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PIPELINE: FIVE CONDITIONS

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November 16, 2013 – Comments (0) | RELATED TICKERS: ENB , KMI , TRP

B.C. wants a bigger piece of the pie

Enbridge estimates Northern Gateway will generate $351 billion in economic benefits for Canada. With B.C. bearing the majority of the spill risk, the province wants to reap a greater reward

By Gordon Hoekstra, Vancouver Sun November 16, 2013

CONDITION 5

British Columbia receives a fair share of the fiscal and economic benefits of a proposed heavy-oil project that reflects the level, degree and nature of the risk borne by the government, the environment and taxpayers.

WHAT'S BEING ADDRESSED Simply put, the B.C. government has said because it is subject to the majority of pipeline spill risk and all of the marine spill risk, it should be getting more of the rewards from a heavy-oil pipeline.

According to Enbridge, the Northern Gateway project will generate $270 billion in additional economic benefits to Canada and $81 billion in extra government revenues over 30 years.

But, says the B.C. Liberal government, the province is projected to receive only $6.7 billion - or about eight per cent - of the government revenues. "Our government does not agree that we should bear the majority of risk with the minority share of benefits being returned to our citizens," the province said in a 52-page technical analysis supporting its five conditions.

PROGRESS The federal Conservative government has said it does not have an issue with B.C's first four conditions, but notes any discussion over economic benefits should be directed at Alberta.

Alberta Premier Alison Redford had initially not welcomed British Columbia's conditions, particularly the economic condition as she was concerned her western neighbour was after Alberta's oil royalties and taxes.

Last spring, Premier Christy Clark said Alberta's royalties were off the table. Recently, the two provinces announced a joint committee to discuss the five conditions and find a way to get oil to the west coast.

Earlier this month, in a joint news conference, the two premiers said they had agreed to a framework that opened the possibility of getting heavy oil to B.C.'s coast. Alberta agreed that B.C. has a right to negotiate with industry on appropriate economic benefits.

HURDLES It's still not clear, despite the agreed-to framework, exactly what kind of economic benefit could be produced to satisfy British Columbia's fair-share-ofeconomic-benefits stipulation for the Northern Gateway project.

(This exercise will be repeated for Kinder Morgan's Trans Mountain expansion as well).

Clark mentioned some possibilities: an oil refinery and the thousands of jobs it would support, or tapping into federal revenues or company profits, possibly through charging fees on oil transported in B.C. The idea of an oil refinery has been proposed for Kitimat by community newspaper publisher David Black, but it does not have the backing of the oilsands industry or financing.

So far, Ottawa has shown no inclination to pony up money or a share of taxes. Enbridge and Alberta oil producers had a muted response to the idea of paying something extra to B.C., saying they already believe Northern Gateway provides substantial economic benefits for the province.

And the Alberta Federation of Labour (AFL) has warned that under Alberta's royalty framework, pipeline tolls are deductible from royalties oil companies pay into the province's coffers.

That, the AFL said, has the potential for B.C.'s hypothetical increased share to eat into Alberta's share, the very thing Redford was trying to fight against.

B.C.'S CURRENT THINKING The two provinces will continue to work together on heavy-oil pipeline issues through their joint provincial working group.

Economic Benefits to B.C., Alberta and Canada Gross Domestic Product = $270 billion (over 30 years)

Environmental Risks to B.C. and Alberta

Marine environmental risk

© Copyright (c) The Vancouver Sun

 

First Nations at centre of opposition

Courts have ruled that aboriginal communities must be consulted. Some First Nations have endorsed Enbridge project, signed on for benefits packages

By Derrick Penner, Vancouver Sun November 15, 2013

CONDITION 4: Legal requirements regarding aboriginal and treaty rights are addressed, and First Nations are provided with the opportunities, information and resources necessary to participate in and benefit from a heavy-oil project.

LEGAL REQUIREMENT:

In British Columbia, where governments have still negotiated few treaties with First Nations to settle their title to Crown land, legal precedence says aboriginal interests must be taken into account before resource developments can proceed. The Supreme Court of Canada's Delgamuukw decision deemed that in the absence of treaties, B.C. First Nations have aboriginal title to their traditional lands and must be consulted on and compensated for infringements to that title, such as in resource developments. Subsequent court rulings - key decisions being the Haida and Taku decisions of 2004 - determined that consultation and accommodation of aboriginal title is a Crown responsibility. However, the Taku decision in particular, determined that the Crown's off er of compensation or mitigation in the face of development can meet its duty to accommodate aboriginal interests even without the First Nation's approval.

HURDLES:

The federal government designated the National Energy Board's joint environmental and project review as the Crown's primary means of consultation for the Northern Gateway pipeline project, which was perhaps problematic for the process. Many First Nations refused to take part in the NEB joint review, and others that did remained wary of their participation being construed as accommodation of their interests.

An initiative called Save the Fraser Gathering of Nations has been the focal point of aboriginal opposition to oil pipeline development in B.C. Some 131 First Nations communities have signed on to its declaration. "It doesn't matter what route you take, you can't get a pipeline around opposed First Nations," Saik'uz First Nation chief Jackie Thomas said at a 2011 event.

The Saik'uz, part of the Yinka Dene Alliance, were among First Nations that didn't participate in the NEB review because it wouldn't be able to resolve issues of aboriginal title.

Coastal First Nations, the umbrella group for aboriginal communities on B.C.'s north coast, participated in the joint review, but executive director Art Sterritt said that was to officially maintain their opposition. In the end, Coastal First Nations withdrew from the joint review. "We might as well keep our powder dry for court," Sterritt said.

OPPORTUNITIES:

Enbridge, as its Northern Gateway project began to gain public profile, promoted it as an exercise in nation building and held out the chance for First Nations to take equity positions in the pipeline and opportunities for jobs and economic development. The company reserved a 10 per cent ownership stake in the project for First Nations and offered benefits packages to 43 First Nations inside a 160-kilometre-wide corridor along the pipeline's route. Enbridge offered to pay $280 million in payments to participating First Nations from their equity participation over the first 30 years of the pipeline's operations. In addition, the company expected First Nations would share in $400 million worth of employment opportunities, job training and procurement opportunities during construction of the $6.5-billion pipeline. Interim, non-treaty agreements have become commonplace in B.C. to share resource benefits with aboriginal communities. For example, the province and mining company New Gold reached an economic and community development agreement with three First Nations to share royalties and offer jobs and training related to the company's New Afton mine near Kamloops.

PROGRESS:

Enbridge has long claimed that it has support of 60 per cent of First Nations along its pipeline route. During the NEB joint review, Haida Nation testimony indicated that 11 of 27 B.C. First Nations and 15 of 18 Alberta First Nations signed on to benefit packages, though few have made their agreements public. And revelations that were made public have proved controversial.

In December of 2011, Gitxsan treaty negotiator Elmer Derrick's revelation that he had signed an agreement with Enbridge was met with widespread and vehement protests within the community, located in B.C.'s Interior. Gitxsan hereditary chiefs eventually voted to rescind the deal.

In recent months, the federal government has stepped up its efforts at consultation. Last March, Natural Resources Minister Joe Oliver appointed Vancouver lawyer Douglas Eyford as the government's special representative on West Coast energy infrastructure to engage with aboriginal communities. And in September, Oliver sent deputy ministers from several federal departments to continue that engagement, but to a tepid response.

 © Copyright (c) The Vancouver Sun

 

Are safety precautions enough?

Enbridge promises extra measures, but company's track record concerns critics. Proposed 1,172-km Northern Gateway pipeline would be about a metre wide and buried a metre deep

By Gordon Hoekstra, Vancouver Sun November 14, 2013

CONDITION 3 : World-leading practices for land oil-spill prevention, response and recovery systems to manage and mitigate the risks and costs of heavy-oil pipelines.

WHAT'S BEING ADDRESSED

The possibility of a rupture of Enbridge's $6.5-billion Northern Gateway pipeline into salmon-bearing rivers in British Columbia is a major concern of First Nations and environmental and community groups.

Similar concerns have been expressed over Kinder Morgan's proposed $5.4-billion twinning of its existing Trans Mountain line, which is in the preliminary stages of review.

While the risk of a major rupture occurring is considered low, recent major incidents - including the 2010 leak of 20,000 barrels of oil from an Enbridge pipeline into the Kalamazoo River in Michigan - have increased apprehension. The largest oil pipeline spill in U.S. history, the Kalamazoo cleanup, has cost Enbridge more than $1 billion.

Adding to public fears, a National Transportation Safety Board investigation into the Kalamazoo spill concluded there was a deficient safety culture at Enbridge, inadequate training, insufficient pipeline checks and an ineffective spill response. Enbridge notes that in 2010 it safely transported 950 million barrels of hydrocarbons with a safety record better than 99.99 per cent.

The last major pipeline spill in B.C. took place in 2000, when about 6,200 barrels of oil spilled near the Pine River (about half of the oil entered the river) in northeastern B.C.

PROGRESS

The Christy Clark-led B.C. government is reviewing its spill preparedness and response system to determine how it can be improved.

It held a spill symposium in March, and subsequently created an industry-led committee and three working groups to provide advice.

Besides investigating what a "world-leading land spill response system" would encompass, the review is meant to provide advice on rules for restoring the environment and creating effective government oversight and coordination.

Federally, the Stephen Harperled Conservative government has promised more inspections and audits of pipelines, and stronger fines for environmental violations.

In 2012, Enbridge announced it would spend an extra $500 million to make the pipeline safer, installing thicker pipe at river crossings, increasing remote shut-off valves by 50 per cent and staffing remote pump stations around the clock. Pump stations would normally be monitored remotely from Edmonton.

HURDLES Last August, internal documents showed B.C. government officials have warned the province is not prepared to handle a spill of even moderate magnitude. Enbridge has committed to a "world-class response capability," but the B.C. government in its submission to the National Energy Board said it is not clear from the evidence that Northern Gateway will be able to respond effectively to spills from the pipeline.

The B.C. government, which opposed the Northern Gateway pipeline in its submission to the NEB, cited many difficulties including: Landslide dangers Heavy snow cover Avalanches Possibility the heavy oil being transported would sink in rivers "The terrain the pipeline would cross is not only remote, it is in many places extremely difficult to access," said the province in its submission.

B.C.'S CURRENT THINKING

The B.C. Liberal government says it is working with stakeholders to develop an industryfunded model for land-based spill prevention and response. Feedback is being used by the ministry to develop an updated report with policy recommendations, expected in early 2014, say B.C. environment officials.

Pipeline buried in the standard method lies on a layer of bedding material (well drained sandy gravel without sharp rocks) covered with prepared gravel padding and soil fill material.

© Copyright (c) The Vancouver Sun

 

Traversing troubled waters

By Larry Pynn, Vancouver Sun November 13, 2013

CONDITION 2 : World-leading marine oil-spill response, prevention and recovery systems for B.C.'s coastline and ocean to manage and mitigate the risks and costs of heavy-oil pipelines and shipments.

WHAT IT MEANS: In its presentation to the Joint Review Panel for the Enbridge Northern Gateway Project, the province further defined its condition, saying that a world-class marine response capacity "means ensuring that the required equipment and personnel can be mobilized in a timely and effective manner regardless of the nature and extent of the spill." The $6.5-billion Northern Gateway oil pipeline to Kitimat and Kinder Morgan's $5.4-billion twinning of the Trans Mountain pipeline to Burnaby would increase tanker traffic up to 1,000 trips a year.

THE CHALLENGE: Has the B.C. government laid down a condition that cannot be met? A report for the province last month confirmed what environmentalists and First Nations have been saying all along - that the ability does not currently exist to manage the risks of a major oil-tanker spill on the B.C. coast. "We are at least a decade and millions of dollars away from having this," Living Oceans Society executive director Karen Wristen argues, adding "no equipment has as yet been invented that can deal effectively with recovery of submerged or sinking oils. Thus, even 'world-class' response fails to meet the test of effectiveness."

The study confirmed that only three to four per cent of a relatively small spill of 70,000 barrels of oil off the remote north coast would be recovered in the first five days - the critical period in terms of maximizing oil recovery. (The largest tankers that would transport oil from B.C. overseas to Asia would carry over one million barrels.) In Juan de Fuca Strait, where resources and equipment are closer, between nine and 31 per cent of the spill would be recovered under various scenarios and seasons, according to the study by U.S.-based Nuka Research and Planning Group LLC.

Other gaps relate to the lack of an escort tug system north of Vancouver, a lack of regulations that require tanker escorts in B.C. waters, an absence of rescue tugs stationed in B.C., and an absence of federal or provincial law that establishes how long-term impacts to the environment or affected communities will be established or compensated.

Concerns over the inadequacy of oil-spill response are confirmed by the Londonbased International Tanker Owners Pollution Federation, which reports that even in ideal conditions in oceans around the world, only 10 to 15 per cent of oil is likely to be recovered.

HOW INDUSTRY WOULD RESPOND: The industry-funded Western Canada Marine Response Corporation says it has the capacity to respond to a spill of 26,000 tonnes, more than its requirement of 10,000 tonnes. It has 31 oil spill response vessels, 52 response trailers and 14 support vehicles, with 11 equipment caches along the West Coast and office warehouse facilities in Burnaby, Duncan and Prince Rupert. It directly employs 27 full-time and six part-time staff , trains at least 200 members of the Fishermen's Oil Spill Emergency Team every year, and says it can draw on a pool of 500 trained responders, including marine contractors.

WHAT OTTAWA IS DOING: The federal government has established a Tanker Safety Expert Panel, which should deliver its findings later this year. It has also promised several new measures related, in part, to administrative penalties for polluters, mandatory marine response plans for oil terminal operators, annual inspections for all tankers and off shore aerial surveillance, and a review of the oil-pollution liability regime now in place. Ottawa says it will also conduct scientific research into the behaviour of diluted bitumen, the molasses-like oil produced in the oilsands that pipeline opponents argue sinks to the floor of the ocean and cannot be cleaned up. And the federal government says it will designate Kitimat - the tanker port terminus of the Northern Gateway project - as a public port, offering better traffic control and vessel safety.

B.C.'S CURRENT THINKING: How close is the condition to being met? The B.C. Ministry of Environment provided The Sun with a statement saying it is encouraged by Ottawa's establishment of the tanker safety expert panel and continues to work with the feds to collaborate on best practices. The ministry is also working on an industry-funded model with "greater financial contribution from those sectors that present the risk of spills and would enhance the provincial capacity to prevent, prepare for, respond to, and recover from spill events."

1 million barrels: Capacity of largest tankers 1,000 trips: Potential annual increase in tanker traffic if both Trans Mountain and Northern Gateway approved 10-15%: Amount of oil that is typically recovered after an ocean spill

© Copyright (c) The Vancouver Sun

 

A route through hostile terrain

An environmental review process will look at environmental effects, including possibility of spills, and whether the project is in the public interest. Opposition is fierce. Part 1 of a five- part series

By Gordon Hoekstra, Vancouver Sun November 12, 2013

WHAT'S BEING ADDRESSED

The first condition, as with all the other conditions, applies to Enbridge's proposed $6.5-billion Northern Gateway pipeline, but also to Kinder Morgan's proposed $5.4-billion expansion of its existing TransMountain pipeline.

The scope of the Northern Gateway review includes its 1,170-kilometre pipeline, marine terminal and tanker transport along the coast of B.C. In the case of Northern Gateway, the review considers the environmental effects of the project, including the possibility of spills.

From a broad perspective, the review is meant to determine whether the project is in the public interest.

The federal cabinet has the final say on the project. Legislative changes introduced by Prime Minister Stephen Harper's Conservatives in 2012 gave Ottawa the power to overrule NEB decisions.

PROGRESS

Public hearings into the Northern Gateway project wrapped up last June.

A decision on the Northern Gateway project by the National Energy Board-led panel is expected before the end of the year.

The Kinder Morgan project is in the early stages of a federal review, and has not yet submitted its formal application.

The year-long Northern Gateway community hearings wrapped up in February, with environmental groups trumpeting their claim that 1,159 speakers opposed the project to two who testified in favour. The panel does not rely on public input, however, and also examines the engineering of the project and rates charged to ship oil.

Those deliberations are meant to help the panel determine whether the project is economically viable, and whether it can be built safely and if it will be harmful to the environment.

High-level federal panels hardly ever turn down projects of this nature.

The last major rejection by the NEB took place in 2004 when it rejected a power line for the Sumas 2 gas-powered electrical plant on the U.S. side of the border south of Abbotsford.

HURDLES

If the Northern Gateway project is given the green light, First Nations have indicated they will use legal action to halt the project.

Groups such as the Yinka Dene Alliance have also said they would resort to civil disobedience to stop the Northern Gateway project.

The alliance represents six First Nations whose traditional territory encompasses about 25 per cent of the pipeline route.

It's also likely environmental groups would partner with First Nations or launch their own legal fights. Both First Nations and environmental groups have turned to the courts in the past to halt major resource projects.

For example, in September 2012, several environmental groups, including the David Suzuki Foundation and Greenpeace Canada, announced they would go to court to use the Species At Risk Act to halt Gateway.

Red Deer Calgary In the early stages of the Northern Gateway review, the Carrier Sekani Tribal Council launched legal action because they said they were not consulted in setting up the review.

Condition 1

Successful completion of the environmental review process. In the case of the Northern Gateway pipeline, that means a recommendation by the National Energy Board Joint Review Panel that the project proceed.

 © Copyright (c) The Vancouver Sun 

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