With a federal election underway, a widely acknowledged need for major investment in energy infrastructure, and the Premiers working on a national energy strategy, there is a sense that a range of significant new initiatives are brewing for the development of major energy infrastructure. While there is no guarantee that great coherence will be achieved, or that any change will occur at all, there is an unusual opportunity to put forward ideas and to have them considered by stakeholders and decision-makers, both during and after the election.
As many have acknowledged during recent pipeline debates, it is no longer sufficient for a government to be pro-development or anti-development. If a government wants to successfully support a major development, it must be trusted to have done its analysis, and to have installed a full range of safeguards on the project. If a government wants to successfully oppose a major project, it needs to have unassailable technical reasoning, broad stakeholder support, and clearly developed alternative ways of fostering comparable economic benefits.
The common factor in all of these scenarios is the need for strong, relevant research that is widely trusted as the basis for decision-making. In the US, the Office of Management and Budget (a different OMB from that commonly used in Ontario) is frequently relied upon, and in many cases a positive assessment from the OMB is a legal requirement before funding a proposal. In Canada the office of the Auditor General performs similar kinds of analysis, but it is essentially a spot-check kind of process - there is no requirement for its assessments to be used in a standardized way across a full range of spending. Nonetheless the findings of the OMB and of the Auditor General are widely respected and relied upon to get through debates that could otherwise be much more divisive and potentially inconclusive without such authoritative, trusted analysis. It could be said that in a modern democratic society independent professional assessments are an essential part of public decision-making.
Ontario’s Premier Kathleen Wynne has become a champion for the development of national energy infrastructure. Working with the other Premiers she has developed the Canadian Energy Strategy, in her words, “to make Canada a world leader in delivering secure, sustainable energy that is socially responsible, strengthens efforts to reduce greenhouse emissions and creates economic growth and prosperity from coast to coast to coast.” Having started as an attempt to set up a shared framework for evaluating energy infrastructure proposals, the Canadian Energy Strategy has started to look a lot more like a national mission.
While there are great differences between the provincial and federal governments they share a common belief and interest in the value of independent regulation and professional analysis. Nowhere is this more important than in the process used for decisions on major infrastructure. In 2007, the government of Canada set up the Major Projects Management Office, “to provide overarching project coordination, management and accountability for major resource projects within the context of the existing federal regulatory review process.” In addition, all federal projects over a certain size must undergo a standardized assessment to determine if some form of public-private partnership is likely to be more cost-effective than traditional public procurement. Coincidentally, in the same year, the government of Ontario instituted “standard Value for Money (VFM) methodology” to be used systematically by Infrastructure Ontario in assessing the advisability of proceeding with each public-private partnership (PPP) proposal. The assessment methodology was recently refreshed following advice from the province’s own Auditor General. Arguably, mechanisms of this nature significantly reduce the risk that large-scale commitments of public funds and resources might be made on an arbitrary basis, slanted to serve relatively narrow interests of affected parties or the government of the day, or simply founded on incorrect assumptions about costs and benefits.
What these initiatives have in common is the importance placed on publicly disseminated independent, objective assessments of value prior to major investments. What many of them lack, to varying degrees, is consistency in their application. In the power generation sector, developers of major projects are familiar with consistent application of professional examinations, usually as part of the requirement for an environmental assessment or other regulatory approvals. Of concern to many observers is the uncertainty over how consistency will be achieved with proposals that emerge under the Canadian Energy Strategy. Will they have their own tests of net public benefit, will they have to undergo all the assessment processes that already exist at provincial levels, or both, or neither? Premier Wynne has left the door to conjecture wide open by introducing legislation in Ontario that will “give Cabinet enhanced powers to designate key transmission corridors to expedite their construction.” Ontario Energy Minister Bob Chiarelli noted on May 12 that an example where such powers might be used is in “enhanced intertie capacity with neighbouring jurisdictions to support clean energy imports.” Explaining the intentions more broadly, he said, “Government will strengthen its role when it comes to electricity transmission infrastructure. That will create a regime where your Provincial Government is firmly setting broad electricity and energy policy via its Long Term Energy Plan and designating core transmission projects to ensure their construction and operation.”
Considering that the Long Term Energy Plan is not subject to regulatory review, and that the new legislation appears to minimize the review required for major transmission, speculation is rampant as to how major energy infrastructure might be assessed on a range of concerns before public commitments are made. This ambiguous situation does not help achieve political ends any more than it serves the needs of project investors for certainty.
Once again, a large part of the solution lies in the consistent application of independent technical analysis. Good quality information, openly shared, is everyone’s friend - and it can be particularly helpful in depoliticizing contentious proposals that are well down the path, as much as in facilitating political consensus-building in the early stages, when a proposal is only a concept.
Political resolution of major issues facing the Canadian Energy Strategy, and approval of specific proposals for new infrastructure, could be immensely assisted if standardized procedures for CBA (Cost Benefit Analysis) were treated as a universal requirement for new interprovincial trade infrastructure or terms, much as other kinds of infrastructure proposals must pass economic tests. Without such a mechanism there is a risk that interprovincial negotiations for bulk supply could over-shadow parts of the normal operation of the market, leading to higher costs, and/or overlook certain principles of existing energy policy or economic policy, leading to inefficiencies, job losses or more. With such a mechanism in place, the debate is likely to be constructive – how to achieve the maximum overall benefit and minimize total costs.
Auditors usually don’t get the credit they deserve for their contributions to the process of nation-building. Thanks to today’s unusual combination of circumstances, it looks like they might have a rare opportunity to improve public understanding on some very consequential long term energy questions.
— Jake Brooks, Editor