Dentons’ Pick of Canadian Regulatory Trends to Watch in 2022

Dentons

The regulatory landscape in 2022 will be shaped by challenges relating to, among other things: accelerating climate change, the imperative of moving the ESG (environmental, social and governance) agenda forward, the digital economy, supply chain disruptions, data protection and national security concerns.

In this annual publication, Dentons’ team of leading regulatory lawyers forecast key trends for 2022 across a range of legal areas, including trade, competition, foreign investment review and national security, energy regulatory, digital economy regulation, and environment and climate change.

Energy regulatory trends to watch in 2022: The Great Energy Transition begins

In 2021, the Canadian and global economy continued to shift towards embracing green energy. Globally, COP26 created a renewed commitment towards a global transition from a hydrocarbon economy to a diversely-fueled economy that leverages green technology to combat climate change. Back at home, the Supreme Court of Canada resolved the highly debated Greenhouse Gas Pollution Pricing Act (more commonly known as the carbon tax) by finding the pan-Canadian carbon tax strategy constitutional.1

Going into 2022, there are several trends in Canada and abroad that we are looking towards as we continue on the road to the Great Energy Transition.

Carbon capture and storage in the growing hydrogen economy

The Canadian government issued its “Hydrogen Strategy for Canada” (the Strategy) back in December 2020. Since then, the Strategy has assisted with a national regulatory push towards “blue” or low carbon hydrogen, and “green” or zero carbon hydrogen. In 2021, both the Governments of British Columbia and Alberta released Hydrogen Strategies2 that outline regulatory actions for these jurisdictions to become leaders in the blue and green hydrogen sectors. Both strategies leverage carbon capture and storage technologies to shift greenhouse gas producing “grey” hydrogen towards the production of blue and green hydrogen.

Looking ahead to 2022, these regulatory strategies will assist to increase the presence of blue and green hydrogen in the Canadian energy supply. Canada is also well-poised to become a dominant player in the global trade of hydrogen. It is already a leading global producer of hydrogen. While the current production of hydrogen in Canada is largely grey hydrogen, the national and provincial hydrogen strategies signal a shift towards an energy transition that will leverage blue and green hydrogen as a decarbonized energy source.

Re-positioning the Alberta Energy Regulator (AER)

In November 2021, the Government of Alberta took steps to improve the regulatory framework of mineral development in the province. These steps included the “Renewing Alberta’s Mineral Future strategy and action plan”3 (the Mineral Strategy) and Bill 82, Mineral Resource Development Act.4 The Mineral Strategy and tabled legislation seek to make the AER a one-stop shop regulator for rare earth minerals as a way to promote the industry in Alberta. The global demand for rare earth minerals is steadily increasing since batteries and other rare earth minerals are essential for the production and development of green energy technology.

Additionally, at the end of 2021, the Government of Alberta proclaimed the Geothermal Resource Development Act, SA 2020, c G-5.5 and the corresponding Geothermal Resource Development Regulation, Alta Reg 250/2021 which establishes the AER as the primary regulator for deep geothermal energy development in Alberta.5 The AER is currently working to finalize the details of the regulatory framework which are set to be published in the Spring of 2022.

These moves to position the AER as the primary regulator of all industries associated with the energy sector anticipate the development of a mining industry that goes beyond coal and oil sands. Going into 2022, the AER should see increasing applications for mining and geothermal activities related to the energy transition.

The development of Small Modular Reactors in Ontario

Small Modular Reactors (SMRs) have been positioned in Canada to become the next generation of nuclear energy innovation.6 SMRs are classified as nuclear reactors generally 300 MW equivalent or less. They are “modular” in that they can operate individually or as part of a larger nuclear complex. SMRs respond to the need for smaller, simpler and cheaper nuclear energy.

Over the past year, Ontario has been a leader in establishing SMR technology. At the end of 2021, Ontario Power Generation announced that they selected GE Hitachi Nuclear Energy to build an SMR at the existing Darlington nuclear power plant.7 This will be the first nuclear reactor on Canadian soil in over three decades. The establishment of this plant will increase the technology expertise of SMRs in Canada and position the rest of the country to continue to pursue SMRs as a clean energy source as part of the green energy transition.

Indigenous participation in the energy transition

As the industry continues to move forward on large-scale energy projects, the Canadian courts have signaled the importance of economic reconciliation with Indigenous peoples. Two significant court decisions in 2021 emphasized that the energy regulatory approach in Canada must shift to meaningfully integrate considerations of economic reconciliation.

The first decision was Ermineskin Cree Nation v. Canada (Environment and Climate Change), 2021 FC 758 (“Ermineskin”). In Ermineskin, Justice Brown of the Federal Court held that the Minister of Environment and Climate Change Canada failed to adequately consult with Indigenous groups before providing a Designation Order for a coal mining project under the Impact Assessment Act, SC 2019, c 28. Crucially, the reasoning reflected the Court’s emphasis on Indigenous economic interest as integral to administrative considerations of the duty to consult and the honour of the crown. Justice Brown clearly rejected the view of Aboriginal rights as being necessarily in conflict with energy development. In turn, he signaled that the collaboration of Indigenous peoples and First Nations in energy development is a fundamental part of reconciliation.

The second significant decision regarding economic reconciliation was AltaLink Management Ltd. v. Alberta (Utilities Commission), 2021 ABCA 342 (“AltaLink”). In line with the Federal Court in Ermineskin, the Alberta Court of Appeal (the ABCA) overturned the decision of the Alberta Utilities Commission (the AUC) because the AUC did not adequately consider the Indigenous economic benefits of a project. In making this decision, the ABCA affirmed prior case law that interprets the public interest of reconciliation in a broad view to include the advancement of Indigenous economic interests. The concurring opinion by Justice Feehan also set out guidance on how administrative tribunals can ensure that Indigenous economic reconciliation is fully realized.

The decisions of Ermineskin and AltaLink demonstrate that Indigenous economic reconciliation is integral to the future of energy development. As green energy developments move forward, these decisions provide a welcome opportunity for collaboration and innovation with Indigenous peoples and First Nations as part of a collective pursuit towards economic reconciliation.

Special thanks to Cate White, Student-at-Law, who assisted in preparing this insight.


1 References re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11.
2 The Government of Alberta, “Alberta Hydrogen Roadmap” (November 5, 2021) accessed online: https://www.alberta.ca/hydrogen-roadmap.aspx; The Government of British Columbia, “B.C. Hydrogen Strategy” (July 6, 2021) accessed online: https://www2.gov.bc.ca/assets/gov/farming-natural-resources-and-industry/electricity-alternative-energy/electricity/bc-hydro-review/bc_hydrogen_strategy_final.pdf.
3 The Government of Alberta, “Minerals Strategy and Action Plan” (November 2021) accessed online: https://www.alberta.ca/minerals-strategy-and-action-plan.aspx.
4 Bill 82, Mineral Resource Development Act, 2nd Sess, 30th Leg, Alberta, 2021 (accessed online): https://docs.assembly.ab.ca/LADDAR_files/docs/bills/bill/legislature_30/session_2/20200225_bill-082.pdf
5 The Alberta Energy Regulator, “Geothermal Resource Development Act (GRDA) Proclamation” (December 13, 2021) online: https://www.aer.ca/regulating-development/rules-and-directives/bulletins/bulletin-2021-46.
6 Dentons Canada LLP, “Innovation in nuclear energy in Canada – Alberta signs memorandum of understanding for the development and deployment of small modular reactors” (April 16, 2021) online: https://www.dentons.com/en/insights/articles/2021/april/16/innovation-in-nuclear-energy-in-canada-alberta-signs-memorandum-of-understanding-for-the-development.
7 GE News Release, “GE Hitachi Nuclear Energy Selected by Ontario Power Generation as Technology partner for Darlington New Nuclear Project” (December 2, 2021) online: https://www.ge.com/news/press-releases/ge-hitachi-nuclear-energy-selected-by-ontario-power-generation-as-technology-partner

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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