California's Environmental Quality Act Could Save Canada's Resource Sector, Satisfy 'Indigenous Licence' Requirements

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Includes: DBC, EWC
by: Dennis Boyko

Summary

Recent statements by First Nations leaders and the prime minister about the resource industry create uncertainty likely to slow development and investment particularly in energy.

The prime minister has hinted his government may expand Aboriginal control over resource development.

If Canada is unable to meet its spending commitments to First Nations there is a risk of an even bigger tax on resource producers, a group delivering 20% of GDP.

We need to make sure that there is, I call this the indigenous licence, not just social but indigenous licence." Assembly of First Nations (AFN) National Chief Perry Bellegarde during a week-long First Nations Forum on Energy in Vancouver. Pipeline projects need 'indigenous licence,' says AFN National Chief, CBC, Feb. 13/16.

We have to re-think elements as basic as space and time…" Canadian Prime Minister Justin Trudeau in a Conservative attack ad during Canada's federal election campaign in 2015. YouTube, accessed Feb. 14/16.

Interpreting the meaning of phrases like 'indigenous licence' and anticipating the federal government's response when it comes to the resource industry is now more than ever an exercise in reading tea leaves, although the message is clear: Objective review of scientific fact, balancing the needs of the many against the few - the hallmark of a modern democracy - will now have less to do with project approval.

As matters stand there is still no single, coordinated process for resource development project review. Resource developers navigate an increasingly complex web of bureaucracy reminiscent of the Third World. Aboriginal consultation is a recent political add-on that has less to do with the rule of law than the subjective interpretation of judges.

Such uncertainty in the wake of declining commodity prices creates a chill that does not augur well for investment in Canada's resource industry, particularly in energy. Expect project slow-downs and protracted delays. For example, Agnico Eagle Mines announced a slow down from previous updates in their recent 2015 full year results

However, decreased spending as compared with previous internal forecasts is expected to delay the potential project start-up by approximately one year to 2020 (see 2015-full-year-results and see Anticipating-trading-agnico-eagle-mines-2015-full-year-results, Feb. 8/16 for background)

For more on delays in the energy sector see

Vaughn Palmer: Shell's B.C. LNG delay is no surprise - Given the uncertainties in the oil and gas market, this delay may not be the last

The future of the resource sector, which for decades literally fueled the Canadian economy, is now especially uncertain. Several important pipeline projects await final approval. However, despite pre-election assertions that his government was 'resource-friendly,' recent statements by Prime Minister Justin Trudeau suggest cryptically that final approval might be withheld even if a project survives Canada's rigorous, multi-level, multi-stakeholder-engagement review/consultation process. See Black Swans Circling Canada's Resource Sector, Feb. 8/16.

Trudeau's comments suggest that he finds Aboriginal engagement under the current review process somehow insufficient such that he may unilaterally expand Aboriginal control. This would be strikingly unfair in view of many hundreds of legal decisions that record and examine at considerable length detailed consultations by the industry with Aboriginals, even with First Nations who possess only the most marginal interest.

Shell Canada Energy, 2013 ABAER 011, for example, is a 295-page decision by the Alberta Energy Resources Board (AERB) regarding Shell's application to increase bitumen production at the Jackpine Mine already in operation. The tribunal considered in great detail the potential environmental impact of the project on various traditional uses as well as measures required to mitigate impact

The Panel believes that determining the significance of project and cumulative effects on TLU and on Aboriginal and treaty rights and culture is a complex exercise that cannot be done simply by looking at the availability of the required resources and access to them. A thorough and proper assessment requires an understanding and integration of a host of issues, including effects on the availability of and access to the resources important to Aboriginal people and the combined effects of noise, odors, barriers to access, perceived contamination of resources, socioeconomic effects, cultural practices, and other factors that influence the choices of people about whether to engage in TLU activities. In addition, the number and variety of projects and activities occurring in the oil sands region, the multiplicity of TLU, rights, and cultural practices associated with the various Aboriginal groups, and a lack of consensus on the appropriate methodology and thresholds for determining when significant adverse effects on Aboriginal TLU, rights, and culture might be occurring make it challenging for individual project proponents, as well as panels such as this one, to complete these assessments. The Panel agrees with Shell and the Aboriginal groups participating in this review that completing cumulative effects assessments on a regional basis, rather than on a project-by-project basis, would be more effective and would reduce the potential for individual project cumulative effects assessments to produce inconsistent results. Shell Canada Energy , 2013 ABAER 011, para. 35.

How earnest. How reasonable. How fair.

Suddenly expanding Aboriginal control over resource development would be a radical move that would involve re-defining Canadian legal institutions and constitutional powers. It's not clear whether Parliament and the courts would go along with it or, frankly, why they would want to.

It's not as if First Nations are in any way prevented from full and equal participation in every kind of enterprise in Canada, including resource development - quite the reverse. For many decades now, there has been a wide and generous assortment of grants and affirmative action programs available exclusively to Aboriginals.

Consider:

INAC is one of the 34 federal government departments (emphasis added) responsible for meeting the Government of Canada's obligations and commitments to First Nations, Inuit and Metis, and for fulfilling the federal government's constitutional responsibilities in the North. … Most of the Department's programs - representing a majority of its spending - are delivered through partnerships with Aboriginal communities and federal-provincial or federal-territorial agreements. INAC also works with urban Aboriginal people, Metis and non-Status Indians (many of whom live in rural areas) through the Office of the Federal Interlocutor. INAC's mandate and wide-ranging responsibilities are shaped by centuries of history, and unique demographic and geographic challenges. Indian and Northern Affairs Canada and Canadian Polar Commission Performance Report for the period ending March 31, 2009/ESTIMATES, p. 3).

According to the report, the total operating expenses of INAC alone that year were $1,661,839,00. Again, that is the amount one of 34 federal departments spent on Aboriginals, a minority of fewer than 1.2 million people - a tiny fraction of the Canadian population of 34 million.

Aboriginal identity 1,172,790. (The derived Aboriginal identity concept refers to those persons who reported identifying with at least one Aboriginal group, that is, North American Indian, Metis or Inuit, and/or those who reported being a Treaty Indian or a Registered Indian, as defined by the Indian Act of Canada, and/or those who reported they were members of an Indian band or First Nation). Aboriginal Peoples Technical Report, 2006 Census, Second Edition.

Now compare 1.2 million Aboriginals with Natural Resources Canada's assertion that natural resources directly and indirectly account for 1.8 million jobs (emphasis added) and almost one-fifth of Canada's nominal GDP. Natural Resources Canada, see report, accessed Feb. 14/16.

How sustainable are Canada's current spending commitments to First Nations with a fifth of the nation's revenue now under water with no sign of recovery in the near future?

Where will the money come from?

What is the risk to current producers of an even bigger tax grab?

Does this prime minister even understand resource economics?

Admittedly, post-election expectations of trust fund Trudeau were not high. Beyond his unearned millions, Trudeau's credentials for the job of prime minister are limited to brand recognition as the eldest son of a political first family and a brief stint as a high school drama teacher in Vancouver, B.C., a city known for its squalid Downtown Eastside (DTES), a leaky condo crisis, which continues unabated, and its devotion to hockey and sporting events rather than intellect or art. The Liberal victory this time was sealed not by an inspired political agenda but by a deliberate appeal to millennials with a promise to legalize pot.

Expectations continue to be low, but there are two questions for the prime minister that might address the new uncertainty in the resource sector:

  1. During consultations with a resource developer, what obligations do Aboriginals have, if any, to each of the other stakeholders? Does 'indigenous licence' include any obligations on the part of First Nations or does entitlement in Canada today flow only one way?

  2. How committed is Canada to its inefficient, protracted resource development review process? Would the government be willing to consider a different approach, one that might yield a more just, more certain result, such as, for example, the process set out in the California Environmental Quality Act (CEQA)?

CEQA is a self-regulating development review process that requires California state and local agencies to identify significant environmental impacts of proposed developments and to avoid or mitigate those impacts if feasible. Depending on the potential effects, a further, more substantial, review may be required in the form of an environmental impact report (EIR).

The goal of CEQA is to encourage the fullest disclosure of environmental impacts as well as the broadest possible public consultation and discourse before final submission to the approving agency.

Interestingly, a project may not be approved as submitted if feasible alternatives or mitigation measures would substantially lessen significant environmental effects.

The California Natural Resources Agency, which provides guidance on CEQA to the other agencies, reviews neither the facts nor the exercise of discretion by the approving agency. Similarly, if the matter goes to court, the court's decision is based on whether the approving authority had sufficient information to make the decision it made. California Natural Resources Agency, accessed Feb. 15/16.

A similar scheme here in Canada, though not without challenges, might eliminate the temptation by politicians and public authorities to apply approval criteria subjectively. A more open, more informative public review process might also reduce the number of dangerous confrontations at development sites once an approved project is under way.

Tight limitation periods under CEQA would also provide greater certainty.

A CEQA review process in Canada would provide automatically for Aboriginal consultation. It would require the approving agency - not the developer - to consult and obtain submissions from all relevant agencies and interested parties regarding the development proposal, not just Aboriginals. There would be no need to rely on courts after the fact as Canada currently does to determine subjectively whether consultation was required and if so, whether the consultation provided was sufficient.

In the right political hands, a CEQA review process might well be the tool that would allow Canada finally to end its shameful apartheid system, which continues to isolate First Nations, and which unfairly and unreasonably requires Canadians to subsidize not one but two streams of public services from only one source of tax revenue.

The recent dramatic decline in commodity prices and the resulting unemployment crisis in the resource sector could provide the impetus for a radical re-evaluation not only of an inefficient, potentially subjective project review process but also of Canada's relations with First Nations based on an outdated, colonial approach that has no place in a modern democracy. If so, it would provide much-needed certainty in the resource sector, which would benefit investors as well as Canada as a whole, including First Nations.

Conclusion

The decline in commodity prices coupled with an unemployment crisis in the sector could provide impetus to re-evaluate Canada's inefficient resource project/environmental review process as well as relations with First Nations based on an outdated colonial apartheid model. Resource companies and their investors should push for and welcome the certainty such changes will bring.

Without changes, expect more announcements of delays in the resource extraction sector projects.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.