One hurdle cleared, many to go for Northern Gateway

Expect a Supreme Court challenge before the sod is ever turned on this pipeline

by Andrew Leach

Darryl Dyck/CP

As most observers expected, the joint National Energy Board and Canadian Environmental Assessment Act review panel approved Enbridge’s Northern Gateway project, subject to 209 conditions. Enbridge Northern Gateway President John Carruthers called these conditions tough on a conference call late this afternoon, but reminded listeners that many reflect, “recommendations and proposals made by and committed to by Northern Gateway during the Joint Review Panel process.” He tentatively stated that he did not see any which would be insurmountable.  Enbridge CEO Al Monaco stated that Enbridge was happy, but not celebrating.

The Northern Gateway project consists of two pipelines (one to ship oil west, the other to import lighter oil products used to dilute oil sands bitumen) and a marine terminal.  The project, if built, would ship 525,000 barrels per day of oil to the Port of Kitimat for export, and would allow the return of 193,000 barrels per day of diluent.

Today’s ruling does not represent a green light for the project, as UBC’s George Hoberg points out in a great blog post on the process ahead. The next step in the process is the approval of the federal cabinet, which must come within 6 months.  As Hoberg points out, the cabinet does not have the power to amend the conditions attached to the approval, although they may ask the review panel to reconsider certain aspects.

A parallel process to cabinet approval will be the ongoing consultation with First Nations in BC and Alberta.  Enbridge has been able to negotiate equity agreements with some First Nations along the route, but it’s not yet clear how many.  The duty to consult with First Nations resides with the Federal government – as Chief Justice McLachlin wrote in the 2004 Haida Nation v. British Columbia [2004] decision of the Supreme Court, “the ultimate legal responsibility for consultation and accommodation rests with the Crown.”  The degree to which this project has appropriately consulted with and accommodated  the interests of First Nations will almost certainly be the subject of a Supreme Court challenge before the first sod is ever turned on this pipeline.

Another hurdle for Enbridge is the development of firm shipping arrangements (basically subscriptions for shipping services) with equity partners and shippers. One of the Panel’s conditions is that Enbridge must have firm take-or-pay style agreements sufficient to cover 60% of the pipeline’s capacity before construction may begin.  Given the projected growth in the oil sands, this might seem like a sure thing but it’s not.  Firms will not want to sign firm shipping agreements unless they feel there is a reasonable possibility the project will be completed on time and on budget.

Also on the table are BC Premier Christy Clark’s 5 conditions, the first of which will be satisfied once the project is issued its final permit by the National Energy Board.  The most contentious of these is the fifth; that BC receive a fair share of the economic benefits of the pipeline. Despite signing a truce last month, Alberta and BC have agreed that any additional economic benefits to be provided to BC would have to be provided by the shippers or by Enbridge, not by Alberta directly.  Given that the economic benefits of the pipelines are, for the most part, due to an induced increase in the price of oil, the lion’s share of these accrue to the Alberta government and to firms operating in Alberta.  Whether this condition can be satisfied, or whether the federal cabinet will be willing to push for a pipeline over the wishes of the government of BC remains to be seen.  Watch for developments on this front with respect to David Black’s Kitimat Clean Refinery, which may be well positioned to offer BC what it wants, while allowing Alberta to not appear to be directly compensating BC for oil transit.

Some of the conditions imposed by the Panel are very interesting.  At first glance, the one most likely to generate controversy relates to oil spill liability. The panel, “requires the company to maintain insurance and other financial resources totaling $950 million.”  The panel based this recommendation on the projected costs to clean up a 31,500 barrel spill.  This number seems low given Enbridge’s recent experience spending over $1 billion to clean up a 20,000 barrel spill in Michigan. This is important in the context of Northern Gateway, which is not an Enbridge asset but rather an equity partnership.  The degree to which partners would or could be held liable for spill damages beyond this cap will certainly be a topic of discussion in the days and weeks to come.

The potential impacts of a spill remain in dispute in the report. One of the key issues is whether diluted bitumen sinks.  The EPA found that, of the 20,000 barrels spilled in Michigan, approximately 4000 barrels of oil remain trapped in river sediment, so clearly it can sink. The Joint Review Panel was not as definitiive – it found that, “further scientific research would be needed for definitive answers,” and has required the Northern Gateway to complete that work.

The Panel found that, “the likelihood of significant adverse environmental effects resulting from project malfunctions or accidents is very low,”  but they did allow that a spill would involve significant adverse environmental effects. However, in what will be a controversial statement, they found that, “a large oil spill would not cause permanent, widespread damage to the environment.”  They did allow that such a spill would bring, “adverse effects on lands, waters, or resources used by residents, communities, and Aboriginal groups.”

What will also be an issue, potentially for legal appeal, is what the Joint Review Panel didn’t consider: the impacts of oil sands development.  The Panel excluded any discussion of the environmental impacts of oil sands development, although they did allow the consideration of increased oil prices generated by the pipeline on the taxes and royalties associated with forecast future oil sands production. This asymmetry was the subject of a challenge during the panel process, and may be the subject of future challenges to the legitimacy of the panel’s findings.

Today’s decision, while not a surprise by any means, still leaves Northern Gateway a long way from shipping oil.

Disclosure: The author holds the Enbridge Professorship at the Alberta School of Business at the University of Alberta and is also an Enbridge shareholder. You can get more details on both here.




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One hurdle cleared, many to go for Northern Gateway

  1. My contention from the beginning has been and remains – wrong pipeline, wrong place. To date i’ve seen no public evidence of a systematic search for the best route from Enbridge. It’s almost as if they threw a dart at the map and said, that’ll do. Familiarity with the coast might have long ago led them to believe that a route to PR, while still risky[ the Skeena runs along much of it] is doable. There’s an industrial town at the end of it with decent port facilities and as importantly, a tanker route out through the Dixon entrance that skirts Haida Gwai, and thereafter pretty much follows the existing tanker exclusion zone that has been in since Pierre’s time. Not perfect, but a whole lot preferable to trying to dishonestly [ the public hearings in Kitimat/PR were rife with bizarre assertions and inaccurate statements about the nature of the route by Enbridge officials] run a route through the heart of the Great Bear Rainforest – a dicey and extremely iffy proposition during winter months.
    Now that option is gone. All that’s really left is the KM proposal, which should or ought to succeed baring the kind of incompetent sales job witnessed on gateway by the feds and Enbridge.
    As your green link ominously concludes Mr L, even if the courts rule in favour of a green light, that will merely signal the beginning of civil disobedience. And no one knows how to do this better then BC.
    In effect the FN have a de facto veto, if only because possession is nine tenths of the law in these cases. The govt’s best, and only hope is to charm, bribe and cajole FNs into acceptance. I’d say, judging on their past performance and the determination of FNs to exert their right to say and mean NO! the odds are way way less then even…I give them about 1 in 50.
    Bit late for Mr O and Enbridge to make nice now; Shoulda thought about that at least 18mnths back.

    • So typical of leftists. When an assessment goes against you, you resort to threats of violence.

      • It’s truly bizarre how you’re consistently completely unable to comprehend what you read. Are you the comment version of an Automated Voice Response system?

      • Yes, because CD always involves violence. You should seriously think about getting a set of cue cards.
        Come to think of it, you are a set of cue cards.

        • OK, what kind of “civil disobedience” were you referring to that doesn’t involve breaking the law?

          • Your original point was violence…no matter. I suggest you look up the definition of CD. Here’s a clue. If no one is allowed to break or defy the law, there never can be any such a thing as CD now, can there?

          • Didn’t you know? Gandhi was a violent revolutionary.

      • Rick you are walking typing proof that Harper Conservatism is a diagnosis not a political position.
        Some people are so heavily invested in cults of no-personality that their support is unconditional. You remind me of my little dog and I would think of you as Harper’s poodle, but I fear it’s worse than that, that’s your ambition.

        • Humbug to all three of you. This is so typical of the disturbingly shallow debate on this issue! It has been very difficult to wade through the hysteria, name calling and childish vitriol so as to find meaningful information. I’m tempted to support the project for no other reason than to show the opponents that if you can’t make a coherent case, shut up and get out of the way for those who can at least muster their arguments..

          • So it’s a shallow debate – it’s the internet

            As for your decision;
            Your opening says both sides are shallow.
            Your closing lines say you’ll take one side over the other.
            Also how can one side at least muster their arguments if both sides in the debate are shallow?

            Wouldn’t that make your taking one side in a shallow debate a shallow person too?

            Didn’t quite think that through before being a troll did you?

          • You may not have noticed harebell, but this debate has been going on for quite awhile outside of the internet. The cornerstone of the anti-Gateway argument is that there might be an oil spill because the Exxon Valdez spilled 25 years ago; the cornerstone of the pro-Gateway argument is economic growth and environmental risk-management. Guess which side convinced the review panel and guess which one makes more sense to the undecided such as myself. The shallow debate is the exchange with rick omen and kcm2 on this page; the real debate was decided elsewhere.

          • No argument about the “real debate” which wasn’t a real debate because climate change wasn’t considered and neither was the “real” effects of an oil spill. The rules for consultation were changed to prevent interested parties from being heard from and the review panel making recommendations had its scope reduced to ensure a verdict favourable to the current revolutionary government.

            All it takes is one accident – computer failure, pilot error, storm etc. and the local industries suffer badly. Louisiana saw many businesses go under – unreported in the so called left wing media by the way.

            The number of tankers required to move this product will be huge and the waterways are a lot tighter. Local sea related industries are vulnerable in BC. The ramifications of any spill on BC is huge yet the pro-Chinese lobby in Ottawa doesn’t care.

            They have put all their eggs in one basket and when it fails and it will, they, you and the others who forced this on BC will be no where to be seen. Look to the Gulf of Mexico and magnify the effects in the slow moving, colder N Pacific and you might have some idea about the devastation that lays ahead. That’s if your dogma doesn’t preclude you from actually looking at the odds and living in reality.

          • Well, we have the clean up part in common, but will have to disagree on pretty much everything else. The environmental assessment process did what it was supposed to do and heard over 1400 submissions, so I doubt any point of view was excluded. Climate change was loud and clear as was much attention to spills. Comparative arguments may be illustrative but not determinative and the BP blow out in the Gulf of Mexico is a bit of a stretch. Anyhow, it’s all now in the political process and will soon be in legal proceedings I’m sure, so let’s leave it be for now. Feel free to demonize others if it makes you feel more righteous, but have a Merry Christmas nonetheless.

          • No, climate change was not considered whatsoever by the Review Panel.
            You might want to get a grasp of the basics before you start complaining about a “shallow debate”.

          • Dear Santa. I’m sure lenny is trying to be good so please bring lenny a copy of the Northern Gateway Project Joint Review Panel final report so he can read it, particularly sections 2.2.2 and 4.3.4 in Vol. 1 and sections 1.1, 8.7 and 9.5 in Vol, 2. A copy of Filing A27962 would be nice too. I think lenny is a little confused about the scope of the review so I’m sure lenny would appreciate some help with the basics.

          • Wherein the Panel states clearly that they didn’t consider emissions associated with the bitumen transported by the pipeline.

          • The panel considered GHG associated with the project they were tasked to review. Your statement that “climate change was not considered whatsoever by the Review Panel” was therefore incorrect. You may or may not understand or agree with the scope of the review process but that’s a different question. Pay attention, relax, go shopping, whatever.

          • The emissions caused by the infrastructure itself aren’t the issue, and they aren’t what Harebell was referring to. But you knew that.
            And it’s obviously nonsense to claim that the emissions from material whose transport comprises the sole purpose of the pipeline isn’t “associated” with the pipeline.

          • I only know what you guys are writing on this post and what you are writing is incorrect on that point. And again, you may or may not agree with the scope of the review, but it is what it is, so if you want to make a broader point, state it correctly. We actually don’t necessarily disagree on the downsides of the project, but if you recall, my original point was that the debate was shallow, and you’re just confirming that in your presentations. Now, I’ll have nothing more to say to either of you because the points have been made and I have other things to do. Good luck, have a Merry Christmas.

    • I, too, have long thought the PR route was the better, for all the reasons you mention. Re: the “bizarre/inaccurate assertions” of Enbridge, IIRC, there was a very brief FAQ answer on the NG website about how there were “elevation” issues that caused Kitimat to be the preferred terminal location to PR. If this is, in fact, true, I presume it is a “cost” issue, not a “technology” issue, i.e. there are dozens of other sections along the NG route where the grades would be a lot more severe than the those in the 140km route between Terrace and PR, so the real issue is the additional cost to send the pipeline in that direction.

      I don’t know that I agree “that option is gone”, though. It is ultimately up to the Feds to approve the route and I’ve always thought the PR option would be a useful bargaining chip for them to get broader buy in.

      • Good point about the grades, the cost factor. I was really alluding to a stylized map of Douglas channel the company had on its billboards and ads. The islands and bends in the channel were no where to be found. I gather it made for a good chuckle in the communities where people do actually know something about the ocean. There might be another issue with draft. A long time resident who i know from Kitimat told me the whole thing is ridiculous, as a good deal of dredging will be needed. In the past it wasn’t unknown for vessels to run aground while turning.
        PR as a route will be much harder now. Smithers, Terrace and PR all have councils who have passed motions against the pipeline, or opposition mps who are popular and outspoken. It is difficult to exaggerate the incompetence of the sales job in the area and with FNs.
        I really can’t see the feds using its constitutional powers here, despite the encouragement of bone heads like Flanagan. BC will become a salted field for the CPC in the way AB has for the LPC. Surely not even Harper is bone headed enough to push that far?
        Difficulties both engineering and political aren’t insurmountable of course, but they are far more difficult and entrenched then they should have been at this juncture. People are in their foxholes and forted up now, for the long haul.

        • Douglas Channel is over a mile wide except for one spot that is about eight cables, there are no course alterations of any particular concern. This route is suitable for vessels up to VLCC’s.

          The new terminal area will be dredged with a turning basin with plenty of allowance for draft.

          People who know something about ocean navigation? Definitely not you, or buddy from Kitimat.

          • It’s not Douglas channel but the bottle neck at the head around Gill island, where it intersects the inside passage and large vessels have to exit into Hecate strait. But you already knew that cap’n , didn’t ya!
            And my friends father in law spent his working life in Kitimat.

          • That would be the mouth of the channel, not the head and that is no bottleneck.

            Ever heard of VTS?

            And one spending their life working in Kitimat does not make them expert on matters marine.

    • Indians do not have a veto over anything, the NG pipeline will be built.

      • Tell them that.

        • I have.

      • Nope! Case a beer on it.

        • You and EO are sounding more and more alike………..you two spend an inordinate amount time on these threads, both of you need help………..give the Canadian Mental Health Association a call.

  2. It’ll never be built.

    • Just like Paul Martin was to win the largest majority in Canadian history?

      • I don’t recall Libs saying that, but I think the media did. As far as pipelines go I refer you to Mackenzie valley.

        • Paul Martin himself said it, as well as pollsters and media.

          Mackenzie valley was shut down because of a combination of factors, most importantly after delays the market price for gas became too low. There is already renewed interest in the MVP with LNG going ahead.

          Enjoy your senility EO…………..

          • I don’t recall Martin saying it…..and I already pointed out the media did. Polls have been wrong for years.

            Mackenzie Valley pipeline was first started in the 70s, and is still not built. Northern Gateway won’t be either.

            Anyone calling themselves ‘Billy Bob’ shouldn’t be talking about senility.

          • Martin said it on TV during the campaign more than once.

            Evidently you have never paid close attention to anything.

          • Evidently I’m not interested in 2006.

          • Nor much else, except for your own nonsensical prattle.

          • I realize you old codgers are having a grinch-off at the moment, but don’t involve me in it.

            I said Northern Gateway won’t be built. End of story.

          • End of your story.

          • I don’t have a story Billy….on the other hand, you’re full of them.

  3. No worries. Mexico just announced today that they will allow foreign companies to drill off-shore on their coastline. Watch the capital drain from Canada as it did when the NDP closed B.C. for mining in the 80′s. We have never really recovered from that. I will be waiting patiently for all the foreign-funded eco-nuts like Forest Ethics (based in San Fransisco) and Tides Canada, which is the portal for many of the millions poured in against Canada’s resources, to raise a great hue and cry over this. After all, it’s about the environment, isn’t it? Or maybe for those with their eyes not yet open, they’ll figure out it’s about the money, pure and simple.

    • There was no NDP government in BC in the 80s, kook.

      • Correction, (typo) meant the 90′s. Same message though, Comrade.

        • Plummeting global commodities prices closed mines in the 90′s. Unless you’re suggesting that the NDP was responsible for global commodity prices and mines closing across the country.

          • BC miners shut down and left in the 90′s due to the NDP’s mining tax and capital equipment tax, thanks to Mike Harcourt and Glen Clark.

          • Name one.

          • Geddes Resources

          • Windy Craggy’s failure had nothing to do with taxes.

          • No, it had to do with NDP confiscation of legal mineral claims, which is even worse than taxes.

            Thanks pointing that out Lenny.

          • So, you can’t cite a single example to support your claim that “miners shut down and left in the 90′s due to the NDP’s mining tax and capital equipment tax”.
            That’s because you entirely fabricated it.

          • Get off the drugs Lenny.

          • Look at the BC Ministry of Energy and Mines historical mineral exploration expenditure chart,

            Moron.

          • Plus, there was the NDP’s misguided CORE review.

  4. Given the hurdles faced by Keystone XL due to GHGs and climate change, I’m surprised Andrew Leach didn’t mention the same in relation to potential hurdles facing Northern Gateway. The climate change /oil sands pipeline connection is not something that can simply be ignored to make it go away.

    • Glo-Bull Warming is the biggest fraud ever perpetrated in human history.

  5. For all those pro-NGW peeps. Its OUR land, we didnt sell it, we didnt give it up, we didnt have a war over it, we didnt throw it away, ITS OURS. I get it that some invaders (immigrants) think they own the whole country, but they dont, and we’ll prove it, anyway we decide to, be it closing down H16, closing the raillines, the airports, the mines, the sea ports, and anything else we want to. We didnt ask for this pipeline, and we all know the jobs will goto immigrants first, janitors and maids, good little servants to the rich invaders. We dont want your money, we dont want your people here, we dont want your overpaid, undersexed, drugged up drunk drivers OVER HERE! We already have ignorant, speeding, drunk driving alberta license plate a-holes here already for the LNG stuff, running down moms and kids. Just remember this, when everything goes wrong with this, ITS YOUR FAULT. Not ours. We dont care if your poor drunk country lovin ignorants need jobs to pay off your ford 150s and 5 bedroom homes. Thats YOUR fault, not ours. We didnt spend ourselves into debt. YOU DID. We didnt dig up the mother earth and spread toxic waste over the lands and waters, YOU DID. You love money. We don’t. You love yourselves. We love our whole peoples. Think of Israel, they have been killing each other for years. Almost same situ, native peoples of a region being displaced and having their land stolen by some “hard working folk, looking only for some LIVING SPACE.”, to take a page from 1930s Germany. Only difference so far, we havent been killing and bombing you guys into the stone age since contact. Id be grateful. This hasnt been Ireland, this hasnt been Russia, this hasnt been Israel. Gratitude people, show it, or we’ll get tired of not being shown it, and we’ll start to DEMAND it. You people live a good life here. And Ill bet NOT one of you PROS have been to reserve longer than it took to roll up your windows and drive through as fast as possible. For all those wanting to hate on natives, blaming us for all that is wrong, check out youtube’s “A Canadian Genocide”, or “8th Fire.” or do something crazy, like actually goto a reserve and talk with them, who knows, maybe youll learn something, like we’re human to….

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