The Ministry of the Environment will have to do less, charge more and become much more efficient in a time of government constraint, according to today’s Drummond Report:
Chapter 13: Environment and Natural Resources
Need for Transformation
Most responsibility for protecting the province’s environmental and natural heritage falls to two ministries: the Ministry of the Environment (MOE) and Ministry of Natural Resources (MNR).
As recently noted by the Environmental Commissioner of Ontario, the core business of these two ministries has become much more complex since their inception. And though they must deal with expanding responsibilities that address entirely new environmental issues, their overall capacity — financial resources, staffing levels and in-house expertise — has not kept pace.1
A new paradigm for environmental and natural resource programs and services is desperately needed, shaped by factors of both supply and demand. On the supply side, the fiscal restraint we recommend in this report will further limit the funding available to meet these ministries’ legislated and policy-driven obligations.
At the same time, demand for continued oversight of environmental approvals, compliance and natural resource stewardship is set to rise. For example, development of the Ring of Fire (an area of northern Ontario with potentially large deposits of valuable minerals such as chromite, nickel, copper and platinum) will put added stress on the approval and compliance resources of several provincial ministries. It will also demand greater collaboration among provincial ministries and other levels of government. In addition, increased demand for renewable energy will place further pressure on the province’s approvals and compliance processes, such as the Renewable Energy Approvals (REAs) that directly support the province’s Green Energy and Green Economy Act.
Transformational changes are essential to improve how government operates in this area. We recommend several measures that would improve effectiveness and efficiency.
Move towards full cost recovery and user-pay models
The government’s environmental programs are not all run on a full cost recovery basis and existing fees do not keep pace with the rising costs of program delivery. Where the opportunity exists and where the beneficiary can be identified, the cost burden of providing these services should be placed on the beneficiary’s shoulders rather than the public’s.
For example, the government spends about $15 million per year through multiple ministries to manage water quantity and encourage its efficient use. In Ontario, anyone who takes more than 50,000 litres of water per day from a lake, river, stream or groundwater source must obtain a Permit to Take Water from MOE. A permit will not be issued if the proposed water-taking will adversely affect existing users or the environment. The cost of the permit ranges from $750 to $3,000, but yields too little annual revenue to offset the cost of the program.2
More costs could be recovered if the commercial and industrial water users who create the need for water management programs pay for their use of water. The charge would also create a financial incentive for companies to use water more efficiently.
Phase 1 of the Water Taking Charges Program, launched in April 2007, established a charge of $3.71 for every million litres of water taken by high-consumption industrial and commercial users. Facilities in this category (under the regulations) include beverage producers, canning/pickling facilities and concrete manufacturers.3
Phase 2 of the program would expand the charge to include medium-consumption (e.g., mining, construction, textile, wood production, metal production and recreational facilities) and low-consumption (e.g., electric power generation) users.4 This could increase annual revenue to almost $6 million, with minimal incremental costs to government, and would recover about 40 per cent of the government’s direct costs on water quantity management programs.
The Auditor General has been particularly critical of the fact that MOE’s approvals program recovers less than 40 per cent of program costs.5 Further, this high program spending (compared to amount recovered) is not reflected in the quality of the services provided. Gaps in delivery standards in previous years resulted in a backlog of 1,700 applications, requiring the addition of temporary resources to resolve.6 Continuing to improve service delivery and focusing ministry efforts on the highest-risk activities should drive modernization efforts.
An example of a modern approval is the REA, implemented in September 2009. This new regulatory approval simplifies and consolidates the number and types of approvals needed for renewable energy projects; it replaces environmental assessments, certificates of approval, Permits to Take Water and municipal planning approvals.
While the REA fee schedule was developed on the basis of full cost recovery, in the case of some smaller projects, the fee was capped at $1,000 so that project proponents would not be overburdened. Even with these limitations, the ministry developed the program on a cost recovery basis, and now recoups about 90 per cent of its direct operating costs through revenue — a marked improvement over historical programs.
A program that fully recovers costs is Drive Clean, Ontario’s mandatory vehicle-emission inspection and maintenance program. Drive Clean is funded through fees charged to motorists for emissions tests performed at accredited, privately owned facilities. The $35 test fee for passenger vehicles is shared between the government (one-third) and the facility providing the emissions test (two-thirds).
Recommendation 13-1: Move towards full cost recovery and user-pay models for environmental programs and services.
Rationalize roles and responsibilities between levels of government
While the Canadian Constitution does not assign specific responsibilities regarding the environment to federal and provincial governments, the mandates of several provincial ministries include some elements of environmental protection. In addition, municipalities are increasingly using powers provided to them by the province to set environmental rules.
The federal government has a role in fisheries and water, as well as an approval role in projects that trigger federal environmental assessments. There is also overlap in areas that the province already regulates, such as air quality.
Among provincial ministries, MNR regulates water, aggregates, and protects endangered species. The Ministry of Municipal Affairs and Housing sets provincial planning requirements, including land use planning. And the Ministry of Energy sets goals for the province’s energy plans, including conservation and fuel standards.
Municipalities make local planning decisions and operate in areas that are currently regulated by the province, such as local air standards and waste. This overlap could be reduced, saving associated costs and relieving businesses of the need to apply for different approvals from various levels of government. As well, environmental outcomes and goals for a municipality may not be aligned with provincial views or interests.
In addition, Ontario’s 36 Conservation Authorities are involved in local protection efforts such as flood control and watershed management, and play a role in local development decisions.
This jurisdictional crowding results in inefficient use of government resources and creates uncertainty and confusion for industry, developers and citizens. The federal government is moving into areas that the province already regulates (e.g., air quality and emissions), with unclear benefits for Ontario, and is not engaging in areas where a national approach may be more appropriate (e.g., waste reduction).
Recommendation 13-2: Rationalize roles and responsibilities for environmental protections that are currently shared across levels of government.
Reform the approvals process
Future growth in the natural resource extraction and energy sectors will place fiscal pressure on provincial environmental approvals and compliance resources. Indeed, a large number of FIT contracts are expected to drive demand for MOE approvals in the coming years.
As an example of how reform could be undertaken, MOE recently launched a significant transformation of the environmental approvals process. It is risk-based, responds to the needs of business, takes advantage of current technology and addresses the increasing complexity of approvals.
The previous Certificates of Approval process was relatively inflexible, requiring that all activities go through the same approval process regardless of the activity’s complexity and risk to the environment. This prevented MOE from focusing on potentially unique or more complex applicants that posed more significant environmental risks.
Launched on Oct. 31, 2011, the new system has two processes: 7
- Environmental Activity and Sector Registry (EASR) — Businesses involved in certain routine activities that are less likely to affect the environment can self-register on the new registry. The facility registering the activity would be required to operate according to rules established in regulations. The EASR is currently available for heating systems, standby power systems and automotive refinishing.
- Environmental Compliance Approvals (ECA) — Businesses with more complex activities apply for a single, facility-based approval that addresses all potential impacts to air, land and water pertaining to the facility’s operation. This would result in a ministry-issued decision based on a detailed technical review of documentation submitted by the applicant, and public input. All activities at the facility can be covered in one application.
Despite these recent improvements to the process, more can and must be done. This need is best illustrated by an example cited in the Environmental Commissioner of Ontario’s 2009–10 Annual Report:8
In September 2009, a company submitted an environmental approval application to MNR to construct a mining camp and an airstrip to service the Ring of Fire area.
The project involved 81 hectares of Crown land, the airstrip, helicopter pads, a fuelling area, storage facilities and staff accommodations. Several days into the approvals process, MNR staff flew over the site for an inspection and were surprised to discover that the proponent had already cleared the forest, and built the mining work camp and the airstrip, both of which appeared to be in active use. As a response, the proponent said it had decided to begin construction because of delays in initiating the approval application process.
To help prevent future transgressions, provincial and federal ministries conducted information and training sessions for companies working in northern Ontario in 2010. These sessions set out the governments’ regulatory environment, and the requirements for authorizing mineral exploration activities — not a simple subject, given the existence of multiple overlapping pieces of legislation.
Recommendation 13-3: Employ a risk-based approach for environmental approvals that focuses on improving outcomes and prevention.
Streamline the Environmental Assessment (EA) process
Many projects trigger both provincial and federal EA requirements as a result of differing legal frameworks.
The Canadian Environmental Assessment Act (CEAA) covers the conduct of federal EAs. The federal EA process applies to projects that are planned by a federal authority; on federal Crown land; those funded by the federal government; or those requiring federal licences or permits.
In an effort to reduce potential duplication, the Canada–Ontario Agreement on Environmental Assessment Cooperation was struck in 2004. This agreement commits both governments to conducting a co-operative EA while retaining their respective decision-making powers.9 In a recent decision by the Supreme Court of Canada, it was noted that responsible authorities “can, and should, minimize duplication by using the coordination mechanisms provided for in the [CEAA]. In particular, federal and provincial governments can adopt mutually agreeable terms for coordinating environmental assessments…. Full use of this authority would serve to reduce unnecessary, costly and inefficient duplication.”10
The CEAA is now under review by the federal government, which has expressed interest in improvements that would include eliminating the duplication of approvals processes by accepting specific federal and provincial requirements as equivalent. This would give federal authorities the ability to designate a provincial EA as equivalent to an assessment conducted under the CEAA. However, removing duplication may require legislative changes at both levels of government, and there is reluctance among both parties to give up decision-making authority.
In addition, some groups or classes of projects that are carried out routinely and that have predictable environmental effects can follow an EA process that is more streamlined. Streamlined EA projects do not need a separate approval by the ministry if the planning process set out in the class EA is followed and successfully completed. Such projects include municipal roads, water and wastewater infrastructure, highway construction and maintenance, forest management activities and other public-sector activities.11
Currently, some projects requiring an EA also need many subsequent environmental and land use approvals; many proponents are unaware of this at the start of the EAprocess. Where sufficient environmental information is provided, environmental approvals could be granted as part of the EA. However, the EA is completed at a higher level of analysis, which might not be detailed enough to assess a project; asking for additional detail at this stage could prolong the EA process.
Recommendation 13-4: Review opportunities to further streamline the environmental assessment process, such as co-ordinating further with the federal government’s process or integrating it with certain approvals.
Move towards prevention and a polluter-pay principle for contaminated sites
Under the Environmental Protection Act (EPA), the province has the “right to compensation” for loss or damage incurred as a direct result of a spill, and for all reasonable costs and expenses incurred for a cleanup. This can be difficult when the owner of a contaminated site is insolvent, no longer exists, or lacks sufficient funds to pay for the cleanup. This can occur when property ownership reverts to the Crown, which in effect transfers the responsibility for cleanup back to the province.
The province can take legal action to ensure the polluter pays for damages or property ownership can revert to the province, with the responsibility to clean up. While financial assurance measures exist under the EPA, they do not require companies to take into account the entire cost of cleaning up a site.
As committed to in the 2011 Ontario Budget, the Ministries of the Environment, Natural Resources, Northern Development and Mines (MNDM), and Infrastructure are currently undertaking an enterprise-wide review of contaminated sites, with the goal of consolidating environmental cleanup activities across the province. The review is expected to include options for a new governance model, financial management and implementation.
The MOE uses Financial Assurance (FA) as an instrument to reduce the financial risk to the province resulting from environmental contamination. Currently, the ministry holds approximately $37 million in cash in addition to other non-cash forms of assurance such as letters of credit and bonds.12 The FA requirement applies only to select sites and industrial sectors, addressing a small portion of the overall risk exposure. The existing legislation13 does not provide an effective policy framework for a robust FA program covering all relevant industrial sectors. Proponents of advanced exploration and mine production projects are required to provide FA for the costs of eventual site rehabilitation under the Mining Act. At present, MNDM holds $33 million of FA in cash, in addition to other non-cash forms, pursuant to projected rehabilitation costs for mine closure plans.14
One example of a successful program is the Superfund, a U.S. Environmental Protection Agency program with federal authority to clean up uncontrolled hazardous waste sites and respond to oil and chemical spills. Funding is provided by the respective industries — primarily the chemical and petroleum industries. Since the start of the program in 1980, the Superfund has paid for the cleanup of thousands of hazardous sites and oil and chemical spills.
The program assesses sites, places them on a National Priorities List, and establishes and implements appropriate cleanup plans. In addition, the Agency has the authority to conduct removal actions where immediate action is required or states are involved; enforce against potentially responsible parties; ensure community involvement; and ensure long-term protectiveness.15
Recommendation 13-5: Place greater emphasis on prevention and the polluter-pay principle for contaminated sites using appropriate financial tools, such as financial assurance.
Identify opportunities to improve performance of the Ontario Clean Water Agency
The Ontario Clean Water Agency (OCWA) operates 187 water treatment and 203 wastewater treatment facilities for over 170 clients, most of which are municipalities. In 2009, OCWA essentially broke even on operations, generating $2.4 million in net revenue against total operating expenses of $143 million.16
Despite this, OCWA is unique in the Ontario government: it is the only agency that competes in the marketplace for its business and receives no government funding. And while OCWA made $11.7 million over the last 10 years, it also ran a deficit on the operations side of its business over the same period.17 Additionally, althoughOCWA services the municipal sector, the wages it offers skilled water and wastewater operators are not competitive with those offered in the municipal sector, resulting in skilled operators leaving the agency.
The Ontario Clean Water Agency’s current business model is neither sustainable nor competitive. It cannot offer appropriate compensation to its skilled operators and it cannot move quickly and flexibly to pursue more lucrative business opportunities.
Recommendation 13-6: Review the effectiveness of the current governance structure of the Ontario Clean Water Agency to evaluate the merits of restructuring it as a for-profit, wholly owned government entity.
Rationalize and consolidate the number of entities/agencies involved in the arena of land use planning and resource management
Many agencies deliver natural resource management activities in southern Ontario.
Administrative consolidation could be achieved by merging activities of the Niagara Parks Commission, St. Lawrence Parks Commission and Ontario Parks. This could achieve efficiencies of scale, such as lower costs in the procurement of merchandise for sale in parks’ souvenir stores.
The number of advisory groups/councils in many of the province’s traditional program areas (i.e., forests, fish and wildlife) could be reduced by having multidisciplinary advisory groups.
A review of the programs and services delivered by MNR and Conservation Authorities could be undertaken to clarify responsibilities and eliminate any duplication.
Across central southern Ontario, a single agency (similar to Metrolinx) could be created to deliver natural resource management activities. Examples of current agencies are the Niagara Escarpment Commission, EcoVision, Greenbelt, Oak Ridges Moraine and Conservation Authorities. Consolidation into a single agency, with its one-window approach, could offer streamlined, more efficient service and fiscal savings over the long term.
Recommendation 13-7: Rationalize and consolidate the entities and agencies involved in land use planning and resources management.
Ring of Fire
The Ring of Fire development in northern Ontario represents a significant opportunity to both realize major mineral development in the region and improve socio-economic opportunity and quality of life for Aboriginal People and other residents of the north. Managed properly, the project will provide benefits over several decades.
Success in the Ring of Fire will require collaboration between Aboriginal People, industry, and the federal and provincial governments. With a focus on creating a healthy workforce, education and skills training, and basic community infrastructure, the government should take innovative approaches to expand labour-market and training programs for First Nations communities. This approach would include implementing a full range of employment programs and related social supports that are available through social assistance for recipients living on reserve. These include education programs, job-specific training, literacy programs and programs that support young parents. The Commission is optimistic that industry partners will employ Aboriginal People throughout the life of the Ring of Fire and work as partners with government to deliver or fund (perhaps both) the employment and training services required. If voluntary efforts by the business sector lag, the government should consider putting a levy on mining-related activities to directly fund initiatives that will prepare Aboriginal People to participate economically in the Ring of Fire.
The government should also enhance its efforts to develop partnerships with the private and not-for-profit sectors in supporting innovative programs such as “Right to Play,” which focus on promoting leadership among Aboriginal youth — essential for future growth and prosperity.
The federal and provincial governments also have a responsibility to improve regulatory certainty in order to secure future investment and growth in the region. This should include streamlining and co-ordinating environmental assessment and regulatory processes to improve timelines while ensuring Aboriginal communities have the capacity to fully participate in these processes.
Recommendation 13-8: Ensure that the government’s approach to the Ring of Fire maximizes opportunities for Aboriginal People and all Ontarians.
1. Environmental Commissioner of Ontario, Annual Report 2010–11, p. 81.
2. “Permits to Take Water,” Nov. 16, 2010, downloaded fromhttp://www.ene.gov.on.ca/environment/en/industry/assessment_and_approvals/water_taking/STDPROD_075554.html.
3. “Stewardship, Leadership, Accountability: Safeguarding and Sustaining Ontario’s Water Resources for Future Generations,” Proposal Paper, Summer 2009, p. 40.
5. Ontario Auditor General, Auditor’s 2009 Report: Government User Fees, p. 154.
6. See http://news.ontario.ca/ene/en/2010/03/moving-forward-to-modernize-environmental-approvals.html (accessed Jan. 25, 2012).
7. “Proposed Environmental Activity and Sector Registry,” EBR Registry Number: 011–1959,” Jan. 18, 2011.
8. Environmental Commissioner of Ontario, Annual Report 2009–10, p. 122.
9. “Provincial and Federal Roles in Environmental Assessments,” Dec. 16, 2010, downloaded fromhttp://www.ene.gov.on.ca/environment/en/industry/assessment_and_approvals/environmental_assessments/STDPROD_075713.html.
10. “MiningWatch Canada v. Canada (Fisheries and Oceans),” 2010 SCC 2,  1 S.C.R. 6, Jan. 21, 2010, downloaded fromhttp://scc.lexum.org/en/2010/2010scc2/2010scc2.html.
11. “Streamlined Environmental Assessments,” June 14, 2011, downloaded fromhttp://www.ene.gov.on.ca/environment/en/industry/assessment_and_approvals/environmental_assessments/STDPROD_075691.html and
“Class Environmental Assessment,” Feb. 2, 2011, downloaded fromhttp://www.ene.gov.on.ca/environment/en/industry/assessment_and_approvals/environmental_assessments/STDPROD_075721.html.
12. Ministry of the Environment financial records.
13. Namely, the Environmental Protection Act and Ontario Water Resources Act.
14. Public Accounts of Ontario 2010–11, p. 4-8.
15. “Superfund – Basic Information,” Oct. 3, 2011, downloaded from http://www.epa.gov/superfund/about.htm.
16. Ontario Clean Water Agency, Annual Report 2009, p. 38.
17. Ontario Ministry of the Environment.