at $120 billion. Natural resources are also responsible for over half of our merchandise exports. Taxes and royalties from this sector support key government services such as education and health care.

Turning to slide 4, looking forward, it's estimated that there could be hundreds of major natural resource projects representing as much as $650 billion in investments in Canada's economy over the next decade. A modern regulatory system for the review of major projects will help attract continued investments to ensure we capitalize on natural resources opportunities to support Canadian jobs, growth, and prosperity during uncertain economic times.

It should be noted that timing is critical as emerging Asian and other international markets are necessary to replace traditional ones. As a result, major projects need to be managed well to ensure they meet their timelines.

Slide 5 outlines the main challenges with the previous regulatory system prior to the MPMO initiative. For example, legislation, regulations, and policies that deal with similar issues should always work in a coordinated fashion, but this was not always the case. Several other key issues existed.

Project reviews generally had no fixed timelines and had become unpredictable, sometimes taking many years to complete. Also, too many small routine projects with negligible environmental risk or risks that were already being managed elsewhere were taking up federal resources that could be applied to projects with a greater risk profile. Issues also existed with the way the crown was discharging its duty to consult with aboriginal groups; it was inconsistent and disorganized.

Finally, the gaps in environmental compliance and enforcement tools were another issue. This included gaps in environmental assessment follow-up, a requirement under the old regime that was not always consistently done. Furthermore, delays and duplication did not bring environmental benefits, but instead were compromising the effectiveness and efficiency of Canada's regulatory regime.

Addressing a system-wide challenge required a system-wide response. That segues into slide 6, which shows how the government-wide MPMO initiative established through budget 2007 was a response to the challenge of improving the regulatory system.

A cabinet directive was put in place to bring the system together. This included 12 partner departments and agencies that are committed to working better together in a horizontal manner on the issues facing major project reviews.

A major projects deputy minister committee was established to provide overarching governance and senior level oversight, and the MPMO was created within Natural Resources Canada to act as a focal point for the initiative.

This office has a dual mandate. It has an operational mandate to enhance existing processes and procedures for major project reviews, and it has a policy mandate to drive towards more fundamental improvements.

We have a small but dedicated team of 25 people. Both the operational and the policy sides of the MPMO are driving towards the same strategic outcomes to ensure improvements in the regulatory system. The MPMO initiative provides capacity investments for six key regulatory departments, and funding was renewed in 2012, to go until March 2015. I'll now turn to slide 7.

Regarding project management, slide number 7 contains information on the management of the MPMO's portfolio. That includes about 75 projects that represent $218 billion in potential new investments in the country. Mining projects are represented in 71 of the portfolios, while the rest is made up of energy projects. As you can see, the portfolio includes complex projects from the natural resources sector.

Slide 8 describes the suite of operational enhancements put in place through the initiatives that have been implemented across departments. New tools have been created to make project reviews more timely and predictable, such as project agreements, weekly status reports, and monthly deputy minister committee meetings.

The whole-of-government approach to aboriginal consultation has been developed to improve the consistency and meaningfulness of consultation for major projects. An MPMO client account manager is assigned to each project to serve as a single window for proponents and to ensure that project-related issues are identified and resolved in a timely manner.

Our IT tool, the MPMO tracker, allows anyone to track the completion of project review milestones online, allowing for a far more transparent process. As a result, the measures put in place help reduce project review timelines while maintaining our high environmental standards and the overall effectiveness of the review process.

Slide 9 shows that in terms of the policy mandate, the MPMO has been driving systemic change across government. Since 2007, the MPMO initiative has served as a focal point for collaborative policy work to advance fundamental reforms, including legislative changes.

The MPMO is providing horizontal leadership to advance system-wide the suite of 12 regulatory initiatives under the current plan for responsible resource development, otherwise known as RRD. We're also responsible for bilateral and multilateral engagement with provinces; advancing the objective of one project, one review; implementing and overseeing the whole-of-government approach to aboriginal consultation for major projects; and advancing earlier engagement with aboriginal groups.

Slide 10 outlines how improvements to the regulatory system for major projects have been incremental in nature and builds on a series of regulatory reform initiatives put in place in recent years. In 2009, changes were introduced to accelerate infrastructure investments under Canada's economic action plan, which included an action plan to improve the regulatory regime in the north. In 2010, the government made targeted changes to the Canadian Environmental Assessment Act and established dedicated participant funding programs. Under Canada's economic action plan 2012, $165 million was allocated over two years to support responsible resource development, including renewal funding for the major projects management office initiative.

Through budget 2012, the government also introduced legislation to streamline the review process for major projects. That legislation, Bill C-38, was given royal assent on June 29, 2012, and implementation of these important changes is under way.

Slide 11 provides a summary of key changes under the plan for responsible resource development, or RRD. The plan focuses on four key objectives or pillars.

The first pillar improves process predictability and timeliness, which consolidates environmental assessment responsibilities from 40 departments and agencies to three. It sets legally binding timelines and ensures that information requirements are clear.

The second pillar reduces duplication in the system by enabling substitution with provinces and allowing organizations that are capable of issuing regulations to issue them.

The third strengthens environmental protection, which focuses resources on major projects where there could be risks, but also introduces new enforcement and compliance measures.

The fourth pillar enhances aboriginal consultation and engagement, which I'll explain in more detail in the next slide, considering its importance to major projects.

Turning to slide 12, the aboriginal consultation and engagement pillar is critical for responsible resource development. Key policy commitments include: allowing better integration of aboriginal consultations into the new environmental assessment and regulatory processes; providing $13.5 million as part of budget 2012 for funding over two years to support consultations with aboriginal peoples; establishing consultation agreements with aboriginal groups and provincial governments.

The objective of these measures is to promote positive and long-term relationships with aboriginal communities. This will help improve reconciliation and facilitate greater participation of aboriginal people in the direct and indirect benefits of new resource projects.

Added to these initiatives is the fact that the Prime Minister has appointed Doug Eyford as a special federal representative on west coast energy infrastructure to engage aboriginal groups on energy infrastructure issues and opportunities. His report is due at the end of this month, on November 29.

Furthermore, the government has recently introduced a new publicly available online tool called ATRIS, the aboriginal and treaty rights information system. It provides users with information on treaties or agreements and claims processes on a geographic basis. This increases the accessibility of up-to-date, site-specific information on the rights or potential rights of aboriginal groups.

On the final slide, I'd like to outline our near-term priorities. Moving forward we'll be working to fully implement RRD and its related regulatory framework. From a policy perspective we'll continue to work with partners and provincial governments to advance the objective of one project, one review.

We are also working to ensure the successful transition of 75 projects to the new regulatory model enacted as part of RRD. We will continue to provide oversight and coordination of the whole-of-government approach to aboriginal consultation and engagement for major projects.

We would like to thank you for your interest in the work of the MPMO and for providing time for us today on your agenda. We'd be happy to answer your questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Mr. Clarke and Mr. Hubbard, for being here today to present information on what is a very important body to handle major natural resource projects development in Canada.

We'll get directly to questions and comments from members. In the seven-minute round we'll start with Ms. Crockatt, then Ms. Duncan, and then Mr. Regan.

Go ahead please, Ms. Crockatt, for up to seven minutes.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Thank you very much for your presentation. I think we all look forward to being able to understand this office just a little bit better. I'd like to talk right upfront about the moral cause. Can you tell me what is the moral cause for your office? Why are you here?

[Terence Hubbard, Director General of Policies, Major Projects Management Office, Department of Natural Resources]

Thank you for your question.

At the time of the creation of the major projects management office it was clear that the current regulatory system just wasn't working well as a system, as my colleague, Jim Clarke, outlined in his presentation.

Over the course of a number of decades a number of regulations and pieces of legislation were put in place for well-intended purposes, but there was very little regard as to how that framework interacted as a system impacting major projects. There were a number of different pieces of legislation, but there was nobody really put in place to look at how those pieces of legislation and regulation interacted together and how they form as a system.

When the major projects management office was created it was really intended to pull together federal regulatory departments and agencies that had responsibilities and a mandate for working on issues related to major projects. It was to ensure that we were taking a whole-of-government approach and looking at issues in a collective way so that we could have a Government of Canada perspective on how to manage these issues rather than looking at a piecemeal approach and looking at issues from an individual departmental mandate, and not really rowing in the same direction in terms of these important projects going forward.

We had a dual purpose in setting up the office. First and foremost, this was ensuring that those individual projects that were moving through the process at any given time were moving forward as efficiently and effectively as possible while at the same time working with our colleagues in other federal regulatory departments and agencies to take a holistic look at the system and how it worked together and to develop options and opportunities for improving that framework going forward.

[Joan Crockatt, Conservative, Calgary Centre, AB]

I'm sure both of you are probably familiar with the Mackenzie Valley pipeline project, which is the poster child for what wasn't working. Could you give us a short précis of what happened and what you think the consequences to Canadians were?

[Terence Hubbard]

I think as members of this committee are aware, the Mackenzie Valley pipeline project was subject to a very complex review process involving a number of different federal regulatory departments and agencies and different territorial responsibilities as well, and had significant issues related to engagement of Canada's aboriginal peoples along the pipeline corridor.

I think we're all aware of the challenges in terms of the timeliness of that process. During that timeframe the project went through the review process, market conditions changed quite considerably to the point that by the time we got through the review process the economics for the project were quite different from the economics that we're currently dealing with today for natural gas, to the point where there's considerable consideration on whether or not that project ultimately moves forward.

It's one of the reasons for the creation of the major projects management office in terms of steps going forward. It was to ensure that the outcomes, the decisions for these projects, regardless of whether it's a go or a no-go decision could be made on a timely basis, so that when there is a window, and often a short window given market cycles, for these projects to move forward, we can capitalize on those opportunities and have those decisions made in a timely fashion.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Okay.

I think it took about 21 years—some people say 18; some people say 21—for the Mackenzie Valley pipeline to go through a regulatory process and by the time it was finally approved, there was essentially no market in the United States any more.

[Terence Hubbard]

The exact timelines as you mentioned are debated depending on when you start and stop the clock. In terms of the overall outcome, yes, market conditions have changed considerably to the point at which the proponents are reconsidering their project proposal.

[Joan Crockatt, Conservative, Calgary Centre, AB]

I wonder if I could ask you about environmental assessments. There tends to be issues raised about whether in essentially compressing the timeframe environmental assessments might be somehow jeopardized or watered down. I wonder if you can tell us what the experience is with other countries that use similar timeframes that you use.

[Terence Hubbard]

In the course of our analysis and in terms of the work and mandate of the major projects management office, we have looked at a number of different jurisdictions and what they've done in their experiences in managing major projects. Obviously, in terms of setting timelines on four major projects, both prior to implementing the legislative changes where we had a policy commitment to put in place these timeframes in these project agreements Jim talked about earlier, and now through the legislative changes, we're very cognizant of the fact that it wasn't about cutting corners.

It was about ensuring an efficient process, ensuring that we were able to deliver better outcomes at the end of those processes. Looking at the examples of what other countries have done and recognizing that it is a competitive investment environment out there and that we're competing for capital with our other jurisdictions that have resources as well, we need to capitalize on the opportunities while we have them. More important probably than the timeline itself is providing certainty to investors that we have a predictable timeframe in place and what they can expect coming into the process in terms of when they will receive a decision at the end of the day, so they can make their decisions and plan on capital accordingly.

Other jurisdictions, for example the European Union, I'm aware of have a timeline of 18 months from the receipt of a complete project application to review to making their final decisions. Like us, I believe those decisions can be made and effective decisions can be made within a timeframe of that length of time.

[Joan Crockatt, Conservative, Calgary Centre, AB]

Jim, in your presentation you mentioned that timing is critical, and we are in a globally competitive market. Can you talk about China maybe and what our challenges are with getting things approved in order to take advantage of the Chinese market?

[Jim Clarke]

It boils down to being globally competitive.

If you look at a case study on the west coast of Canada in British Columbia, if you talk to the provincial government, they will tell you that there are upwards of 20 potential liquefied natural gas facilities or pipelines that could be built in British Columbia over the next few years if the circumstances are right. There's a lot of interest in Asian markets in terms of the export business.

It's all about having a regulatory process that is predictable and timely, but in no way cuts corners from an environmental protection point of view, and all the while ensures meaningful aboriginal consultation throughout the process, so that Canada can be held up as a model in terms of its regulatory process in terms of efficiency and effectiveness.

[The Chair, Conservative, Leon Benoit]

Thank you very much, Ms. Crockatt.

We go now to the official opposition, Ms. Duncan, for up to seven minutes, please.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thank you, Mr. Chair.

To the witnesses, thank you very much for appearing on relatively short notice.

I happened to be at the conference in Banff when the former minister actually announced the MPMO. I have followed it with great interest.

I've taken the time to look at some of your agreements for specific projects. I think that might be one of the more useful ways to take a look at how you're saying you're operating and then in practice what happens.

I notice in your presentation you said that to ensure predictability and transparency in project review you have early engagement of proponents and information and guidance for proponents. However, for the Jackpine project, which is a matter of major contention and the final decision on it is still being held up, in the preamble to your project agreement between all the entities, you state that Shell Canada has already submitted its environmental impact assessment.

Can you tell me how this is balancing better the interests of the various responsibilities in government? You state that you have early engagement proponents, and yet your role only comes into effect after the environmental impact assessment has already been signed off.

[Jim Clarke]

Thank you for the question.

First of all, I'll mention what our project agreements are and then I'll indicate that depending upon the circumstance of a project, they can be completed very early in the stage of a project review, or depending upon the circumstances of the review, a little bit later than early in the project review.

The philosophy behind the project agreement is that at the earliest moment when there is enough useful information we work with our colleagues across the federal system to outline roles and responsibilities for the review of a particular project. Those include milestones for the environmental assessment, milestones for the regulatory permitting, and an overall examination of how the aboriginal consultation process will be conducted. We work with them to develop a document that will make it very clear who's doing what and what the project milestones are, including target timelines. Everyone who's involved in the review will get their deputy ministers to sign the project agreement, and then we'll post it publicly. Then we'll use the milestones and the target timelines in that project agreement to publicly track how that project is progressing through the review of—

[Linda Duncan, NDP, Edmonton Strathcona, AB]

You're not answering my question.

[Jim Clarke]

I'm getting there.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Your mandate under the cabinet directive is two things. One is to do more efficient reviews, which is obviously to fast-track, which has been in throne speech after throne speech and budget documentation after budget documentation since I was elected five years ago. Clearly, the government wants to move to more fast-tracking of these developments and to make Canada the energy leader of the world. Your directive actually is two-pronged, and I'm having a hard time figuring out even with the presentation you've made where the other prong comes in.

If your agreement with all the agencies isn't even signed until after the environmental impact assessment has been filed, how do you ensure that, for example, concerns about the environment are...or frankly, with regard to the Jackpine project, that ongoing concerns of the first nations.... There are 88 non-binding conditions attached. How then after the fact can you be coordinating all the input of the agencies when you don't come into play until after the environmental impact assessment has already been filed?

[Jim Clarke]

I wonder if we have an issue of terminology here.

You're talking about the environmental impact statement, not the report, not the result of the review itself.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

I'm reading from your document which says, “has submitted an Environmental Impact Assessment (EIA) report”.

[Jim Clarke]

Right, and that's essentially the upfront document prepared by the proponent in terms of the anticipated impacts of the project. That is then subject to a public hearing process—

[Linda Duncan, NDP, Edmonton Strathcona, AB]

No, an environmental impact assessment is never done—

[The Chair, Conservative, Leon Benoit]

Ms. Duncan, come on. You asked a question that requires a substantial answer from the witnesses. I'd ask you to show the courtesy to allow the witness to answer, please.

Go ahead, please, Mr. Clarke.

[Jim Clarke]

There was a joint review panel process for the review of the Jackpine mine expansion, which included public hearings and multiple opportunities for public participation, including review and comment on the environmental impact assessment report which Ms. Duncan is referring to. It was a very transparent public process. There was a panel report issued most recently, and now the government is contemplating a decision on the project.