Energy sector investment is booming globally but Canada is missing out
Building big, ambitious projects has become increasingly difficult in Canada in recent years, particularly in the energy sector.
Whether it’s carbon capture projects in Alberta, offshore wind turbines in Newfoundland and Labrador, or hydroelectric dams in the James Bay area, getting a project off the ground has become a Herculean task—especially if it requires government approval.
While multiple factors contribute to project delays, one law stands out as the most significant barrier to development: the Impact Assessment Act.
Since its adoption in 2019, approvals for large infrastructure projects—especially energy projects—have slowed to a crawl. In fact, only a single project, Cedar LNG, has been approved under the act, in a process that took three and a half years. In comparison, 17 major projects were approved in the first five years under the previous law.
Under the old system, assessments focused solely on a project’s environmental impact, with the goal of minimizing its negative effects. The new law, however, attempts to integrate assessments of a wide range of additional factors—social, health and gender impacts, among others—into a single process. This is just one of many bureaucratic hurdles that must be cleared before shovels ever hit the ground.
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Trying to address all these elements at once inevitably leads to excessive delays.
Take the Cedar LNG project. The Impact Assessment Act stipulates that the review process should take no more than 300 days. Instead, it took 1,026 days—nearly three times longer than the legal limit.
Call it gridlock, regulatory limbo or just a bureaucratic nightmare, but this uncertainty isn’t just frustrating—it’s actively driving investment away.
Since 2015, investment in the construction of extraction or pipeline transportation facilities in Canada has dropped from $56.8 billion to $42.9 billion—a 24.4 per cent decline.
Meanwhile, the energy industry continues to grow elsewhere. Between 2009 and 2017, oil and gas investment rose by 51 per cent in the United States, while increasing by a mere one per cent in Canada.
This trend has only intensified. Since 2015, global investment in upstream oil and gas production has increased by 25 per cent. In 2024, it is expected to reach US$603 billion, and, according to a joint International Energy Forum and S&P Global Commodity Insights report, it will climb another 22 per cent by 2030.
Despite record global investment, Canada is failing to attract its fair share. Investors are crystal clear about why: overregulation.
Survey data backs this up. Sixty-eight per cent of investors cite environmental regulations as a major concern in Canada—far higher than in the U.S. Even more tellingly, 54 per cent of investors say regulatory duplication is a significant issue in Canada, compared to just 34 per cent south of the border.
Canada cannot afford to drive investment away. The energy industry contributes substantially to the country’s prosperity. In 2023 alone, it added more than $200 billion to Canada’s GDP, representing 7.7 per cent of the total economy.
The consequences of this disparity in investment won’t just be felt in GDP numbers. It will cost jobs.
When investment dries up, job creation evaporates, and opportunities for higher wages disappear. The sector currently supports nearly half a million jobs, both directly and indirectly.
The federal government needs to go back to the drawing board and rethink its drawn-out, nebulous regulatory process.
For starters, it should return to a permitting process that focuses on compliance with clear environmental standards, as was the case under the previous system.
To further streamline the process, a strict 18-month limit should be implemented, with penalties if this timeline is not respected.
Finally, the federal government should automatically recognize provincial assessments as an acceptable substitute. Duplicate bureaucratic measures serve no purpose but to delay projects and drive up costs.
This is a wake-up call for policymakers: If they fail to simplify and streamline the impact assessment process now, Canada will continue to lose investment, jobs, and economic growth to its global competitors.
Krystle Wittevrongel is director of research at the Montreal Economic Institute, a think tank with offices in Montreal, Ottawa, and Calgary.
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