Canada’s Impact Assessment Act is a chokehold on growth

Impact Assessment Act deters development, chases capital away, and stifles energy market growth

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The ongoing U.S. tariff roller-coaster has been an economic stress test for Canada, exposing deep structural vulnerabilities in our economy.

The silver lining? It has sparked a national conversation about our dangerous 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. That leaves us hostage to American politics, economic cycles and trade whims.

For a country rich in natural resources, this level of dependence is risky. Most major energy producers export to multiple markets to reduce economic exposure. Canada, by contrast, has put nearly all its eggs in one basket—the U.S.

Calls to diversify our markets are nothing new. But for decades, we’ve lacked the infrastructure to make that possible. Bottlenecks, production constraints, export dependency and missed opportunities have all become hallmarks of Canada’s failure to act.

Take the Trans Mountain pipeline expansion. It’s just one of many proposed projects intended to address these limitations. And yet, investor interest has steadily declined. Between 2015 and 2024, capital investment in Canadian oil and gas extraction fell by about 16 per cent, even as it rose by 25 per cent globally.

When investment leaves, so do jobs. Local economies suffer, government revenues shrink, and Canada’s ability to fund public services takes a hit.

So why is capital fleeing?

Among the key reasons is the deeply flawed Impact Assessment Act.

This matters because without pipelines and other infrastructure, we can’t diversify. And building that infrastructure is increasingly difficult, thanks to federal legislation that has made getting major projects approved a drawn-out, politicized ordeal.

Nicknamed the “no more pipelines law,” the Impact Assessment Act was introduced in 2019 with the promise of streamlining environmental reviews for major projects. It was supposed to be faster, more transparent and more predictable.

Instead, it delivered the opposite.

One of the longstanding problems with Canada’s environmental review process has been the sheer time it takes to get a decision. The Impact Assessment Act introduced timelines that appeared shorter, but baked into the legislation were broad powers for the minister to delay or extend assessments.

In practice, this means federal officials can stall a project for years, often with little explanation. So-called “clock stoppages” have become routine. These indefinite delays inject uncertainty and push investors to look elsewhere.

Imagine being told a project would take three years to review—and three years in, finding out you’re no closer to approval than when you started. You’d be forgiven for wishing you had invested in a jurisdiction with less red tape.

The Impact Assessment Act also gives the federal government far too much discretionary power. A project that meets all the legal thresholds to avoid federal review can still be pulled into the process at the minister’s discretion.

Take a nickel mine in northern Ontario producing under 5,000 tonnes per day—small enough to avoid a federal assessment. But if the environment minister deems federal interests to be “at risk,” that mine could still be subjected to a full review.

This arbitrary power undermines both transparency and investor confidence. It sends a message: even if you follow the rules, your project could still be delayed, re-reviewed or denied on political grounds.

It’s hard not to wonder if the system is designed to bury disfavoured projects in paperwork and process until they simply give up.

Thankfully, political attention is finally turning to this issue.

The Liberals say they’ll keep the Impact Assessment Act but tweak it to ensure faster reviews. The Conservatives, on the other hand, have pledged to scrap it entirely, citing its chilling effect on investment and growth.

The latter may be the only viable path forward. Reforming the Act would require a complete overhaul. While it’s not the sole reason Canada is falling behind, it is emblematic of Ottawa’s broader tendency to overregulate—often at the expense of jobs, growth and Canadians’ standard of living.

Krystle Wittevrongel is director of research at the Montreal Economic Institute, a think-tank with offices in Montreal, Ottawa and Calgary.