Vol. 146, No. 15 — July 18, 2012

Registration

SOR/2012-146 July 6, 2012

CANADIAN ENVIRONMENTAL ASSESSMENT ACT, 2012

Cost Recovery Regulations

P.C. 2012-971 July 5, 2012

His Excellency the Governor General in Council, on the recommendation of the Minister of the Environment, pursuant to section 83 of the Canadian Environmental Assessment Act, 2012 (see footnote a), makes the annexed Cost Recovery Regulations.

COST RECOVERY REGULATIONS

APPLICATION

Application

1. Subsection 59(1) of the Canadian Environmental Assessment Act, 2012 (“the Act”) does not apply to the following proponents:

  • (a) a federal authority;

  • (b) the Commissioner in Council of the Northwest Territories, the Legislature of Yukon and an agency or body of those territories;

  • (c) the council of a band, as defined in subsection 2(1) of the Indian Act; and

  • (d) a provincial government, except in the case of a provincial Crown corporation.

SERVICES

Services

2. The services provided by a third party that are set out in Part 1 of the schedule are prescribed for the purposes of paragraph 59(1)(b) of the Act.

AMOUNTS TO BE PAID

Responsibilities of the Agency

3. The amounts referred to in column 2 of Part 2 of the schedule are prescribed for the expenses referred to in column 1 for the purposes of paragraph 59(1)(b) of the Act in relation to the exercise of the responsibilities of the Agency.

Responsibilities of a review panel

4. The amounts referred to in column 2 of Part 3 of the schedule are prescribed for the expenses referred to in column 1 for the purposes of paragraph 59(1)(b) of the Act in relation to the exercise of the responsibilities of the members of a review panel.

COMING INTO FORCE

S.C. 2012, c. 19

5. These Regulations come into force on the day on which section 52 of the Jobs, Growth and Long-term Prosperity Act, chapter 19 of the Statutes of Canada, 2012, comes into force.

SCHEDULE
(Sections 2 to 4)

PART 1

THIRD-PARTY SERVICES

Item

Services

1.

Travel:

(a) regular travel services

(b) chartered services

2.

Publication and printing (including professional desktop publishing, editing and English/French or French/English translation)

3.

Distribution services:

(a) regular mail

(b) courier

4.

Telecommunications (including telephone and line installation, Internet, long-distance, teleconference and video conference services)

5.

Advertising and news wire services

6.

Public meeting, panel hearing and panel meeting facilities and equipment, including

(a) hospitality

(b) simultaneous interpretation

(c) audio systems

(d) transcription services

(e) computer equipment

PART 2

AMOUNTS RELATED TO THE EXERCISE OF THE AGENCY’S RESPONSIBILITIES

Item

Column 1

Column 2

1.

Direct and attributable federal government employees’ salaries and benefit plans (EBP), including overhead and overtime charges

Salary per diem rates based on a productivity rate of 220 days/year and an EBP of 20% of total chargeable salaries using

(a) for employees represented by bargaining units, the rates of pay as established in collective agreements between Treasury Board and the bargaining units (the highest increment will be used for all classifications), or

(b) for excluded or unrepresented employees, the rates of pay established by Treasury Board under section 11.1 of the Financial Administration Act (the highest increment will be used for all classifications)

2.

Direct and attributable federal government employees’ travel expenses

Rates as per the Treasury Board Directive on the Management of Expenditures on Travel, Hospitality and Conferences

PART 3

AMOUNTS RELATED TO THE EXERCISE OF THE RESPONSIBILITIES OF MEMBERS OF A REVIEW PANEL

Item

Column 1

Column 2

1.

Remuneration of review panel members:

 

(a) panel chairperson

(b) panel member

(a) $650 per day

(b) $500 per day

2.

Direct and attributable review panel members’ travel expenses

Rates as per the Treasury Board Directive on the Management of Expenditures on Travel, Hospitality and Conferences

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

1. Background

The Government’s 2012 Economic Action Plan on Jobs, Growth and Long-term Prosperity, presented in the House of Commons on March 29, 2012, committed the Government to reforming the regulatory system in the resource sector in order to support responsible resource development. The reform introduced system-wide legislative improvements to the review process for major economic projects to achieve the goal of “one project, one review” in a clearly defined time period, reducing duplication and regulatory burdens, supporting consultation with Aboriginal peoples, and focusing resources on large projects where the potential environmental impacts are the greatest.

The Jobs, Growth and Long-term Prosperity Act introduced a new Canadian Environmental Assessment Act, 2012 (CEAA 2012) and repealed the Canadian Environmental Assessment Act (the former Act).

The purpose of CEAA 2012 is to update the federal environmental assessment process and to focus reviews on those project proposals that have a greater potential for significant adverse environmental effects in areas of federal jurisdiction. The legislation is part of a larger proposal to ensure that the environmental assessment, regulatory permitting, and Aboriginal consultation process for project reviews is more timely, improves environmental protection, reduces regulatory burden, duplication and overlap, and provides meaningful Aboriginal consultation, especially in relation to Canada’s resource sector in order to encourage growth in that sector.

Three regulations are required to support the new legislative scheme for federal environmental assessment. The regulations will prescribe

  • the list of designated activities that may require an environmental assessment;
  • the information to be included in a project description; and
  • the services and amounts for which the Canadian Environmental Assessment Agency (the Agency) can recover costs from the proponent of a project undergoing an assessment by review panel.

The Regulations concerning cost recovery — the Cost Recovery Regulations — are the subject of this Regulatory Impact Analysis Statement.

The former Act required the Agency to provide administrative support to review panels. In doing so, the Agency was empowered to recover specified costs related directly to an environmental assessment by review panel from the proponent of the project under review. This was done through the Environmental Assessment Review Panel Service Charges Order (the Order) established in 1998 under the Financial Administration Act (FAA). In addition, certain costs not prescribed in the Order because they cannot be determined in advance (e.g. fees for technical analyses) have been recovered by the Agency, to a limited extent, through service level agreements (SLAs) with the proponent.

CEAA 2012 provides for a similar cost recovery scheme to enable the Agency to recover from the proponent of a project certain costs incurred during the course of an environmental assessment of that project. The scheme allows for two types of costs to be recovered:

  • costs that the Agency incurs for services provided by a third party; and
  • amounts associated with the carrying out of the Agency’s responsibilities and those of members of a review panel.

While the cost recovery authority enables the Agency to recover costs for all environmental assessments, the Agency will, under these Regulations, recover costs only in relation to panel reviews. Panel reviews particularly merit the use of cost recovery as they are unique in nature, relatively infrequent, and involve additional costs associated with the use of external experts as panel members and the conduct of public hearings. It is estimated that there may be one to three new panel reviews per year; however, it is difficult to predict how many panel reviews there will be at any given time.

In order that certain ongoing panel reviews can benefit from the improvements to the federal environmental assessment process, CEAA 2012 includes transition clauses. Ongoing panel reviews will be completed in accordance with the procedures laid out in the new Act. The Agency is currently recovering costs associated with these panel reviews and will continue to cost recover under the authority of the new Act and these Regulations.

The practice of recovering prescribed environmental assessment costs is in keeping with the policy of the Government of Canada on charging user fees for services delivered to the private sector. This new cost recovery regime is similar to that of certain other Commonwealth countries, notably New Zealand.

2. Issue

Application of the former Order gave rise to three issues that threatened to undermine the effectiveness of the former cost recovery regime.

1. The former cost recovery regime did not cover the full period of time for which the Agency carried out responsibilities in support of environmental assessments by a review panel. The Order covered the time from the appointment of the panel members to the publication of the panel’s report, but substantial review-related work is done before and after that period. The Agency’s costs related to that work should also be recovered, since the overall objective is to recover the costs associated with all phases of an assessment by a review panel.

2. The Standing Joint Committee for the Scrutiny of Regulations considered the majority of the fees listed in the Order to be ultra vires (beyond the authority of) the FAA. In its view, the references in the former Order to rates set by third parties that were not fixed to a specific point in time (e.g. postal rates set by the Canada Post Corporation), constituted an illegal sub-delegation of the authority of the Minister of the Environment to prescribe fees.

3. Approximately 15% of costs borne by the Agency in supporting a panel review were not prescribed in the Order because those costs could not be determined in advance. Such costs included, for example, fees for technical consultants or for legal services. To a limited extent, the Agency was able to recover some of these costs through service level agreements (SLAs) with proponents, but this was not a reliable approach because proponents were not obliged to sign SLAs and such agreements were not legally enforceable. A proposal to address this issue by amending the Order to adopt flat fees averaged across panel reviews met with strong opposition from industry representatives, who prefer to pay the actual costs related to a particular panel review.

In recent years, three alternatives were considered to address the problems encountered with the former cost recovery regime. The first alternative was to amend the former Order to address the concern of the Standing Joint Committee for the Scrutiny of Regulations. However, this would have created a complex system of fixed fees, which would have been difficult and expensive for the Agency to manage.

The second alternative was to abolish cost recovery and seek instead additional funds to meet the Agency’s expenses. However, this approach would have been contrary to the Government’s policy of recovering costs incurred in providing unique benefits to particular clients.

The third alternative was to make legislative changes to include a cost recovery scheme within the federal environmental assessment legislation, rather than under the FAA.

Examination of these three options clearly showed that the best way to resolve the foregoing issues was to create a new cost recovery scheme through provisions in the new CEAA 2012.

3. Objectives

The objectives of the Regulations are to support the cost recovery provisions of CEAA 2012 by prescribing the costs in relation to the environmental assessment of a project that the Agency can recover from the proponent of that project, specifically costs associated with

  • services provided by a third party; and
  • the exercise of the Agency’s responsibilities and those of the members of a review panel.

4. Description

In order to resolve the first issue mentioned above, concerning the limited time period covered by the former Order, CEAA 2012 provides for a cost recovery scheme to enable the Agency to recover from the proponent of a project costs incurred throughout the environmental assessment of that project, from the posting of the notice of commencement of the environmental assessment to the issuance of the decision statement. CEAA 2012 also includes provisions to allow regulations under the Act to reference third party documents that may be amended from time to time. These provisions address the second issue mentioned above.

The Regulations prescribe the costs in relation to the environmental assessment of a project that the Agency can recover from the proponent of that project. While the cost recovery authority in CEAA 2012 enables the Agency to recover costs for all environmental assessments, the Regulations limit cost recovery to projects being assessed by a review panel.

A schedule to the Regulations contains the list of third party services and amounts related to the exercise of the Agency’s responsibilities and those of the members of a review panel that can be cost recovered. This list is essentially the same as that contained in the schedule to the former Order, with respect to both the services and amounts to be cost recovered, with two minor exceptions. First, the entry in the former Order relating to costs associated with an “information office” has been removed because the Agency no longer establishes such facilities in the context of a panel review. Second, in the interest of clarity, a separate entry has been created for “advertising and news wire services”; charges for such services were previously cost recovered under the heading of “publication and printing services.”

The services and amounts that can be cost recovered by the Agency will be the actual costs incurred by government in delivering an environmental assessment by review panel.

The Regulations identify the proponents to whom the cost recovery scheme established in CEAA 2012 does not apply, namely a proponent who is

  • a federal authority;
  • the Commissioner in Council of the Northwest Territories, the Legislature of the Yukon, an agency or body of those governments;
  • the council of a band, as defined in subsection 2(1) of the Indian Act; or
  • a provincial government, except in the case of a provincial Crown corporation.

This list of excluded proponents is the same as that prescribed in the former Order.

The cost recovery scheme supported by these Regulations mirrors quite closely the regime under the former Order. Costs associated with the exercise of panel members’ responsibilities and the responsibilities of Agency staff in providing direct support to review panels will continue to be recovered. However, CEAA 2012 extends the time period during which costs can be recovered to include the period before and after the establishment of the panel, and provides for the recovery of prescribed amounts for all the Agency’s responsibilities in relation to the environmental assessment (e.g. the salary of Agency employees involved in the negotiation of a joint review panel agreement with another jurisdiction and in the integration of Aboriginal consultations). The Agency will no longer use SLAs to recover costs not identified in the Regulations.

These Regulations are expected to result in an incremental increase in costs for proponents of projects that are subject to an environmental assessment by a review panel. That incremental increase is expected to be approximately 28% above the former level of cost recovery. Compared with the former cost recovery regime, these costs represent a transfer of costs, with a greater proportion of the government’s costs in support of review panels being transferred to industry.

5. Consultation

The key stakeholders regarding these Regulations, for the purposes of consultation, are

  • proponents of projects that are subject to on-going panel reviews under the former Act;
  • businesses who propose projects that may be subject to assessment by a review panel under CEAA 2012;
  • industry associations; and
  • the affected public.

The Agency consulted on the proposed Regulations through its Web site. A consultation paper was posted on May 3, 2012, and interested parties were invited to submit comments by May 23, 2012. In addition, the Agency discussed the proposal with the proponents of projects currently undergoing assessment by review panel and with other stakeholders in bilateral briefings on the proposed new environmental assessment (EA) scheme.

By the end of the consultation period, the Agency had received comments concerning the Cost Recovery Regulations from three companies, one federal department, and nine Aboriginal organizations. In summary, the comments were as follows:

  • The companies were generally supportive of the Regulations. They requested clarification on limitations for certain costs to be recovered, and on the circumstances in which Agency staff expenses can be recovered.
  • The federal department remarked on the 24-month limit on panel reviews (which is prescribed in CEAA 2012, not in the Regulations) and the potential impact on costs.
  • The Aboriginal organizations expressed concern about ensuring meaningful participation of Aboriginal groups in the environmental assessment process. Most of them requested amendments to the Regulations to enable cost recovery for participant funding for Aboriginal groups. There was also concern about recovery of costs for transcription and simultaneous interpretation of Aboriginal languages.

In its meetings with representatives of industry, the Agency responded to several questions regarding the intent of the Regulations and their application. No concerns were registered by the industry associations during the briefings.

It was determined that nothing in the comments received after the consultations necessitated any change in the Cost Recovery Regulations as proposed. However, certain matters raised in those comments are addressed here in order to explain why no changes were made.

Some concerns raised in relation to the new cost recovery regime pertain to matters that are established in CEAA 2012 and therefore cannot be addressed in these Regulations. For example, the types of costs that can be recovered under the new cost recovery scheme are established in CEAA 2012: recoverable costs are limited to services provided by a third party and costs related to the exercise of the responsibilities of the Agency and of review panel members. There is no provision for cost recovery of participant funding and so that cannot be added in the Regulations.

Although CEAA 2012 provides for cost recovery in all environmental assessments, it has been decided as a matter of policy that only panel reviews will be cost-recovered. That decision is reflected in the Regulations, which apply only to panel reviews. Limiting the application of cost recovery to environmental assessments by review panels ensures the scope of the scheme remains very similar to that of the former scheme.

There is no predetermined cap on the level of cost recovery for any third-party service. The amount to be recovered will be the actual cost incurred for the service, and the service must be directly related to the environmental assessment of the project in question.

The reference to “English” and “French” translation in the Regulations is an example of the types of publication and printing services that may be cost recovered. It does not preclude cost recovery for translation of a document to or from an Aboriginal language if that is required for the conduct of an assessment by a review panel.

Recovery of expenses incurred by an Agency employee would be justified whenever the employee’s work activity is directly related to the panel review in question. Besides the earlier example of negotiating a joint review agreement with another jurisdiction, those circumstances might also include such duties as making a visit to the project site or attending a public meeting held by the panel. All recoverable costs are to be recovered by the Agency from the proponent of the project that is under review.

6. Small business lens and “One-for-One” Rule

There is no incremental increase in administrative burden for business as a result of this proposal as proponents were already required to set up administrative procedures in order to comply with the former cost recovery regime. The businesses that go through panel reviews for significant projects are generally large businesses. The small business lens and the “One-for-One” Rule do not apply to this proposal.

7. Rationale

The new cost recovery scheme under CEAA 2012 represents the best alternative to addressing issues associated with the former scheme under the FAA. The changes will better align the charges to project proponents with the actual costs to government associated with delivering environmental assessments by review panel. The regulatory approach is consistent with industry’s preference to pay actual costs of an individual assessment rather than average costs.

While there is expected to be an incremental increase of approximately 28% in the amount that individual proponents of projects that are subject to an environmental assessment by a review panel will pay through the cost recovery scheme, that increase is very small when compared with the capital cost of those projects, even when combined with the proponent’s own environmental assessment costs. The incremental increase in the recoverable cost of a panel review will not be significant for Canadian businesses in general.

8. Implementation and enforcement

The Canadian Environmental Assessment Agency already has an implementation procedure in place that should adequately serve to operate the new cost recovery scheme.

Enforcement of the new cost recovery scheme is not expected to present any difficulties. Project proponents who have been required to reimburse the Agency for costs prescribed in the former Order have always met their financial responsibilities, and may be expected to continue to do so under the new scheme. In the unlikely event that a problem arises, CEAA 2012 establishes that any costs or amounts owed by a proponent constitute a debt owed to Her Majesty and may be recovered through court action. Such action can be facilitated by the powers of designated persons, as authorized by CEAA 2012, to enter and examine any place believed to relate to a designated project.

The concept of service standards does not apply directly to these Regulations or to the cost recovery process generally. The Agency’s only client in this matter is the proponent of the project that is under environmental assessment, and the Agency’s dealings with that client are governed by standard financial procedures that are subject to audit as necessary. However, CEAA 2012 requires that a panel review be completed in less than 24 months, which will ensure that proponents will no longer experience undue delays in the review of their projects. The Minister of the Environment will set a timeline on a project specific basis for each phase of the panel process, not to exceed a total of 24 months. While the timelines may be extended in some circumstances, a panel review may be terminated if the timelines are not met.

9. Contact

John McCauley
Director
Legislative and Regulatory Affairs
Canadian Environmental Assessment Agency
160 Elgin Street, 22nd Floor
Ottawa, Ontario
K1A 0H3
Telephone: 613-948-1785
Fax: 613-957-0897
Email: john.mccauley@ceaa-acee.gc.ca

Footnote a
S.C. 2012, c. 19, s. 52