Sector sees regulatory improvements, but wants more cuts to red tape
Building and operating the complex mines that contributed $52 billion in GDP to Canada’s economy in 2012 is a relatively straightforward task compared to the heavy lifting often required to navigate the industry’s regulatory regime and cope with challenges such as Aboriginal consultation.
That’s the view of experts including the Mining Association of Canada (MAC) now calling for further changes to improve the industry’s operating environment.
The regulation of mining activity is primarily the responsibility of the provinces, but many aspects require approval from several federal government departments. It’s the continuing lack of a harmonized approach that remains a major bugbear for mining companies.
Jenny Chu Steinberg, a partner with the law firm Gowlings, says in spite of the steps taken by the federal government to promote its “one project, one assessment” goal, many companies attempting to develop mines in Canada say there is a lack of clarity around what requirements must be satisfied to obtain permits and there is too much uncertainty around timelines.
“Timelines affect economics, so the uncertainty around timelines can be critical to whether a mine gets developed,” says Ms. Chu Steinberg. “With both the federal government and provincial governments having jurisdiction over environmental matters, and each level of government having its own environmental assessment legislation, there is unnecessary duplication.”
While acknowledging that there has been some improvement in recent years, MAC president and CEO Pierre Gratton says the current regulatory environment remains complex and time consuming.
On the positive side he says Canada’s mining regulations are in transition and the changes could indicate a more harmonious approach between provincial and federal regulators.
For example, he points out that the environmental assessment (EA) at the federal level is now much more efficient and better run than it used to be.
“We now hear from proponents that the federal EA is better than the provincial reviews, whereas that wasn’t the case in the past. That’s more a reflection of improvements at federal level than deterioration at provincial level,” adds Mr. Gratton.
Roger Taplin, a partner and co-leader of the global mining group at the law firm McCarthy Tétrault, says while moves towards regulatory reform have been welcomed by the industry, for these processes to be effective they must not only be efficient, but also have the confidence of the public.
“The federal government’s initiatives coincided with significant reductions in staffing levels and resources within government departments, in particular cuts to investment in science and government scientists,” he says. “The result has been a noticeably increasing polarization in the debate about resource projects and a significant erosion of public confidence in regulatory processes for resource projects.”
Nevertheless, he adds, the mining industry has been pro-active in efforts to earn social license and form relationships with local communities, including First Nations. However, the lack of a long term, sustainable public policy plan that has support at the federal and provincial government levels, and includes a way to adequately address Aboriginal issues remains a significant challenge for the entire resource sector.
“First Nations are consistently challenging regulatory decision making processes, particularly in areas where there is still a lot of uncertainty,” he says. “Added to that is the fact that the aspirations of Aboriginal groups may far exceed where the law appears to be settling, which means the courts may not provide the same release valve they have in recent years. I think we may see a significant increase in political action from Aboriginal groups.”
Ms. Chu Steinberg says while there’s no question that the concerns of Aboriginal and other communities must be addressed prior to the development of new mines, mining companies and other groups would benefit from a more streamlined and standardized process for dealing with these concerns.
She believes three changes in the regulatory regime would encourage more mining investment in Canada:
A more favourable tax regime to improve project economics, particularly in a low commodity price environment.
Better co-operation between the federal government and its provincial counterparts when it comes to permitting so that there is no duplication.
A more streamlined and standardized process for dealing with the government’s duty to consult and the concerns of Aboriginal and other communities.
Mr. Taplin says in spite of some challenges, Canada remains a mining-friendly jurisdiction and a safe place to invest.
“In our experience, investors – and particularly foreign investors – are telling us that they are very attentive to the regulatory environment in Canada and the impact that the regulatory scheme is having on project schedule and project certainty, and thus the ability to recover investments.”
Mr. Gratton believes it’s an oversimplification to suggest that Canada’s regulatory regime is a disincentive to investment.
“It’s not sufficient reason for investors to turn their backs on Canada,” he says. “There’s a lot of investment going on and a lot of interest.”
Mr. Taplin says a greater certainty and predictability in the regulatory process is the key to encouraging more investment in mining in Canada.
“The provinces in particular need to take more of a leadership role on Aboriginal issues,” he says. “Governments should be carefully looking at legislative responses to consultation issues, rather than simply responding to the courts on a case-by-case basis. At the same time, Aboriginal groups need to be active participants in decision-making.”
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