Canada’s Impact Assessment Act is a bureaucratic chokehold

The ongoing U.S. tariff rollercoaster has been an economic stress test for Canada, revealing some serious structural weaknesses in our economy.

The silver lining: we have begun a national conversation about our country’s overreliance on a single market for energy exports.

Right now, Canada sends 97 per cent of its oil and 100 per cent of its natural gas exports to the United States. This makes Canada captive to American politics, economic whims, and trade dynamics.

While there have been calls to open up access to new markets, we lack the infrastructure required to do so. This has been an issue for decades, leading to bottlenecks, production constraints, export dependency, and missed opportunities for market diversification.

For decades, projects have been proposed to try and address that issue. The Trans Mountain pipeline expansion project, for instance.

But over the years, interest from prospective investors has waned, despite the fact that the problem remains. While capital investment in Canadian oil and gas extraction fell by about 16 per cent between 2015 and 2024, it grew by 25 per cent in the rest of the world.

In short, investors are increasingly shunning Canada and choosing to put their money to work elsewhere.

Among the main causes of this sorry state of affairs is the Impact Assessment Act (IAA).

Also known as the “no more pipelines law,” the IAA was introduced in 2019 with the goal of increasing transparency and efficiency in the assessment process for major projects. However, the Act has proven to be a deeply flawed framework that undermines this purpose.

One of the issues with federal environmental assessments that predated the IAA was the amount of time it took projects to go through the process — something the IAA was supposed to address. It put forward legislated timelines that appeared shorter than those under the previous legislation.

While it is not solely responsible for our stagnation, the Impact Assessment Act (IAA) remains an emblematic example of Ottawa’s tendency to overregulate at the expense of Canadians’ living standards.

However, built-in rules allow the minister of environment and climate change to delay or extend these timelines. This opened the door to political interference and undermines one of the IAA’s primary objectives: ensuring timely and predictable assessments.

Such interference has become common, as many projects have experienced a “stoppage of the clock.” These stoppages drag out the process indefinitely, creating uncertainty for investors and making it less likely that they will make a bet on Canada.

Imagine being sold a process that should take, according to the government, three years, but then finding out three years in that your multi-billion-dollar investment may actually be tied up for another three years or more. You’d probably wish you had put your money elsewhere.

The IAA simply places too much power at the whim of federal officials, especially the minister. For example, a project may find itself requiring an impact assessment even if it technically meets the criteria to avoid one.

Take a nickel mining project in northern Ontario for example. With a production of less than 5,000 tonnes per day, it is within the limits set by the IAA to not require federal review. But the environment minister can still decide that the project requires an assessment if it’s believed federal interests are at risk, thus leaving the project vulnerable.

This enabling of arbitrary decision-making further erodes the transparency of the process, damaging both public trust and investor certainty.

In fact, it’s as if by design that politicians who oppose a project can paralyze it or burden it to death with complex and vague regulations.

Thankfully, politicians have finally taken notice.

The Liberals plan to keep the IAA in place, but tweak it in such a way that they promise will lead to faster assessments. The Conservatives have made it clear that they believe the IAA needs to be repealed due to its negative impact on Canada’s economic growth.

The latter may be the better approach, as fixing the IAA would require significant reform. While it is not solely responsible for our stagnation, it remains an emblematic example of Ottawa’s tendency to overregulate at the expense of Canadians’ living standards.

Krystle Wittevrongel is Director of Research at the MEI. The views reflected in this opinion piece are her own.