OTTAWA - Canada's aggressive pursuit of resource development is exposing the country to heightened environmental and financial risks that are not being properly handled by federal regulators, a new audit says.
In his final report to Parliament after five years on the job, Scott Vaughan — Canada's commissioner of the environment and sustainable development — said government is not keeping sufficient tabs on mining in the North, offshore drilling in the Atlantic and hydraulic fracturing in hundreds of thousands of shale gas wells sprouting up across the country.
Nor are regulators adequately equipped to deal with major oil spills or an expected 300 per cent increase in tanker traffic off the West Coast, the report states.
Coupled with previous reports that question oversight of pipelines and the oilsands, "you end up with a portrait where there are some serious questions about the federal capacity to safeguard Canada's environment," Vaughan said.
"We know that there's a boom in natural resources in this country. I think what we need now, given the gaps, given the problems that we've found, is a boom in environmental protection in this country as well. Because these need to move hand in hand."
Instead, he found that in many cases, government regulators can't, or won't, figure out what they are supposed to be doing. They are reeling from dramatic changes to environmental legislation, outdated requirements, confusing lines of responsibility and large holes of missing information.
At stake, he said, is Canada's reputation as an exporter, as well as the habitat of fragile ocean ecosystems.
"You can't have environmental protection trying to catch up with legacy issues that have been left because of a boom in natural resources. I think this is a cautionary tale from this report: right now there is an imbalance."
Specifically, the commissioner found that the two Atlantic offshore petroleum boards are not ready to respond to major oil spills, despite a complex array of regulations and procedures.
The government had asked Vaughan to audit the offshore boards after the 2010 oil spill in the Gulf of Mexico prompted questions about how Canada would handle a similar situation.
Vaughan found jurisdictional confusion that has led to a lack of co-ordination and significant gaps in the way authorities were monitoring the activities of companies.
"They have not established or updated policies and procedures to guide environmental assessments, and they are not systematically tracking measures to prevent or reduce environmental impacts," Vaughan writes.
The boards – and the handful of federal departments they work with – have not yet figured out how to apply the new environmental assessment regime, which was dramatically overhauled last summer in one of the federal government's budget omnibus bills.
The chief executive of the Canada-Newfoundland Offshore Petroleum Board acknowledged the need to respond to the criticisms, but also said that spill prevention would remain the board's priority, and that the main responsibility for actual spills lies with companies.
Vaughan raised similar red flags about the government’s methods of mitigating financial risks stemming from environmental damage.
Liability limits for nuclear accidents or oil spills are decades out of date, he said, leaving taxpayers exposed to huge financial risk if something goes wrong.
For example, companies would only have to cover a maximum of $40 million in damages in case of an offshore spill in the Arctic, or $30 million in the Atlantic Ocean – liabilities that have not changed in a quarter of a century and are far lower than other countries. The cleanup of the 2010 spill in the Gulf of Mexico cost US$40 billion.
In the North, Vaughan is especially concerned that officials with Aboriginal Affairs and Northern Development Canada are not inspecting mining operations to make sure companies are living up to their obligations.
Changes to the Fisheries Act included in last summer's omnibus bill have left regulators unsure about what kind of compensation plans companies should have in place, the report notes.
At the same time, tanker traffic and marine transportation of oil and gas is soaring.
"These findings, when considered with our concerns regarding preparedness to effectively respond to a major oil spill, show clearly that Canadians are exposed to environmental risks and the financial implications that go with them," Vaughan writes.
Still, the federal government has indicated it is aware of its archaic regime. Ottawa has been reviewing it for months now, and is contemplating legislative changes likely this spring that would significantly increase liability limits.
"Work is underway to address the financial assurances required of industry to ensure that we protect taxpayers and the environment," Environment Minister Peter Kent said in a news release.
But opposition MPs universally condemned the Conservatives for sacrificing the environment to resource development. By ignoring the financial and environmental vulnerabilities that are the flip-side of loosely regulated development, Ottawa is putting the entire economy at risk, they argued.
"This is leaving taxpayers on the hook and fails to meet the test of prudent financial management," said the NDP's environment critic, Megan Leslie.
Vaughan also expressed frustration with the slow pace of establishing protections for sea life.
The Ocean Act — along with international agreements to which Canada is a signatory — provides for a network of marine protected areas that would allow ecosystems to flourish without the threat of intense economic activity.
"The level of protection falls well short of what the Ocean Act calls for, and at the current rate, it could take many decades to reach the goal of creating a network of marine protected areas," Vaughan writes.
As a result, Canada's oceans are increasingly threatened by pollution, overfishing and climate change, he said.
The commissioner also encouraged the government to get a better grip on the risks associated with the practice of hydraulic fracturing, known as fracking, which is becoming more and more popular in many regions across Canada.
There are some 200,000 fracking wells in Canada, and that number is expected to double in the next 20 years, the report says. However, oil and gas exploration and drilling activities are exempt from reporting releases of pollutants to Environment Canada.
"The government cannot know if Canadians are adequately protected."
Environment Canada and Health Canada are in the midst of research on the topic.