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Social licence and the nation’s wealth

The controversy over the Energy East pipeline reveals fatal flaws in how we collectively decide on the benefits and costs mega resource projects. The collapse of oil prices Canadians understand that how natural resources support our standard of living. The stakes are too high for decisions on mega projects such as Energy East to be politicized. We need an independent process to search for the social licence to develop these projects.

Historically, social licence referred to the “permission” received by mining companies in third world countries to engage in resource extraction and major infrastructure activities. Now the definition of social licence has morphed to the idea that that all “stakeholders” must reach a consensus on the advisability of any natural resource development.

The federal government has taken steps to improve management of resource development. The Canadian Environmental Assessment Act (CEAA 2012) imposed an expedited project review process to ensure timely assessment of compliance of any “large” project with federal environmental regulations. Canada created the Major Projects Management Office (MPMO) to manage this review process. However, with the growing number of parties seeking a voice in the consultations, it is hard to see how the MPMO can expedite or even bring to closure the approval processes for large-scale projects such as Energy East or Ring of Fire.

Three challenges exist. How do we create social licence for a project? Who should be involved – that is who has standing in that process? And at the core, how can one expedite the review of natural resource projects while managing environmental risk?

 The resource developer (specifically the shareholders in the company) and government will clearly always be at the table. Increasingly, the courts have determined that Aboriginal communities must be included as “government” when projects encroach on their lands.

Deciding who else should have standing in determining now becomes challenging. Residents that stand to gain or lose directly from the development should be at the table. In the Northern Gateway, decision process, the Kitimat town council convened a referendum of residents, who rejected the siting of the pipeline port facilities within the municipal limits. Since the project has the potential to affect their lives and livelihoods directly, their voices need to be included in the social licence process.

Canadian citizens/taxpayers also must have standing. They share indirectly in the benefits, some in direct and derived employment, and all in the contributions that royalties make to public revenues. Taxpayers will also likely pick up some of the tab in the event of a major environmental accident.

 

Now is a diverse group of proponents and opponents. Increasingly, the environmental lobby wades into the debate on specific projects, typically stressing the risks associated with development. Simultaneously, think tanks often weigh in on the economic costs and benefits. The upshot is a din of diverse opinions that creates confusion and disengagement

Governments must do three things to restore the integrity of resource development review.

  • First, we need a universally respected intuitional structure to support these deliberations. With the hiatus in resource development, governments have an opportunity to develop that structure now, balancing speed and comprehensiveness of review
  • Second, membership in the group of vested stakeholders rests on legal/constitutional principles, the degree of exposure to proximate risk, and the capacity to halt projects legally and/or politically. Governments must define a framework for identifying the vested stakeholders, and work through the inevitable court and political challenges as it defines that group.
  • Finally, government must invest in good public science and support the knowledge translation to ensure that all Canadians receive an independent and current understanding of the benefits and costs arising from any natural resource project. That information needs to have the authority that official statistics possess when issued by Statistics Canada. We have a long way to go to restore trust in public science.

These are daunting tasks. Ultimately, decisions that emerge from resource development review must have the gravitas of a Supreme Court decision, if we are to create the process to reach social licence that ensures natural resource development contributes responsibly to our national wealth. This is too serious a business to leave to polititians

Gregory Mason

www.gregorymason.ca

Gregory Mason is an associate professor of economics at the University of Manitoba and a senior consultant at PRA Inc. His views are his own.

 

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