Federal cabinet issues new directive for clean growth projects

Last week, on the margins of the national Energy and Mines Ministers’ Conference in Calgary, the Government of Canada published a new Cabinet Directive on Regulatory and Permitting Efficiency for Clean Growth Projects (the Cabinet Directive). For many in Canada’s public and private sectors, this long overdue directive will replace the last federal cabinet directive designed to get major projects built faster, which was published more than 15 years ago¹. While the Cabinet Directive does not carry the same legal weight as a law or regulation, a cabinet directive is generally seen as a federal policy instrument that is more substantial than a policy guideline issued by a single department because the directive is endorsed by all of cabinet.

The federal government initially stated its intention to develop the Cabinet Directive earlier this year when new measures were announced in Budget 2024 to improve federal regulatory and permitting processes. In June, the government published an action plan entitled Building Canada’s Clean Future (the Action Plan), elaborating on the new measures announced in Budget 2024, including new target timelines for impact assessment and permitting processes, a commitment to create a Federal Permitting Dashboard that reports on the status of clean growth projects, and the establishment of a Federal Permitting Coordinator and a Crown Consultation Coordinator. This Cabinet Directive also comes shortly after the highly-anticipated amendments to the Impact Assessment Act were introduced and ultimately became law on June 20, 2024.

While the Government of Canada has had a busy spring rolling out measures intended to improve federal regulatory and permitting processes, significant criticism continues to be directed at 1) its design of an impact assessment process that has resulted in few project approvals and a constitutional loss at the Supreme Court of Canada, and 2) a lack of coordination and urgency across all federal regulatory departments and agencies when it comes to permitting major projects. Although the federal cabinet appears to finally be responding with this direction to the public service, project proponents and investors remain wary of further administrative measures that do not impose enforceable deadlines.

What you need to know

• “Key sectors” considered to be aligned with a net-zero future. In recent years, the Government of Canada shifted focus from building “major projects” to buildings “clean growth projects”, a term that had not previously been explicitly defined in law or policy. The new Cabinet Directive includes a list of six sectors identified as “key sectors to advance clean growth”, while acknowledging that the list may evolve based on Canada’s competitive position and as new technologies come online. The key sectors listed are 1) greening manufacturing, industry and hard-to-abate sectors, 2) critical minerals, 3) power/electricity, 4) nuclear, 5) enabling infrastructure, and 6) clean fuels.
• Internal federal governance structures feature prominently. The primary purpose of the Cabinet Directive is to give clear direction from the elected ministers and centre of government to the public service to implement the government’s objectives. This includes establishing a new Deputy Ministers’ Regulatory Efficiency Action Council comprised of the deputy heads of federal entities with a role in issuing key federal permits, licenses or authorizations for clean growth projects “to get to construction”. The Cabinet Directive also provides details regarding the role of the Clean Growth Office and the Deputy Secretary of Clean Growth at the Privy Council Office.
• Directs all federal entities to “drive culture change”. Think tanks, such as the Canada West Foundation², have repeatedly pointed out the importance of a “cultural shift” within the federal departments and agencies responsible for regulatory processes. The Cabinet Directive lists ten specific ways that the public service can inject urgency into their work without compromising on the objectives of the legislation and regulations they are implementing.

Key sectors to advance clean growth

For years, the Government of Canada has focused the bulk of its industrial policies and new regulatory actions on combating climate change and supporting sectors aligned with a net-zero emissions global economy. This is often described as “clean growth”, a term that is generally not well defined and has been evolving alongside the development of technologies and global economic trends. This new Cabinet Directive prioritizes the following “key sectors that are aligned with a net-zero future”:

• green manufacturing, industry, and hard-to-abate sectors;
• critical minerals;
• power/electricity;
• nuclear;
• enabling infrastructure (such as ports, roads, pipelines and transmission lines); and
• clean fuels.

As announced in Budget 2024, and now specified in the Cabinet Directive, federal entities are now expected to:

• complete impact assessments and federal permitting processes for designated projects under the Impact Assessment Act within five years; and
• complete federal permitting processes for projects that do not require impact assessments within two years.

Additionally, the Impact Assessment Agency and the Canadian Nuclear Safety Commission are expected to work together to ensure a three-year review process for nuclear projects.

Offices, councils and coordinators

Between the new measures announced in Budget 2024, the Action Plan and the Cabinet Directive, there will be no shortage of internal governance mechanisms to facilitate a focus on clean growth projects. Specifically, the Cabinet Directive outlines and assigns responsibilities for the following internal governance structures:

• A new Deputy Ministers’ Regulatory Efficiency Action Council (Action Council) that will include deputy heads of federal entities with a role in issuing key federal permits, licenses or authorizations for clean growth projects to get to construction³. This Council involves a similar structure to and is very likely modelled off the United States Permitting Council, which is comprised of representatives from the permitting departments across the United States federal government, such as the Environmental Protection Agency, Department of Energy, Federal Energy Regulatory Commission and the Nuclear Regulatory Commission.
• The previously announced Clean Growth Office, within the Privy Council Office, will act as the secretariat to the Action Council. This office will provide strategic advice on the implementation of the Cabinet Directive, work closely with federal entities to track projects with upcoming federal decisions and report to the Action Council.
• Two new coordinator positions are outlined in detail in the Action Plan: the Federal Permitting Coordinator and the Crown Consultation Coordinator. While the description of these positions is high-level, and subject to engagement with Indigenous partners, both of these roles will ultimately be housed within the Clean Growth Office and reside with the Deputy Secretary of Clean Growth⁴.

With the new governance mechanisms, the Cabinet Directive clarifies that regulatory entities such as the Canadian Energy Regulator and the Canadian Nuclear Safety Commission will continue to operate at arm’s length to preserve their regulatory independence and to ensure that their autonomy is “not affected” by the directive.

Driving “culture change”

Similar to the 2007 Cabinet Directive on Improving the Performance of the Regulatory System for Major Projects, this Cabinet Directive is intended to accelerate the Government of Canada’s decision-making and set out clear federal roles and responsibilities within the public service to that end. It is intended to “give confidence” to Canadians, and presumably also investors in projects in Canada, in the integrity and efficiency of federal regulatory and permitting systems.

This new Cabinet Directive, in fact, devotes an entire section to “culture change” within the 14 relevant federal departments and agencies aimed at creating a sense of urgency without compromising the objectives of the legislation and regulations they are implementing. It lists ten specific actions the public service can take, including working to “respond quickly” to proponent applications, providing “risk-informed” guidance, and increasing early engagement with Indigenous peoples.

One significant change to the status quo will be when the status of projects becomes available through a new public permitting dashboard. Currently, the Impact Assessment Agency of Canada updates its Registry with the status of projects in their system⁵; however, for projects seeking a federal permit, such as under the Fisheries Act, Canadian Navigable Waters Act, Species at Risk Act, or Explosives Act, there are no transparency mechanisms to determine the status of the federal permit. The Cabinet Directive provides that the Action Council will be responsible for identifying projects to include on the public dashboard and other internal tracking mechanisms designed to ensure the timeline targets are met.

What happens next?

The Cabinet Directive is published as approved by the federal cabinet, and therefore takes effect immediately. However, the Cabinet Directive only creates obligations for entities and individuals within the federal government and does not give rise to any obligations or modify any laws or regulations applicable to the private sector. Presumably in the coming months, the Action Council will begin meeting and working to establish the public permitting dashboard and internally enforce the target timelines set out above. Whether or not these measures will have the practical effect of speeding up or improving the effectiveness of project and permit approvals—and if so, to what extent—remains to be seen.