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1993 Report of the Auditor General of Canada

Chapter 26—Pulp and Paper Regulations

Main Points

Introduction

Audit Scope

Description of Regulations

Pulp and Paper Effluent Regulations

Pulp and Paper Mill Effluent Chlorinated Dioxins and Furans Regulations

Adsorbable Organic Halogens (AOX)

Pulp and Paper Mill Defoamer and Wood Chip Regulations

Observations and Recommendations

Incomplete Information Provided on Effectiveness and Cost

A key reason for enacting the 1992 effluent regulations was not clearly stated
Expected improvements to the environment or human health were not explained
The basis for pollution control standards was not clearly explained
Potential overlaps with provincial pulp and paper regulations were not fully explained
How the regulatory overlap problems will be resolved is unclear
Impact of tax deductions on cost to industry was not explained
Significant uncertainty in the cost estimates was not explained
Comparability of Canada's regulations to those of our competitors is difficult to assess
Responses to industry concerns were not clearly explained

Assessment of Regulatory Alternatives and Options Was Not Adequate

There was inadequate consideration of not regulating pulp and paper defoamers and wood chips
The potential of using economic instruments was not examined
Site-specific pollution controls were not explained
Information provided on testing for chronic effects was inadequate
The reason for not regulating other types of dioxin and furan was not explained

Consultation Is Satisfactory for the Development of Regulations, but Not for Their Implementation

Conclusions

Assistant Auditor General: Richard B. Fadden
Responsible Auditor: Alan Gilmore

Main Points

26.1 The pulp and paper industry is a major contributor to Canada's economy and our trade balance. The industry is the largest industrial user of water in Canada and a major source of pollution. This makes it a focus of both government and environmentalist concern.

26.2 We examined the information provided to Parliament and the public on three sets of regulations intended to control pollutants from pulp and paper mills.

26.3 We found that parliamentarians and stakeholders were not comprehensively and equally informed about key issues affecting the effectiveness and cost of the pulp and paper regulations, for example:

  • industry and environmentalist concerns about the effectiveness of the effluent regulations;
  • potential overlaps with provincial pulp and paper regulations;
  • tax deductions that could substantially reduce the cost to industry of implementation and that could reduce taxes paid to the federal and provincial governments;
  • alternative and possibly more efficient or more environmentally sensitive solutions;
  • why the government did not regulate, as did Quebec, dioxins and furans by their total toxicity; and
  • the advantages and disadvantages of using site-specific pollution control standards based on the assimilative capacity of a watershed.
26.4 We recommend that the Department of the Environment more comprehensively and equally inform Parliament and stakeholders about its regulatory initiatives and that its Regulatory Impact Analysis Statements contain full information on proposed regulations.

Introduction

26.5 The pulp and paper industry is a major contributor to Canada's economy and our trade balance. About 2.8 percent of total employment in 1989 was forestry-related, and pulp and paper mills accounted for almost one in three of these jobs. The forestry sector's 1992 contribution to the balance of trade was $19.5 billion. This was larger than any other sector, and roughly one third was from wood pulp exports. In 1989, wood pulp net exports alone contributed about $6.8 billion to the balance of Canadian commodity trade.

26.6 Canada produced over 15 percent of the world's pulp in 1989, second only to the United States, which produced 37 percent. Canada's principal export markets are the United States, the European Economic Community, and Japan. Domestically and internationally, Canada is the world's largest trader in market pulp, with 28 percent of the global free market. The United States follows with 23 percent, and Scandinavia is the third-largest trader with 20 percent. Although countries other than these export market pulp, none has a share exceeding 5 percent.

26.7 The pulp and paper industry is the largest industrial user of water in Canada, and a major source of pollution. This makes it a focus of both government and environmentalist concern. In the context of its Green Plan and the concept of "sustainable development", the government has developed what it believes is a sound regulatory program to control pollution from the industry. The pulp and paper regulations were among the early government measures under the Green Plan .

Audit Scope

26.8 We examined the Pulp and Paper Effluent Regulations, the Pulp and Paper Mill Effluent Chlorinated Dioxins and Furans Regulations, and the Pulp and Paper Mill Defoamer and Wood Chip Regulations.

26.9 We reviewed the economic and scientific analyses supporting the need for the regulations; alternatives examined by the government; and cost-benefit analyses. We also reviewed the process of consultation with stakeholders, and information in the Regulatory Impact Analysis Statements.

26.10 We examined material from the departments of the Environment, Fisheries and Oceans, National Health and Welfare, Industry, Science and Technology, and Forestry.

26.11 We focussed on the extent to which the pulp and paper regulations were developed in accordance with the principles of the government's regulatory policy. These principles include:

  • clear accountability of ministers and officials;
  • full opportunity for public consultation and participation in the regulatory process;
  • an assessment of proposed regulations to ensure that benefits clearly exceed costs;
  • clear and reliable public information on the need for regulations;
  • an evaluation of the effectiveness of regulatory programs;
  • a secure foundation in law for the actions of regulatory authorities.
26.12 Of particular concern was the accuracy and completeness of the information provided in the Regulatory Impact Analysis Statement. The function of the Regulatory Impact Analysis Statement, one of the basic elements of the regulatory policy, has not changed. It remains the essential means of disclosing information to Cabinet, Parliament and the public.

26.13 The Regulatory Impact Analysis Statement is intended to provide decision makers with the following information:

  • the purpose and content of the proposal, and the current situation or conditions that the regulation is expected to improve;
  • the alternative means that were considered to meet the proposal's objectives, and the reasons why these alternatives were rejected;
  • explanations of any departures from the government's regulatory policy;
  • a clear assessment of the impact of the proposed initiative on Canada's economy and society, including its costs and benefits;
  • a summary of the intergovernmental and private sector consultation that has taken place, and a description of any change between the original and final proposals and the basis for the change; and
  • the strategy being adopted to ensure and monitor compliance, and a description of the enforcement mechanism in place or anticipated.
26.14 Our focus on the disclosure of information to Parliament and the public is based on the principle that individuals, groups, and companies have the right, in a democratic country, to be fully informed about, and to participate in, government decisions that limit their freedom or affect their lives. This places an obligation on the government to disclose information fully rather than choosing when and what information to disclose. Our emphasis on disclosure was also in recognition that most regulatory decisions are, in the end, judgments involving a balancing of individual, group, business and community interests. Although equal access to information is not alone a sufficient condition for a reasonable outcome, it is a necessary condition. These principles are recognized and accepted by the government in its Citizens' Code of Regulatory Fairness.

Description of Regulations

Pulp and Paper Effluent Regulations

26.15 The Pulp and Paper Effluent Regulations were passed 7 May 1992 under the authority of the Fisheries Act , replacing the 1971 Pulp and Paper Effluent Regulations. They are intended primarily to control conventional pollutants from pulp and paper mills in order to protect fish and their habitat. Pollutants of concern are suspended solids, biochemical oxygen-demanding matter and effluent that is acutely lethal to fish.

26.16 Although the legal responsibility for the Fisheries Act rests with the Department of Fisheries and Oceans, administrative responsibility for sections related to pollution control have been the responsibility of the Department of the Environment since 1978.

26.17 An assessment of the effluent's potential harm to human health was not conducted because the regulations were passed under the authority of the Fisheries Act . That Act, unlike the Canadian Environmental Protection Act , does not require a human health assessment. However, the Department has done work on assessing the damage to fish and fish habitat.

26.18 The regulations define effluent as waste water from a variety of sources in the production process. The effluent regulations set limits on total suspended solids that can be present in the effluent, on the extent of biological oxygen demand caused by the effluent and on the acute lethality, as defined by tests on trout.

26.19 The regulatory limits on total suspended solids and biological oxygen demand are related to the production rate of a mill. The limits are not absolute, but are linked to the quantity of finished product. Higher production could allow more pollution. There is no specific limit on the quantities of effluent that can be discharged, except as defined by the historical production capacity of a mill. Permissible deposits as a result of increased capacity can be raised with the approval of the Department. Finally, the regulatory limits apply to the effluent coming out at the end of the pipe. The regulations do not directly address pulp and paper sludge, or air emissions from pulp and paper plants, as these are not within the scope of the Fisheries Act.

26.20 The regulations also require that the industry establish an Environmental Effects Monitoring program. On a three-year cycle, each mill is required to provide local information on whether deposits of deleterious substances in waters frequented by fish have altered, disrupted or destroyed fish habitat. The program is intended to provide information to evaluate the need for further control measures, by evaluating the effectiveness of existing control measures and by assessing changes in the receiving environment.

26.21 The 1992 regulations update the regulations passed in 1971. According to the Department, the main changes are the following:

  • new effluent quality requirements are established, with limits and conditions prescribed for the deposit of effluent;
  • the regulations are binding on all mills that deposit effluent in receiving waters, whereas the 1971 regulations applied only to mills built after their promulgation, and covered less then ten percent of mills;
  • procedures are established for the routine monitoring and reporting of deposits; and
  • an Environmental Effects Monitoring program is included in the regulation.

Pulp and Paper Mill Effluent Chlorinated Dioxins and Furans Regulations

26.22 The Pulp and Paper Mill Effluent Chlorinated Dioxins and Furans Regulations were passed on 7 May 1992 under the authority of the Canadian Environmental Protection Act . They took effect on 1 July 1992. The regulations control two members of the family of chlorinated dioxins and furans. Chlorinated dioxins and furans, as a group, were the first substances on the Priority Substance List to be assessed for their toxicity, as defined in part 2 of the Act.

26.23 The assessment concluded that the compounds are highly toxic, that they may enter the environment in quantities that have immediate and long-term harmful effects on the environment, and that they constitute a danger to human health in Canada.

26.24 Under the Canadian Environmental Protection Act , the definition of a toxic substance is broad and may include any substances considered harmful to the environment and/or human health. The ministers of Environment and Health and Welfare each are responsible for activities under this legislation and may act jointly or separately. Assessing toxicity and recommending regulations are areas where the ministers have equal responsibility and must act together.

26.25 The Dioxin and Furan Regulations specify that no mill may release into the environment final effluent that contains any measurable concentration of 2,3,7,8 TCDD (a particularly toxic dioxin compound) or of 2,3,7,8 TCDF (a particularly toxic furan). This regulation is directed solely at chlorine bleaching plants.

26.26 The regulations also authorize the government to require that mills provide data on dioxins and furans in the intermediate effluent flows and in the pulp and paper sludge at the mill.

Adsorbable Organic Halogens (AOX)

26.27 The regulations for dioxins and furans were based on an assessment report under the Canadian Environmental Protection Act . A second assessment report addressed all organochlorines in components of effluent from pulp and paper mills. This second assessment included an evaluation of the use of the test parameter "AOX", or Adsorbable Organic Halogens, as a potential federal pollution control limit. The report concluded that AOX as a measure does not provide estimates of the potential toxicity, persistence, or bio-accumulation in the aquatic environment. Its use as a regulatory parameter was therefore rejected by the Department. Subsequent studies by the Department support this conclusion.

26.28 Several provinces are proceeding to regulate AOX. They believe that AOX is an indicator for a large number of organochlorines, some of which may be highly toxic. They also believe that the most appropriate and responsible action would be to adopt a precautionary approach and regulate AOX.

Pulp and Paper Mill Defoamer and Wood Chip Regulations

26.29 The Pulp and Paper Mill Defoamer and Wood Chip Regulations also were passed on 7 May 1992 under the Canadian Environmental Protection Act . Their purpose is to reduce possible precursors to toxic dioxin and furan.

26.30 Pulp and paper mills use defoamer additives that, in the presence of a chlorine bleaching process, could be a source of dioxins and furans in mill products and in their effluents. To manufacture these defoamers, oils and polymers are used that can contain dibenzo-para-dioxins and dibenzofurans. These can react with chlorine to form toxic dioxin and toxic furan.

26.31 Polychlorinated phenols, which can contain dioxins and furans, are used as fungicides to preserve and protect wood. When a mill uses chips from wood treated in this way, dioxins and furans could be released both in the final products and in the waste water from the mills.

26.32 The Pulp and Paper Mill Defoamer and Wood Chips Regulations limit the potential sources of dioxins and furans from defoamers and wood chips.

Observations and Recommendations

Incomplete Information Provided on Effectiveness and Cost

Parliamentarians and stakeholders were not comprehensively and equally informed about key issues affecting the effectiveness and cost of the pulp and paper regulations.
26.33 The Department used press releases, public discussions, telephone conversations and parliamentary committee hearings to provide information on the Pulp and Paper Regulations. The Department also provided information to interested parties on request. However, we found that, where one part of the public was fully informed about a particular part of the regulations and its impacts, another part of the public received little information.

26.34 We found that there was a lack of comprehensive and equally available information on a number of issues, including:

  • industry and environmentalist concerns about the effectiveness of the effluent regulations;
  • potential overlaps with provincial pulp and paper regulations;
  • tax deductions that could substantially reduce the cost to industry of implementation and that could reduce taxes paid to the federal and provincial governments;
  • alternative and possibly more efficient or more environmentally sensitive solutions;
  • why the government did not regulate, as did Quebec, dioxins and furans by their total toxicity; and
  • the advantages and disadvantages of using site-specific pollution control standards based on the assimilative capacity of a watershed.
A key reason for enacting the 1992 effluent regulations was not clearly stated
26.35 The Green Plan states that the pulp and paper effluent regulations are necessary to provide a national framework for the protection of fish and fish habitat to ensure sustainable fisheries. However, the Department of the Environment did not explain to Parliament and stakeholders that, without regulations, the industry was subject to prosecution under section 36(3) of the Fisheries Act for depositing substances deleterious to fish, and that the Department had not taken full action. Without the new regulations, 90 percent of pulp and paper mills could have been subject to a potential threat of prosecution. Departmental officials told us that "there have been very few convictions under the Fisheries Act ." Nevertheless, implementing the regulations afforded mills who met the regulatory requirements with some protection, by allowing the discharge of prescribed amounts under specified conditions.

Expected improvements to the environment or human health were not explained
26.36 The regulations that deal with conventional pollutants under the Fisheries Act pertain only to fish and fish habitat. Therefore, because there was no legislative obligation to do so, little information was provided on the impact of conventional pollutants on the environment in general, or on human health.

26.37 The January 1993 report of the Sub-committee on Regulations and Competitiveness of the House of Commons Standing Committee on Finance criticized the Department for not assessing the benefits of the regulations. The report stated that a commitment of $4.1 billion in resources, with no apparent sense of the magnitude of the benefits, was not reasonable.

26.38 The data to assess the effectiveness of the regulations, including long-term impacts, are expected to come eventually from the Environmental Effects Monitoring program. The program is an important component of the pulp and paper effluent regulations and all mills must comply. The program is under the Fisheries Act and therefore does not assess the effects on the environment in general, or on human health.

26.39 The monitoring program is intended to evaluate the need for future control measures, but is not itself a pollution control. The details of the program, including the scientific methodologies, have been left to the administrative discretion of the Department of the Environment. This is because there has been no legislative authorization to do otherwise. The Environmental Effects Monitoring guidelines and program continued to be developed after the regulations were passed. In early 1993, the industry expressed concern that the program was still evolving and that its final scope and costs to all were not yet defined fully.

The basis for pollution control standards was not clearly explained
26.40 The Regulatory Impact Analysis Statement stated that "the regulatory limits have been set to take into consideration the available technologies." The statement did not explain that the limits were not set based on best available technology. Rather, departmental officials told us that "the limits were crafted as a national baseline and to be consistent with those of competitor countries."

Potential overlaps with provincial pulp and paper regulations were not fully explained
26.41 The pulp and paper regulations were put in place under Acts that control both fisheries and the environment. These are legislative areas in which both federal and provincial levels of government have exercised jurisdiction.

26.42 At the same time as the federal pulp and paper regulations were being introduced, Quebec, Ontario, Alberta and British Columbia were proposing similar or more stringent general effluent regulations. Given the overlapping regulatory plans, the federal regulations could be redundant in four key provinces. In addition, the costs and benefits of implementation could be attributed to the provincial regulatory actions rather than to the federal initiative.

26.43 The Department of the Environment recognized the consequences of the regulatory overlaps. For the Pulp and Paper Effluent Regulations, the Department estimated that the incremental capital cost due to federal regulations might be about $347 million, not $2.3 billion as reported in the Regulatory Impact Analysis Statement, assuming that the regulatory initiatives of the provinces would be introduced as planned. Similarly, the Department's estimate that it needed 78 person-years to enforce the regulations did not take into account the resources that the provinces would be providing.

How the regulatory overlap problems will be resolved is unclear
26.44 Both the industry and the provinces have expressed the desire that the regulations be implemented as efficiently as possible. They have proposed that the federal and provincial governments agree on a consistent pollution prevention approach, and one administration and inspection system. This would reduce the need for parallel federal and provincial regulatory offices and would reduce the costs to industry of regulatory compliance. To date, how this will be done remains unresolved.

Impact of tax deductions on cost to industry was not explained
26.45 When regulations are introduced that require a business to spend money to meet new standards, the business may reduce its taxable income by deducting capital cost allowances and operating expenses. These deductions can reduce substantially the taxes paid to the federal and provincial governments. Depending on profitability, a loss of up to $1.4 billion in direct federal and provincial tax revenue could result from the Pulp and Paper Effluent Regulations, and $180 million from the Chlorinated Dioxin and Furan Regulations.

Significant uncertainty in the cost estimates was not explained
26.46 The cost estimates in the impact analyses of the regulations are based on expert opinion on the current state of the mills in Canada and on what individual mills might do to meet regulation requirements. The Department did not explain that its estimates were accurate to plus or minus 25 percent, or $1.2 billion.

Comparability of Canada's regulations to those of our competitors is difficult to assess
26.47 The Regulatory Impact Analysis Statement stated that Canada's pulp and paper mill regulatory program was one of the most comprehensive of regulatory frameworks, and comparable to those of other pulp and paper producing countries. This statement was based on a comparison of Canada's legal framework with those of other countries. The Department did not explain that there are few simple standards and that regulatory regimes vary considerably among countries. Scientific methodologies for testing differ, different product lines or production techniques can have different standards, and in many countries the effluent standard is negotiated individually on a mill-by-mill basis.

26.48 The best test of the comparability of Canada's regulations is the resulting quality of the effluent, as determined by effects on the environment and on human health. The Department, as mentioned previously, has yet to express clearly the expected benefits of these regulations. Until these expected benefits are stated, or measured, comparability of the pulp and paper regulations is tenuous.

Responses to industry concerns were not clearly explained
26.49 Industry was concerned that it might not have sufficient time to find financing and to construct the necessary pollution controls. The Department did not clearly explain that, in response, the government included a provision in the regulations to allow it to authorize, up to 31 December 1995, the continued discharging of effluents at pre-regulation levels.

26.50 The effluent regulations allow the government to grant two types of authority to companies to continue polluting at pre-regulation levels. A transitional authorization may be granted to mills from December 1992 until 31 December 1993, and "under extraordinary circumstances" a transitional authorization extension to 31 December 1995 may be granted. The authorizations also require mills to submit plans for installing pollution controls and they permit the Department to monitor the mills' performance against these plans. Departmental officials told us that "the authorization process was a workable solution as it sets interim targets and milestones with monitoring during the extension period to ensure final compliance."

26.51 The effluent regulations came into force in December 1992. Of the 97 mills that were not already in compliance, 91 have been granted authority to continue polluting at pre-regulation levels until the end of 1993. The number of mills that would apply for this authority was not known at the time the regulation was passed. However, it was anticipated that a significant number might apply. This was not explained in the Regulatory Impact Analysis Statement.

26.52 In addition to the authorizations to the end of 1993, about 70 of the 97 mills have applied for further extensions to the end of 1995. If these are granted, the medium-term effectiveness of the regulations may be questionable.

26.53 An extension also is allowed for dioxins and furans. However, the life span of that extension is more limited. If a mill meets certain requirements, it may be authorized to pollute at pre-regulation levels until January 1994. The regulations do not provide for an extension beyond that date. After passage of the regulations, 26 mills were granted the extension to the January 1994 deadline. Another 21 mills were directly affected by the regulation but, according to the Department of the Environment, they were already in compliance.

26.54 Amendments were also made to respond to industry concerns that its water conservation initiatives may make it difficult to meet the water-concentration-based limits on pollution. The Department did not explain clearly that amendments to the regulations allow it to authorize mills to combine treated and untreated effluents within certain limits to reduce the acute lethality of the final effluent.

Assessment of Regulatory Alternatives and Options Was Not Adequate

26.55 We are concerned that more efficient or more environmentally sensitive solutions may not have been adequately considered.

26.56 Policies of the Department of the Environment and Treasury Board require a proper assessment and analysis of options, including socio-economic implications, before making a decision to regulate. However, in the case of the pulp and paper regulations, an options report with associated costs and benefits was not prepared in advance of the decision.

There was inadequate consideration of not regulating pulp and paper defoamers and wood chips
26.57 The objective of the regulations is to reduce specific chemicals in defoamers and wood chips that are linked to the production of toxic dioxin and furan in paper mills. However, industry had already acted, without regulations, to reduce precursor chemicals prior to passage of the regulations. According to the Department of the Environment, the industry had reduced the use of treated wood chips by 90 percent. There have been no violations since the regulations were passed. The alternative of not having regulations was not assessed.

26.58 The Department's draft Regulatory Review Report recommends the retention of the regulations, but also recommends the development of a national standard and certification program for defoamers and a code of practice for the use of PCP-treated chips, in preparation for the withdrawal of the regulations.

The potential of using economic instruments was not examined
26.59 Regulatory approaches that include requiring industry to consider the cost of using the environment, previously free, are called market or economic instruments. In practice, they involve charging companies for effluent discharges, or creating market permits or quotas. For example, an effluent charge (a form of tax) requires those who discharge a pollutant into the environment to pay the government a specified amount for every kilogram discharged.

26.60 Economic instruments, particularly effluent charges, in conjunction with traditional regulations have been implemented in some jurisdictions to control effluent. We commented in our 1989 Report that such instruments for controlling ozone-depleting chemicals had not been considered. The advantages and disadvantages of using economic instruments in Canada were discussed in a Department of the Environment discussion paper published in 1992.

26.61 The paper, entitled "Economic Instruments for Environmental Protection", concluded that economic instruments alone, or in conjunction with regulations, could be a viable alternative to traditional regulation. It recommended that economic instruments be considered for specific environmental problems. However, the Department did not consider and explain to decision makers the pros and cons of using economic instruments to control pulp and paper effluents.

26.62 The Department indicates that, although the use of economic instruments could be successful in reducing pollution, it would not meet the requirements of the Fisheries Act that prohibit any deposition of any deleterious substance. Thus, the use of economic instruments would require a change in legislation. In the case of toxic dioxin and furan, we agree that an outright ban of these highly toxic substances is required.

Site-specific pollution controls were not explained
26.63 The current regulations set the same pollution control standards for all mills in Canada. In a site-specific approach, the performance standards that apply at each mill would vary with the characteristics of the waterway receiving the effluent, and its ability to absorb the harmful effects caused by the effluent. The Regulatory Impact Analysis Statement should have explained this approach and the reasons for rejecting it, because:

  • the regulations do not place a limit on the total amount of pollutants that can be discharged into a specific watershed, and it may have been more effective to set limits based on the receiving capacity of the water body;
  • the advantages of site specific regulations based on local assimilative capacity had long been known in the Department of the Environment;
  • it was an issue in the public consultations. This public concern was not reported in the Regulatory Impact Analysis Statement; and
  • it has been implemented in several jurisdictions. Several countries, notably Sweden, Finland and, to some extent, the U.S., have adopted some type of site-specific strategy. The federal government has developed site-specific regulations for the Port Alberni mill in B.C, which is situated in a particularly sensitive ecosystem.
Information provided on testing for chronic effects was inadequate
26.64 The Regulatory Impact Analysis Statement did not report that stakeholders were concerned over the lack of control measures for chronic effects of pollution. They were concerned that acute effect controls were insufficient for proper regulation. Acute effect controls regulate water quality by assessing the short-term survival rates of fish and insects in mill effluent. For example, if no more than 50 percent of the fish are dead after 96 hours of exposure, the effluent passes the pollution standard.

26.65 Chronic effect controls are believed to reflect more accurately the impacts of effluents on the environment and living organisms because of the cumulative effects of exposure over time. Controls for chronic effects were recommended to the Department of the Environment as long ago as 1980. They are already required in some jurisdictions, for example, by some permits in the United States. Tests similar to what might become chronic effect controls are contained in the Department's Environmental Effects Monitoring program. The first results of these tests are not expected until 1996.

The reason for not regulating other types of dioxin and furan was not explained
26.66 The current regulations address one of many toxic forms of chlorinated dioxin and chlorinated furan, which normally account for 90 percent of the total toxicity. However, this is not always the case. Departmental studies show that in sediments near coastal mills, non-controlled forms are found in much larger proportions. The Department did not explain why it did not regulate dioxins and furans according to their total toxicity, as Quebec did.

26.67 The Department believes that its regulatory approach will address the situation that gave rise to the contaminated sediments. Further, it states that its monitoring program will allow it to eliminate the sources of other forms of dioxin and furan if significant levels are found.

Consultation Is Satisfactory for the Development of Regulations, but Not for Their Implementation

26.68 Our 1989 Report noted that there was room for major improvement in consulting with stakeholders, particularly environmentalists. We have found that the consultation process leading to the development of regulations is now satisfactory. However, environmentalists and other interest groups indicate that consultation while the regulations were being implemented was inadequate, particularly in developing the guidance documents for the Environmental Effects Monitoring program.

Conclusions

26.69 This chapter reports on an audit of the 1992 pulp and paper regulations. Major improvements are needed to provide comprehensive information equally to Parliament and stakeholders, on such matters as the reasons for enacting the regulations, the concerns of the public, the reasons behind regulatory limits, potential overlaps with provincial regulation, regulatory costs, and possible regulatory options. The provision of information on options, and the evaluation of options, continue to need improvement.

26.70 The Department of the Environment should more comprehensively and equally inform Parliament and stakeholders about its regulatory initiatives. In particular, its Regulatory Impact Analysis Statements should contain full information on:

  • reasons for the regulations;
  • reasons for the regulatory limits, and comparisons with other jurisdictions, especially where international competitiveness is an issue;
  • the concerns of stakeholders and why these concerns should or should not be taken into account in formulating the regulation;
  • overlaps and potential overlaps with provincial regulations, and how they will be reconciled; and
  • the costs and benefits of regulations, taking into account federal-provincial overlaps and tax deductions.
26.71 The Department of the Environment should improve its identification and evaluation of regulatory and non-regulatory options.

26.72 The Department of the Environment should seek to improve its consultation process further by providing more opportunities for public participation during the implementation of regulations.

Department's response: The Auditor General's observations on the comprehensiveness of the Regulatory Impact Analysis Statement (RIAS) for the pulp and paper regulations provide valuable advice in considering development of future regulations. The Department is, in fact, proceeding to address concerns raised in the audit.

Administrative agreements are currently under negotiation with provinces on the pulp and paper regulations to provide a single regulatory window for industry that meets the obligations of both levels of government. Through information transfer and work-sharing between governments, the agreements will reduce overlap of federal and provincial regulatory requirements to industry. The federal government recognizes that provincial governments may put in place more stringent requirements to address site-specific concerns. Equivalency agreements are also under discussion under which a Canadian Environmental Protection Act regulation would not apply in a province where an equivalent provincial or territorial regulation is in force.

The Department is actively exploring alternatives to regulation and is formally incorporating benefit analysis and assessment of alternatives in the environmental measures development process. Some alternatives are: SO2 emission trading; study of management options for HCFC's and methyl bromide; and the use of economic instruments to encourage less waste generation. Benefit valuation activities initiated by the Department include the development of a policy proposal for Treasury Board on the role of discount rates in environmental benefit analysis, an annotated benefit analysis inventory that would facilitate the use of results from one study for alternative applications and a survey on the importance to Canadians of achieving a cleaner ecosystem.

In addition to the above general comments, there are three particular points to which the Department wishes to respond. These are: industry's concern that the final scope and cost of the Environmental Effects Monitoring program is not yet fully defined; the uncertainty of cost estimates for mills to implement the regulations; and the nature of transitional authorizations.

The Environmental Effects Monitoring program is indeed evolutionary and is intended to take advantage of advances in science and methodology. At the end of each three-year cycle, monitoring requirements are reviewed and evaluated for their effectiveness.

Cost estimates, as noted by the Auditor General, were based on expert opinion of the current situation of mills in Canada. They were pre-design estimates across the whole industry and a variance on the scale of plus or minus 25 percent was within recognized industry practice.

A key benefit of the transitional authorization process, as provided for in the regulations, is an effective, legally binding mechanism to ensure that the necessary planning, design and investments are made so that the regulations are fully implemented in a predictable manner.