Canada’s Energy Future Altered by New Legislation

The Canadian House of Commons and Senate have adjourned for summer following the last scheduled parliamentary session until fall. Prime Minister Justin Trudeau’s Liberal Party currently holds a majority in the House of Commons and pushed to pass significant legislation before potential shakeups by the federal elections in October 2019. Among the bills passed were C-69, the Impact Assessment Act and C-48, the Oil Tanker Moratorium Act, both of which will have far-reaching consequences for the future of Canada’s energy sector.

Bill C-69 replaces the existing National Energy Board with a new Canadian Energy Regulator which will oversee the Impact Assessment Agency of Canada (IAA). The IAA will provide a regulatory process for largescale energy projects covering hydroelectric dams, natural gas extraction, and mining. As a significant oil exporter, many of Canada’s petroleum industry ventures will also fall under the purview of the IAA including interprovincial pipeline construction, oil sands exploitation, offshore drilling, and hydrocarbon refinement. The wording of the bill states that the regulatory agenda will provide “a process for assessing the environmental, health, social and economic effects of designated projects with a view to preventing certain adverse effects and fostering sustainability” and will take into account “the impact on the rights of the Indigenous peoples of Canada.” The framework brings back some of the regulatory processes that were abandoned during the Harper government in 2012. Supporters are praising Trudeau’s efforts to diversify the energy sector and recognize that future economic stability must go hand-in-hand with environmental sustainability. On the contrary, fierce criticisms of the bill and challenges within its legislative process underscore major political divisions within the country. In the reading of C-69, the Senate made an unprecedented 188 amendments to the bill, 99 of which were ultimately accepted by the Liberal Party. Even after the record number of amendments, many still oppose the bill. Staunch critics, including Premier Jason Kenney of the oil-rich province of Alberta, nicknamed the bill the “No More Pipelines Bill.” Energy interests such as the Canadian Energy Pipeline Association have warned that “the potential for new major pipeline development in Canada is bleak.” Overall, opponents are worried that this piece of legislation will negatively affect investor confidence, job creation, and ultimately hinder economic performance.

After passing through both Chambers, Bill C-48 has also received Royal Assent by Governor General Julie Payette to become law. C-48, or the Oil Tanker Moratorium Act, limits oil tanker traffic along much of Canada’s west coast. Vessels carrying more than 12,500 metric tonnes (roughly 13,779 tons) of crude oil will not be permitted to load or unload in an area stretching from the northern tip of Vancouver Island in the south to the British Columbia-Alaska border in the north. The moratorium will not apply to vessels transporting liquefied natural gas (LNG). C-48 is part of a broader Oceans Protection Plan, a CAD 1.5 billion (USD 1.14 billion) investment by Ottawa to protect the coasts and waterways, and part of Trudeau’s plan to transition away from a dependence on fossil fuels. This bill has similarly faced backlash with Conservatives calling it an “open and transparent attack on Canada’s oil and gas sector.”   

Though Bills C-69 and C-48 and the implementation of a carbon tax have bolstered Trudeau’s environmental record, he has drawn the ire of environmentalists, indigenous groups, and politicians from the New Democratic Party (NDP) and the Green Party due to his approval of a major oil pipeline deal shortly before the passing of C-69. The Trans Mountain Expansion Project (TMX) will run from Alberta to British Columbia’s Pacific coast and triple Trans Mountain’s current capacity to 890,000 barrels daily. The project will alleviate congestion on existing, overburdened pipeline and allow Canada to diversify toward lucrative Asian markets. As of June 2019, 99% of Canadian exports go to refiners in the United States, but inadequate pipeline and refinery capacity means that oil is sold at a discount. To remedy this issue, the federal government bought the 66-year-old Trans Mountain pipeline from Kinder Morgan Inc. in 2018 for CAD 4.5 billion (USD 3.4 billion) and created the Trans Mountain Co. crown corporation to temporarily manage the project. As a caveat to the TMX, Trudeau pledged to reinvest the annual CAD 500 million (USD 380 million) tax revenue from the pipeline into various clean energy projects.

The balance that Trudeau is trying to strike with the concurrent passing of C-69 and C-48 along with the approval of a pipeline project shows divisiveness in Canada relating to its energy future – a point further exemplified by the political rift. Overall, while change in legislation will pave the way for diversification in the energy sector and towards a future of renewable resources, the government cannot completely turn its back on the economic benefits that the petrochemical industry brings. 

 

About the Author

Jonathan Fong

Jonathan Fong is a Risk Specialist at Global Risk Intelligence. He is fluent in English and Cantonese, proficient in Mandarin, and has an intermediate command of French. He is currently a MSc Foreign Service candidate at Georgetown University in Washington, DC, where he focuses on Global Business and Finance. Jonathan is currently based in the USA.

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