Enbridge Northern Gateway

January 14, 2014

The proposed Northern Gateway project consists of two pipelines that would run 1,178 kilometres from Bruderheim, Alberta to a marine terminal in Kitimat, British Columbia (the Project). One pipeline would take 525,000 bpd of Alberta oil west to the enticing Asian markets; the other, would bring 193,000 bpd of much-needed condensate back east to thin all of the bitumen causing concern for land-locked Albertans.

The Joint Review Panel (the Panel) was established by the Minister of the Environment as well as the National Energy Board (NEB) to review the Project pursuant to the Canadian Environmental Assessment Act, 2012 and the National Energy Board Act. Among other issues, the Panel was tasked with assessing and making recommendations to the Governor in Council in respect of the following:

  • Any environmental effects of the Project and the significance of those effects;
  • Any measures that could mitigate any adverse environmental effects; and
  • Whether the Project is in the public interest (having regard for environmental, social and economic considerations).

After conducting 77 days of community hearings to hear oral evidence from intervenors in 21 communities along the proposed route, and 96 days of final hearings for parties to conduct questioning on written evidence, the Panel concluded that Canada and Canadians would be better off with Northern Gateway than without it. While the Panel did find that the Project, along with other projects, would cumulatively cause significant adverse environmental effects for certain populations of woodland caribou and grizzly bears, the Panel recommended that these effects be found to be justified in the circumstances.

In view of recent significant spills (for example Enbridge’s 2010 spill into the Kalamazoo River in Michigan and Plains Midstream’s 2011 Rainbow pipeline spill near Peace River, Alberta) heightened concerns were raised, and scrutiny given, to the issues of spill likelihood, mitigation and response. The Panel concluded that Northern Gateway had taken steps to minimize the likelihood of a large spill through its precautionary design approach and its commitments to use innovative and redundant safety systems. In the unlikely event of a spill, the Panel found that there would be significant adverse environmental effects but that such a spill would not cause permanent, widespread damage to the environment. Should a spill occur, the Panel has recommended a condition requiring Northern Gateway to maintain insurance and other financial resources totaling $950 million ($100 million cash on hand, $600 million in insurance and $250 million in financial backstops such as guarantees). Notably, on the heels of the release of the Panel’s Report, Enbridge has announced that it will be engaging an independent auditor to monitor its pipeline safety program, starting with its 2013 data, to help improve its operations in areas such as pipeline integrity, leak detection and public safety.

What’s next? We wait. Within 180 days the Governor in Council (that is, the Governor General acting on the advice of the Federal Cabinet) must decide whether to accept, reject, or request a reconsideration of, the Panel’s recommendations. Assuming Northern Gateway gets the green light (a safe assumption – after all, how could the Prime Minister, who publicly warned that Canada “won’t take no for an answer” to Keystone XL, afford to say anything but yes to Gateway?), the Governor in Council will order the NEB to issue certificates of public convenience and necessity, which certificates will be subject to the 209 conditions.

We also wait to see what becomes of threatened legal challenges, the most interesting of which are likely to centre on issues of the adequacy of consultation with various Aboriginal groups, the scope of risk assessments conducted and unanswered questions on issues of Aboriginal title to impacted lands. Particularly vocal have been certain coastal Aboriginal groups such as the Haisla Nation and the Coastal First Nations, an alliance of First Nations on B.C.’s North and Central Coast and Haida Gwaii, who discontinued their participation during the questioning phase of the hearing, citing the inadequacy of funding to meaningfully participate in the process and disappointment with the nature of the process.

In respect of Aboriginal interests, the Panel found that during construction and routine operations the Project would not significantly adversely affect the interests of Aboriginal groups that use the lands, water and resources in the Project area. In addition, the Panel found that Aboriginal groups would benefit from project-related programs such as ongoing wildlife studies, monitoring programs, and Northern Gateway’s commitment to support education, training, and business opportunities. There are also those among the eligible Aboriginal groups along the pipeline and coastal route who were offered and accepted to share up to 10 per cent of the equity in the Project, the value of which offer was estimated at $280 million (15 of the 18 offers made in Alberta were accepted, whereas only 11 of 22 in B.C. were accepted).

The Panel was, however, openly critical of Enbridge’s consultation with Aboriginal groups noting that Enbridge “could have done more to clearly communicate to some Aboriginal groups how it considered, and will continue to consider, information provided.” A number of conditions relating to continued consultation with Aboriginal groups prior to construction and throughout the life of the Project are among the 32 pages of the Panel’s detailed conditions. The Crown is largely relying upon this joint review process as well as Enbridge’s consultation efforts to meet its duty to consult with Aboriginal peoples. Whereas some Aboriginal groups focused their criticism on the adequacy of Enbridge’s consultation program, other groups have been more concerned with the Crown’s reliance upon the Joint Review Process as a means to meet its duty to consult.

Environmental groups have also threatened legal challenges based on, among other grounds, the Panel’s determination that greenhouse gas emissions from upstream oil sands operations producing bitumen to be transported on the Northern Gateway would not be considered as part of the emissions of the Project as they were beyond the scope of its review. In particular, the Panel held that it did not consider that there was a sufficiently direct connection between the Project and any particular existing or proposed oil sands development to warrant consideration of the effects of those operations.

In the end, we find it is hard to conclude anything other than that there will be significant local, regional, and national economic and social benefits arising from the Project given the breadth of education, training and employment initiatives as well as research and monitoring programs outlined in the 209 recommended conditions. To put the number of conditions in perspective, it may be helpful to consider that the Keystone XL project, admittedly a project of much smaller scope than Northern Gateway, had a mere 22 conditions to its approval. Perhaps a more apt comparison is with the MacKenzie Valley Pipeline project, also the subject of much public opposition, which was approved subject to 76 conditions. It seems there may be a correlation between the amount of vocal (and publicized) opposition to a pipeline project and the number of conditions subject to which it is approved.

While 209 conditions might initially strike any reader as indicative of an extraordinarily conditioned approval, it should not be lost on readers that the Panel’s conditions incorporate all of Northern Gateway’s voluntary commitments. That is, much of what is outlined in the conditions did not come as any surprise to Northern Gateway, which, as the Panel noted “proposed mitigation measures that go well beyond those typically proposed for pipeline projects.” Those commitments include funding of various research chairs and a Fisheries Liaison Committee to improve communication and collaboration between users of coastal waters. Canadians will certainly benefit from these initiatives, though critics easily dismiss them as mere window dressing.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at www.stikeman.com/legal-notice.

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