Moving towards a “net benefit” test for pipelines and natural resource development.

Posted on February 2, 2016 · Posted in Blog

Few issues are more contentious and irreconcilable for any government than the management of natural resources and development of pipelines. The juxtaposition of the economy and environment is delicate and certain to rise the ire of at least some stakeholders all of the time.

For ten years, the Harper government’s unrepentant, knee jerk approval of any and all natural resources projects missed the mark totally in balancing these conflicting considerations. The new government should be lauded for its recent announcement, made by Natural Resources Minister Jim Carr and Minister of Environment and Climate Change Catherine McKenna, to expand the relevant criteria for approving natural resource development pipeline projects.

Yet the government needs to signal to Canadians an approach to resource development that is more unequivocal and less ambiguous, not unlike the “net benefit” test used to evaluate foreign takeover bids. Without an overarching test, the scheme is too arbitrary and subject to the whims of the eagerness to please. Law and policy must be at the apex of any overarching decisions, notwithstanding the centrality of their social context.

Natural resource projects should be allowed to proceed when after a careful review and thorough due diligence, the government is satisfied on balance that the economic benefits will outweigh environmental risks and liabilities, all while upholding constitutionally protected First Nations treaty rights. The test must carefully consider the following three obvious prongs; economic growth, environmental liability and risk and the preservation of First Nations treaties.

The economy remains a paramount consideration. As imperative as it is for Canada to diversify its economy, and to tap into its “resourcefulness” as alluded to recently by the Prime Minister in Davos, natural resources remain a driving force for our economy. The abrupt drop of the price of crude has sent our dollar in a tailspin and has had profound reverberations for our country’s economy.

The prime minister has rightly touted the need to invest in infrastructure and to take advantage of ultra low interest rates to stimulate economic growth and demand in these sluggish times. The same presumption should acknowledge that from the perspective of creating jobs, and making Canada an attractive for investment, the government should be open to natural resource development as a job generator and exercise in nation building.

By the same token, the government must weigh economic considerations against the very real environmental hazards and long term consequences that natural resource development and extraction entails. A careful weighing will require comprehensive due diligence to assess the impact of spills and accidents, and that proper mitigation strategies are in place to minimize adverse environmental impacts.

The government must carefully consider the extent to which natural resource development projects will increase overall emissions of greenhouse gases, and insist on extraction methods that enhance energy efficiency. Although strides have been made in this direction over most recent years, the government should not approve of any project whose carbon footprint will hinder Canada’s ability to meet its long-term targets to reduce emissions as set out in the Paris conference. The government must continue its diligent collaboration with the provinces in meeting these targets, and the prime minister has been steadfast in his tenure so far.

The final prong in a net benefit test must consider the impact on First Nations communities. The Delgamuukw case remains the leading jurisprudence in this regard, stipulating that the federal government must have a compelling and substantial purpose in extinguishing aboriginal title, and must act in a fiduciary capacity “consistent with the special relationship between aboriginals and the Crown.” In practical terms this means that the government is obliged to respect aboriginal title and is prohibited from infringing such rights in a manner that disrespects their traditions and customs.

First Nations have been successful utilizing the courts to ensure that their treaty rights are protected, and this serves as a stark reminder to governments that resource development projects must operate within the strict confines of constitutionally protected principles. Resource development that does not respect these precepts will be snarled from the outset, and only further undermine an essential relationship this prime minister has made a sincere vow to rehabilitate and repair.

The government has taken necessary steps to signal openness to natural resource development projects, but within reasonable limitations that encourage environmental sustainability, social cohesion, and the rights of our First Nations communities. The only missing piece is a cohesive thread and unifying set of principles to provide a guiding prism for making decisions.

The advantage of a more rigorous proposed “net benefit” test is that while it does ensure that the ultimate decisions are made by politicians and not bureaucrats, its evidence based application will make sure that it is driven by contextual logic, all part and parcel of the seamlessness and orderliness inherent to the rule of law.

The government must continue to consult and seek divergent points of view, but it too will have to quite literally draw a line in the sand, and realize that there are limits to harmoniousness. It must insist that the proper mechanisms are in place now so that it can deflect the deluge of disaffection that is coming regardless what it decides. On this hot topic, one thing is for certain; at least some torrent of discontent is on its way!

Jeremy A. Richler is a sole practicing lawyer in Toronto with a specialization in e-discovery and corporate law. He is a card carrying member of the Liberal party of Canada.