Another report calls out red tape in Canada’s resource sector
Canada’s slow and complicated project approval process needs an overhaul to reverse declining investment in mining and other major infrastructure projects, a report from the C.D. Howe Institute suggests.
The bipartisan think tank noted in its report, Smoothing the path: How Canada can make faster major-project decisions, that long timelines for major project approvals of up to 10 years scare away investors and delay projects.
Charles DeLand, associate director of research at the institute and lead author, wrote that jurisdictional overlap among various government levels and high regulatory costs further weigh on productivity and competitiveness. Established in 1958, the institute aims to raise living standards by fostering economically sound public policies.
“The complexity and uncertainty of Canada’s current regulatory framework are major barriers to investment,” DeLand said in the report. “Streamlining these processes is essential for economic growth and competitiveness.”
The report is the second released this month to critique Canada’s regulatory regime. The other report, from PwC, focused on British Columbia.
Stringent environmental regulations and the need for thorough Indigenous consultations also complicate and delay investment decisions, DeLand said.
As a result, investment has declined and the comparative investment gap between the U.S. and Canada is widening. New investment per worker in Canada, at C57¢ for every US dollar in 2022, lags compared to international counterparts.
C.D. Howe estimates capital investment in mining and oil and gas extraction in 2022 amounted to C$42 billion, adjusted for inflation. That’s down from about C$100 billion at its high point in 2014. The 2022 investment was around 69% of the 2019 level, about C$60 billion.
On the regulatory front, since Justin Trudeau’s Liberal government passed the Impact Assessment Act in 2019, only one major project, the Bay du Nord offshore oil project in Newfoundland and Labrador, has successfully completed the process. The federal government approved this project in April 2022, attaching 137 conditions to the approval.
Key issues
On average, other countries’ approval process are about half the time it takes in Canada. That makes complex projects more expensive to advance, with regulatory assessment costs that can reach hundreds of millions.
Major projects often involve different levels of government—federal, provincial, Indigenous, and municipal. This can lead to confusion and inefficiencies, DeLand suggested. The report calls for more explicit boundaries and better cooperation between these governments.
DeLand suggests allowing expert, politically independent tribunals to make decisions about the public interest of a project could remove a layer of political uncertainty, as well as writing laws that focus reviews only on issues relevant to the project.
The institute also recommends ensuring that the regulatory review process and the approvals given are reliable for the construction and operation of projects.
“Cutting application costs, speeding up approvals, and reducing the risk of rejection can lower breakeven costs and increase investment chances,” DeLand said.