A COMPARISON OF DIFFERENT REGULATORY APPROACHES, ANALYSIS OF THE RELATIVE BENEFITS OF COMMAND AND CONTROL, REFLEXIVE LAW AND SOCIAL LICENCING IN ENSURING OIL INDUSTRY COMPLIANCE WITH ENVIRONMENTALLY SUSTAINABLE PRACTICES AND OBLIGATIONS BY SAHAR GHANAATI A thesis submitted in conformity with the requirements for the Master degree (LLM) Faculty of Law University of Toronto Copyright 2012 Sahar Ghanaati A comparison of different regulatory approaches, analysis of the relative benefits of command and control, reflexive law and social licensing in ensuring oil industry compliance with environmentally sustainable practices and obligations Master Degree, LLM 2012 Sahar Ghanaati Faculty of Law, University of Toronto Abstract This paper explores the relative benefits of command and control, reflexive law and social licensing in ensuring oil industry compliance with environmentally sustainable practices and obligations. Recognizing why oil sands and their development are significant, the background and development are reviewed first, and then the focus is shifted to look at its economics including the benefits, uncertainties and environmental costs of development. This paper examines how lawmakers in Canada have failed to meet their respective obligation. Drawing on environmental provisions, case law and legal scholars’ articles, books and reports, this paper examines the very problematic issue of oil sands regulation. It proposes to provide an in depth analysis of each regulatory forms and their application to the oil sands. It concludes that in order to solve the oil sands regulation challenges, a collaborative stringent enforcement of regulation from both federal and provincial governments, oil industry and public Pressure is required. ii Sahar Ghanaati Acknowledgments I would like to express my very great appreciation to my supervisor professor Andrew Green for his valuable and constructive suggestions during the planning and development of this research work. His willingness to give his time so generously has been very much appreciated. I want to thank the University of Toronto, Faculty of Law for the opportunity to study at an outstanding university and for providing the financial means and facilities. I would like to acknowledge and extend my heartfelt gratitude to the following persons, Ms. Julia Hall, Professor Jutta Brunnée and the staff at the graduate writing centre for their advice on my writing throughout the past year. I also want to thank my family for their kindness & endless love, through the duration of my studies. This paper is dedicated to the Canadian children who I hope will have more respect for the environment and will have the intellectual growth to protect and serve it as it has always served us. iii Sahar Ghanaati COMPARATIVE ANALYSIS OF THREE FORMS OF ENVIRONMENTAL REGULATION FOR OIL SANDS INTRODUCTION 1 0.A. WHY ARE THE OIL SANDS SIGNIFICANT? IS THERE A PROBLEM WITH THE REGULATIONS OF OIL SANDS? 1 SECTION 1 - BACKGROUND ON OIL SANDS 4 1.A. BACKGROUND ON OIL SANDS 4 SECTION 2 - ECONOMIC BENEFITS OF OIL SANDS 5 2.A. ECONOMIC BENEFITS OF OIL SANDS 5 2.B. ECONOMIC UNCERTAINTIES OF OIL SANDS DEVELOPMENT 7 2 C. ENVIRONMENTAL COSTS TO OIL SANDS DEVELOPMENT 9 SECTION 3 - COMMAND AND CONTROL REGULATION 11 3.A. COMMAND AND CONTROL REGULATION 11 3.B. COMMAND AND CONTROL REGULATION OF ALBERTA'S OIL SANDS: HISTORY, PRACTICES AND POLITICS 14 3.C. JURISDICTION OVER ENVIRONMENTAL ISSUES 15 3.D. GOVERMENT REGULATION OF OIL SANDS 17 3.D.1. FEDERAL REGULATION 17 3.D.2. PROVINCIAL REGULATION 24 SECTION 4 - REFLEXIVE LAW APPROACH AND OIL SANDS 30 4.A. THE REFLEXIVE LAW APPROACH 30 4.B. REFLEXIVE REGULATIN AND OIL SANDS 33 4.C. INFORMATION (AUDITING) AND TRANSPARENCY POLICIES 41 SECTION 5 - SOCIAL LICENCE REGULATION AND OIL SANDS 44 5.A. SOCIAL LICENCE REGULATION 44 5.A.1. SOCIAL LISCENCE EFFECT INDUSTRY AND GOVERNMENT 46 5.A.2. CIVIL SOCIETY AND PUBLIC INTEREST AS DISTINGUISHED FROM GOVERNMENT AND INDUSTRY 47 5.A.3. GREENHOUSE GAS EMISSIONS 48 5.A.4. THE ISSUE ABOUT THE OIL SANDS 49 iv Sahar Ghanaati 5.B. EXAMPLE OF CIVIL SOCIETY VOICES 51 5.B.1. ENGOS AND SCHOLARS 51 5.B.2. ACTIVISTS 53 5.B.3. SCHOLARS, SCIENTISTS, ENVIRONMENTALISTS, ENGOS AND ENGAGING THE PUBLIC 55 5.B.4. WHY DO WE NEED SOCIAL LICENCE REGULATION?THE IMPORTANCE OF PUBLIC PARTICIPATION 56 5.B.5. BROADER PUBLICS 59 SECTION 6 - THE THREE FORMS OF REGULATION AND THEIR RELEVANCE TO OIL SANDS 60 SECTION 7 - CONCLUSION 63 BIBLIOGRAPHY 64 v Sahar Ghanaati INTRODUCTION 0.A. WHY ARE THE OIL SANDS SIGNIFICANT? IS THERE A PROBLEM WITH THE REGULATION OF THE OIL SANDS? In the past Canada has been considered as an admirable country and has enjoyed a great international reputation and influence, undeniably at present the situation is widely divergent. Canada is no longer considered as an environmentally progressive nation. Canada’s position has changed from a key player in international environmental protection to being recognized as a supporter of multinational oil companies. Canada was a responsible affiliate of the Intergovernmental Panel on Climate Change (IPCC) and one of the countries that initiated the Climate Change Convention at the Rio Earth Summit twenty years ago. Unfortunately, Canada became known for an unwise decision, ranked as the first country in the developed world to formally abandon the Kyoto Protocol in 2012.1 Many Canadians are embarrassed about the direction that their country is taking. There are many critics at the national and international levels criticizing Canadian policies on many issues including the global climate change. In Canada the main industry contributing to the Greenhouse gas emissions (GHG) and consequently to global warming is the oil sands industry. This paper explores the relative benefits of three forms of regulation for oil sands -- command and control, reflexive law and social licensing -- in ensuring oil industry compliance with environmentally sustainable practices and obligations. This paper considers that the collaborative stringent enforcement of regulation forms such as government control, industry self-regulation, and public pressure could respond to the environmental challenges facing oil sands regulation. 1 Canada abandons Kyoto Protocol (The Independent December 2011) [online] <http://www.independent.co.uk/environment/climatechange/canada-abandons-kyoto-protocol-6276239.html> 1 Sahar Ghanaati An overview of the three forms of regulation is given before an in depth discussion of each type in the following sections. First, Command and control approach is known as the direct regulation, through which environmental standards are imposed and sanctions are given. The federal and Alberta’s provincial governments are in charge of enforcing command and control regulation on the oil sands industry. This regulation’s objective is to reduce the impact of harm done to the environment. Command and control regulation is the laws established by the government. This regulatory technique has been extensively criticized. In terms of the command and control regulation of the oil sands, many have called into question the actions of the government. The Canadian government has been lobbied consistently by the oil sands industry.2 The federal and Alberta governments have not restricted their role to imposing rules; they have in addition partaken in and advocated for the development of oil sands, subsequently this has caused many to question the reliability of their regulatory functions. Given the criticisms of government regulation of oil sands, a new regulatory method became necessary: the reflexive law approach. The second regulatory approach discussed in the paper is Reflexive law, which is an alternative approach that grants access to more useful and more efficient environmental regulation. Reflexive law is essentially convincing corporations to adopt a process of self-reflection, to consequently, encourage corporations to self-regulate.3 Reflexive law supports businesses' ethical environmental actions by providing useful motivation for responsible behaviour.4 Reflexive law‘s self regulation encourages the oil industry to take voluntary measures. Thus far industry’s self regulation has been very limited and more focused on technology based innovations. 2 Climate Action Network Canada, Dirty Oil Diplomacy, The Canadian Government’s Global Push to Sell the Tar Sands, online: <http://can.cdn.hstd.org/wp-content/uploads/2012/03/CAN_dirty_diplomacy_March8.pdf> 3 Gunningham N “Regulation and Governance: shifting architectures, Journal of environmental law”, (2009) 21 JEL 4 Gunningham N R. Kagan & D. Thornton, "Social License and Environmental Protection: Why Businesses Go Beyond Compliance" (2004) 29 Law and Social Inquiry at 781-782. 2 Sahar Ghanaati Oil corporations are not only ruled by government and self-regulation. The third form of regulation has been branded as Civil regulation, which is societal pressure applied to oil corporations to behave in an environmentally acceptable way5. Social pressure and expressed public opinion produced by civil society can positively impact the oil sands industry’s environmental behaviour, particularly greenhouse (GHG) emissions, and government policies surrounding the industry in the form of social licence regulation. Murphy and Bendell argue that civil regulation is where organisations of civil society set the standards for business behaviour6. It is left to the discretion of the oil corporations whether they choose to accept those standards or not.7. Peter Newell maintains that the wide series