Providing coverage of Alaska and northern Canada's oil and gas industry
February 2016

Vol. 21, No. 6 Week of February 07, 2016

Rewriting pipeline rules

Canadian government overhauls mega-project applications regulatory processing to include climate-change review, more consultation


For Petroleum News

The Canadian government of Prime Minister Justin Trudeau has made a tentative move that observers believe will either remove confusion over the approval process for energy infrastructure projects, or consign those plans to the scrap heap.

But the administration says it will need more time to draft a permanent regulatory process.

In the interim, Natural Resources Minister Jim Carr and Environment Minister Catherine McKenna said all resource projects - starting with Kinder Morgan’s Trans Mountain expansion, TransCanada’s Energy East, the Petronas-led Pacific Northwest LNG project and crude-by-rail terminals - will be subject to an examination of the greenhouse gas emissions generated by the extraction of related oil and natural gas.

The government will also appoint a ministerial adviser to consult with aboriginal communities along the Trans Mountain and Energy East routes, effectively creating a parallel process to the National Energy Board reviews.

Final decision the cabinets

Ultimately, Carr said, the federal cabinet will decide on the fate of pipelines regardless of what the NEB recommends after “weighing all the factors that are important to determine the national interest for these major projects.”

He said the new measures are intended to “restore the public trust in the way Canada reviews and assesses major resource projects. Without the confidence of Canadians, none of these projects will move forward.”

McKenna said the government wants to “make better, evidence-based decisions on major projects. (But) no project will return to square one.”

While her department will examine the upstream GHG emissions tied to pipelines it will not consider the emissions from refineries or end users of the fuels.

She said it is “essential” to rebuild Canadians’ trust in environmental assessment processes and “to respect the rights and interests of indigenous peoples.”

Energy East review extended

In the case of Energy East, for which NEB hearings have not begun, the review period will be extended by six months, while a final government decision on Trans Mountain will be delayed until December from August.

A TransCanada spokesman said his company supports a “strong and clear regulatory framework that helps Canadians see our commitment to building and operating oil and gas pipelines in the safest and most environmentally sound way possible.”

“TransCanada operates in a highly regulated industry. We will continue to work with all levels of government and our regulators to ensure the continued safe and environmentally sound transportation of our natural resources to market,” he said.

Kinder Morgan Canada President Ian Anderson said that although his company has “concerns about how this delay could impact the project schedule, we support the principle that public confidence in the review process is crucial.”

CAPP concerned about delays

Tim McMillan, president of the Canadian Association of Petroleum Producers, said his organization welcomes the Liberal move to clarify the transition rules, but is concerned about further delays and duplication built into the review process.

“Getting our product to market in a timely fashion is and has been a challenge,” he said.

Canadian Energy Pipeline Association President Chris Bloomer said his member companies are open to new processes that help improve the confidence of Canadians in pipelines.

Revision for streamlined process

What the Trudeau government is drastically revising is four years of a streamlined regulatory process introduced by former Prime Minister Stephen Harper that set a “one project, one review” standard for NEB hearings along with a two-year limit on reaching a decision.

Harper, after watching the Mackenzie Gas Project go through seven years of consultations and hearings, resulting in the venture being overtaken by a flood of new production from North American shale gas fields, was resolved to eliminating duplication and deterring activist and special interest groups from derailing the regulatory process.

He also gave cabinet the right to overrule the NEB if it recommended against an application.

Harper made it clear that its primary objective was “strong economic growth” and turning Canada into an energy superpower.

Pressure on government

The extreme pressure on the Trudeau government from some First Nations, environmentalists, local communities and landowners to reverse that policy was intensified on Jan. 26 when federal Environment and Sustainable Development Commissioner Julie Gelfand found significant gaps in current pipeline oversight.

She said her audit “concluded that the NEB did not adequately track companies’ implementation of pipeline approval conditions and that it was not consistently following up on company deficiencies. We found that the board’s tracking systems were outdated and inefficient.”

In addition, Gelfand said the NEB was having trouble hiring and retaining specialists in pipeline safety and regulatory compliance.

NEB Chair Peter Watson questioned the findings and insisted his agency “absolutely enforces and monitors all companies’ compliance with pipeline approval conditions,” but promised that all new recommendations would be addressed by the end of 2016.

He said the NEB is at a “critical juncture” in its 56-year history and its regulation of about 46,000 miles of pipelines, given the complexity of the issues and the public scrutiny it has come under.

Candice Bergen, energy spokeswoman for the opposition Conservative Party, said the transition measures are another layer of bureaucracy and red tape aimed at slowing resource development, designed by a government that is ideologically opposed to the use of fossil fuels.

She said “this sends a terrible signal to investors” and is far from the “glimmer of hope” the energy industry had been looking for.

“This is not good news for all those workers in the resource sector who are worried about their jobs right now,” Bergen said.

Goal not shutting down industry

Federal cabinet ministers emphatically reject claims that the Trudeau government is determined to shut down the oil industry to achieve its goals for lowering GHG emissions.

Alberta Environment Minister Shannon Phillips said her government will support any process that improves public confidence and bolsters the chances to getting pipelines built.

“Of course we are not interested in unnecessary delays,” she said.

Carr acknowledged that the additional consultation and evaluation requirements will still not satisfy all Canadians, as reflected by a coalition of 74 environmental groups which issued a statement urging the government to reject new pipelines to limits GHG emissions.

He said there will be opposition to “whatever decisions the government makes on pipelines,” noting that the three federal opposition parties - Conservative, New Democratic Party and Bloc Quebecois - “come from completely different perspectives: ‘Don’t build anything. Build everything right now. Be very careful what you build.’”

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