Wresting authority from the regulators: The proper role of the National Energy Board in environmental assessments

This column was originally published on Slaw – Canada's online legal magazine.

It is not every day that we have an opportunity to effect transformative legal change. It is natural, then, that when last summer a number of cabinet ministers announced the review of four key federal environmental laws, West Coast Environmental Law – along with other lawyers, academics, environmental groups, Indigenous peoples and the general public – took a keen interest. Through these reviews we have an opportunity to not only strengthen environmental processes and substantive legal protections, but to also transform the governance of environmental planning and decision-making.

This opportunity is perhaps most pronounced in the reviews of federal environmental assessment processes and the National Energy Board (NEB). Currently, two out of the three federal bodies who are responsible authorities for environmental assessments under the Canadian Environmental Assessment Act, 2012 – the NEB and the Canadian Nuclear Safety Commission (CNSC) – are regulators.

The problem? Environmental assessment is a planning, not regulatory, tool. Putting regulators in charge of environmental assessment limits its planning potential and effectively reduces it to just another part of the project-level regulatory process. But environmental assessment is much more than a regulatory box to be checked off by project proponents. For example, next generation environmental assessment laws in Canada can and should require higher level regional and strategic assessment and planning before project level assessments occur. We know from experience that done properly, this can increase regulatory efficiency and the certainty that industry desires, while ensuring principles of sustainability are upheld.

Transitioning to next generation environmental assessment will necessitate removing authority from the regulators and placing it with a separate federal authority, one equipped to engage in broader, more collaborative and deliberative planning processes. In our submissions to the federal environmental assessment review panel we have made detailed recommendations about how this could be done. And in this column, we discuss some of the reasons why the transformation is necessary.

But first, a little context: In 2012, the federal government weakened a number of Canada’s oldest and most important environmental laws, including by replacing the Canadian Environmental Assessment Act with the weaker CEAA 2012 and giving the NEB greater authority to permit environmental harms and impose barriers to public participation.

The changes were requested by the oil and gas industry in the hopes that they’d expedite the approval of projects like oil pipelines and tankers, but they had an opposite effect. Lawsuits and protests over proposed projects led to the federal government’s rejection of the proposed Enbridge Northern Gateway oil tankers and pipelines project, and the decision to hit the reset button on the environmental assessment of the proposed Energy East oil tankers and pipeline project.

They also made the environmental law rollbacks an election issue in 2015 and led the Prime Minister to direct his cabinet ministers to undertake the review of four major federal environmental laws, processes and bodies: the Fisheries Act, Navigation Protection Act, environmental assessment processes and the National Energy Board.

In 2016, the government appointed two expert panels to review federal environmental assessment process and the NEB. The environmental assessment panel wrapped up its public and Indigenous engagement in December and is expected to produce its report on March 31st, while the NEB expert panel is mandated to wrap up its engagement in March 2017 and produce a report on May 15.

The two reviews overlap considerably, especially because the NEB currently reviews environmental assessments of major energy projects. This overlap has led some participants in the NEB modernization review to make recommendations focused on how to improve NEB-administered environmental assessment processes. Such recommendations, however, risk entrenching the mindset that the NEB should be a responsible authority in environmental assessments. Rather, the environmental assessment conversation during the NEB review should focus on two things: 1) relieving the Board of its environmental assessment authority; and 2) what the proper role of the Board is in environmental assessments.

The NEB should not be a responsible authority

As we mention above, the basis of the argument for not having the NEB be a responsible authority in environmental assessments is that environmental assessment is a planning tool, not a regulatory tool.

Proponents tend to like having the NEB administer environmental assessments because it rolls those processes into regulatory processes, creating perceived efficiencies. However, this approach has typically resulted in a narrower scope of reviews, which has eroded public confidence in the NEB and the outcomes from environmental assessment.

For environmental assessments to be effective planning tools, responsible authorities must have broad mandates, perspectives and expertise. This is required so that responsible authorities are able to recognize and reflect the interdependence between environmental, social, and economic values, and to uphold the Crown’s constitutional duties to Indigenous peoples. The more limited mandate and focus of regulators imposes significant barriers to their ability to do so. At worst, a regulator may be become “captured” by the regulated industry, giving short shrift to other values and rights.

In a similar vein, environmental assessments do not fall solely within federal jurisdiction: rather, provincial and Indigenous jurisdictions overlap federal jurisdiction, leading to a need to coordinate processes and decisions. In order for the federal government to implement the United Nations Declaration on the Rights of Indigenous Peoples and ensure environmental assessment processes and decisions move Canada down the path of reconciliation, environmental assessments should be co-governed with Indigenous nations, which also requires the assessment authority to have a broad and flexible mandate.

Further, planning tools necessarily need to be employed before regulatory ones. Rolling assessments into regulatory processes limits the planning potential of assessments. For example, best practices in environmental assessment means considering alternatives to the project, including the “no” alternative, with alternatives not necessarily limited to proposals within the jurisdiction of a particular regulator. This is why we have recommended that strategic and regional sustainability assessments happen before project-level reviews so that fewer resources are wasted on projects that are not consistent with higher level sustainability goals and commitments.

Finally, having regulators be responsible authorities can lead to divergence in environmental assessment processes and decision-making across different project types. For example, the NEB has much more restrictive rules regarding public participation than does the Canadian Environmental Assessment Agency, and also tends to impose a narrower focus on reviews. For example, in the Kinder Morgan Trans Mountain Expansion Project review, the NEB refused to consider the climate impacts of the project, despite being the only body conducting an environmental assessment. While the NEB’s decision to ignore climate change survived a court challenge, the reputational damage to the NEB resulted in widespread mistrust of the regulator and its recommendations.

Not all inconsistencies can be mitigated through consistent laws and policies for all; institutional culture plays a role in the interpretation and application of those laws and policies. Consistency and fairness favours one responsible authority for environmental assessments of proposals of all types.

Furthermore, to be credible, environmental assessments require a trusted responsible authority. As mentioned above, the NEB lacks public trust. Even if it underwent significant reforms to strengthen its accountability, transparency and mandate, changing the institutional mindset and earning Canadians’ trust would still be difficult.

The proper role of the NEB in environmental assessments

All of which is not to say that there isn’t an important role for the NEB (and the CNSC) in environmental assessments, because there is. Just as federal and provincial departments and agencies participate as experts in environmental assessments, the regulators should also be engaged during assessments to provide their advice and expertise, and also to help streamline the transition between the assessment and regulatory stages.

This involvement can happen in different ways. One option is to invite – or require – the NEB’s general participation in environmental assessments of proposals that are also within the NEB’s jurisdiction, to provide the reviewing body with advice and recommendations.

Another option would be to move away from the current proponent-led system wherein proponents pay consultants to prepare the primary environmental assessment reports, to the US system in which the assessment authority prepares those reports and recovers costs from proponents. Under this model, members of the NEB could belong to a roster of federal, provincial and Indigenous experts and appointed (along with non-government experts) to teams that prepare the environmental assessment reports.

We have recommended, as have many individuals and organisations who made submissions to the environmental assessment review panel, that Canada implement a next generation environmental assessment law that focuses on identifying outcomes that make the greatest contribution to sustainability, environmentally, socially and economically. As we make this shift, the NEB’s analysis of matters such as product availability, market need, economic feasibility, and (at a project level) financial responsibility and structure of the applicant (see National Energy Board Act, s. 52(2)(a-d)) will be an important input to sustainability assessment, to be weighed along with other evidence.

In other words, National Energy Board Act should be amended so that energy needs analysis conducted by the NEB would result in findings and recommendations about whether certain market and financial conditions are present (to inform sustainability assessment and decision-making about a project) but the NEB would no longer be the body responsible for recommending whether it is in the overall public interest for a project to proceed.

The NEB would retain its other regulatory functions (such as determining whether a pipeline may be safely opened for transmission, detailed route approvals, orders to ensure safety and security of operation of a pipeline etc.). It may also make sense that the NEB, in its regulatory role, regain the ability to deny a certificate if certain financial and market conditions are not met.

Leaving an environmental legacy

The federal environmental law reviews are a once-in-a-generation opportunity to make visionary changes to the way we make environmental decisions. Taking full advantage of this opportunity to apply our collective wisdom earned throughout the decades will require changing the rules of the game, and also sometimes its players. The National Energy Board (and CNSC) should stay in the game, but no longer as team captains. It is time for a consistent package of assessment laws and policies to apply to all types of proposals, and one responsible authority to ensure that environmental assessment is truly used as a planning tool.

Jessica Clogg, Executive Director & Senior Counsel
Anna Johnston, Staff Counsel