DAVID EBNER

July 28, 2008

TOBA INLET, B.C. -- Amid the jagged mountains, glaciers and deep inlets northwest of Vancouver, Plutonic Power Corp. is building a green future, a $660-million hydro project to generate low-emissions electricity for 75,000 homes.

The beauty of the remote wilderness belies the challenges to build here, a three-year effort that includes two generating stations, 60 kilometres of roads and a 150-kilometre transmission line to connect to the grid.

But getting to this stage was almost as complicated as the next two years of building, with a regulatory approval process, requiring 52 individual permits, licences and approvals, that extended more than 500 days instead of the expected 180. While civil servants in Ottawa worked through the various applications, upstart Plutonic - with no revenues - watched project costs shoot $70-million higher as it scrambled to put together equity and debt financing, which it has secured from General Electric Co.

"It was just taking forever," said Donald McInnes, chief executive officer of Plutonic. "You'd go and answer three queries and get four more."

"You'd answer those and then you'd get five more, answer those, get two more. It never seemed to end."

As Canada prepares to grapple with a major wave of new natural resources industrial projects, the slow review of such efforts in Ottawa clashes with the urgency to build. Big proposals percolate across the country but especially in the West, with British Columbia's major green-power expansion, Alberta's oil sands and connected pipelines and a potential nuclear power plant in Alberta and/or Saskatchewan.

Delays can be extremely costly, the most obvious example being the Mackenzie Valley natural gas pipeline project in the Northwest Territories, which was supposed to take three years to review. The current and still-uncertain schedule has it extending into a fifth year - project cost has spiked to $16-billion from $7-billion and will likely rise further still.

Aiming to maintain detailed oversight, but equally looking to cut assessment time in half, Stephen Harper's Conservative government has responded to industry lobbying by creating a central hub to orchestrate the movement and vetting of paper among the buildings cloistered around Parliament Hill.

Ottawa's solution - greeted with vague optimism but mostly doubted by business people and environmentalists alike - is the Major Projects Management Office, announced in the spring of 2007 and opened five months ago. It is supposed to co-ordinate five government departments, one agency and two federal regulators. It is backed by $150-million over five years, with $20-million to support the office itself and the rest for resources at various departments, especially new workers to handle the onslaught of applications for industrial development.

The promise seems simple: Establish and then stick by timelines. Put it all on a website, for successes and failures to be easily tracked and assessed.

Six projects have been submitted to the new office to handle, including Plutonic's next and much larger run-of-river (i.e., non-storage, or no dams) project. It is a $4-billion plan to power 300,000 homes, with 18 generating stations in Bute Inlet just north of Toba Inlet near Powell River where the firm is building a run-of-river generator today.

Gary Lunn, federal natural resources minister, said the management office will strength Ottawa's ability to review projects, reasoning that the more departments work together, the better the result. "Defined timelines are crucial," he said this month aboard an amphibian Grumman Goose on a visit to Plutonic's Toba project. "No one's talking to each other. We have to manage the silos."

Later, standing on a dock in the inlet on a windy day, responding to the criticism that the Conservatives just want to ram projects through to approval, he said: "A process that takes twice as long as it's supposed to doesn't necessarily produce a better result."

But instant improvement is unlikely, Mr. Lunn conceded, and not all regulatory problems will be solved right away. The management office won't touch projects in the Northwest Territories, Yukon or Nunavut, for which a separate regulatory overhaul is being considered, led by Indian and Northern Affairs.

Industry executives say the management office is a good idea but are skeptical how much good it will do. Hal Kvisle, CEO of pipeline and power firm TransCanada Corp., said the office "may be helpful."

"It'll serve to draw attention to some of the more challenging examples of federal regulatory ineptness," Mr. Kvisle said. "And [the management office] will at least be someone we can call when projects are bogged down in the system."

TransCanada has submitted its proposed $4-billion Belle Plaine polygeneration project in Saskatchewan to the management office. The Calgary company's experience in regulatory reviews is mixed. Its Keystone oil sands pipeline, recently reviewed and approved by the National Energy Board, went well, Mr. Kvisle said, but the Mackenzie gas project, which is also being reviewed by the NEB but has other components, is the opposite, the "most glaring example" of a regulatory review gone awry.

The "protracted Mackenzie process" has single-handedly added $3-billion to the cost of the project, TransCanada has estimated. "The whole project is now in jeopardy as a result of regulatory delay," Mr. Kvisle said.

Skepticism is common, said Shawn Denstedt, a leading regulatory lawyer in the energy business at Osler Hoskin & Harcourt LLP in Calgary. The main question is whether more bureaucracy will solve the problem. "Perhaps all of the red tape that's been associated with the federal process can be managed by this new office," Mr. Denstedt said, adding that the major problem on big past projects was "federal departments all coming at you from the same angle."

Stephen Hazell, executive director of the Sierra Club of Canada, said he was originally worried the office was just a front to reduce regulatory stringency but now sees it as a way for critics to more easily keep tabs on project reviews. "But I'm not sure this office will deliver the goods to make things happen more quickly."

In Ottawa, the management office is finding its feet, said Adam Hendriks, director of Western operations at the office.

"It's not like all of a sudden that everyone's going to work well together and it'll all be fixed. These are long-standing issues," Mr. Hendriks said. "On one hand, it's a bit frustrating, when you're trying to make the system move - but I'm very hopeful we get there ... "

***

Test cases

Six proposed industrial projects have been submitted to the Major Projects Management Office in Ottawa, opened this year to co-ordinate different federal government departments to improve and speed up regulatory reviews.

Belle Plaine Polygeneration project

WHAT: Using petroleum coke for several proposes, including to extract carbon dioxide for enhanced oil recovery.
Who: TransCanada Corp.
Where: Saskatchewan

Bute Inlet Hydro Generation project

WHAT: A run-of-river power project to produce electricity.
Who: Plutonic Power Corp.
Where: British Columbia

Direct-Shipping Ore project

WHAT: Open-pit iron ore mining and processing.
Who: New Millennium Capital Corp.
Where: Quebec

Kerr-Sulphurets-Mitchell project

WHAT: A gold and copper mine.
Who: Seabridge Gold Inc.
Where: B.C.

Mica 5/6 project

WHAT: An expansion of an existing hydroelectric generating station.
Who: B.C. Hydro.
Where: B.C.

Schefferville project

What: Open-pit iron ore mining and processing.
Who: Labrador Iron Mines Ltd.
Where: Labrador

David Ebner