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Northern Gateway faces new unknown Enbridge gains regulatory endorsement along with 209 conditions; faces more entrained opposition from environmentalists, First Nations Gary Park For Petroleum News
To the surprise of few, but the outrage of many, Enbridge’s Northern Gateway project, designed to be the first route to Asia for commercial quantities of oil sands crude, has cleared its first significant regulatory hurdle.
A Joint Review Panel of Canada’s National Energy Board and the Canadian Environmental Assessment Agency delivered a recommendation to the Canadian government for a final decision by about mid-June that essentially endorsed the plans to export 525,000 barrels per day of crude bitumen to the Pacific Basin and import 193,000 bpd of condensate.
In line with a checklist it issued earlier this year, the JRP attached 209 conditions it said Enbridge must meet, primarily involving the prevention or cleanup of oil spills in coastal waters and on land and other action to protect the environment and wildlife.
The recommendations can either be accepted or rejected by the cabinet of Prime Minister Stephen Harper, but not modified.
A long ways to go The building consensus is that the project is, to borrow a phrase from Winston Churchill in the Second World War, “not even at the beginning of the end, but is, perhaps, at the end of the beginning.”
The JRP’s bottom-line conclusion was clear: “The project, if built and operated in compliance with the conditions set out, would be in the public interest. Canadians would be better off with the project than without it.”
But, in the midst of an exhaustive report, it delivered a telling rebuke suggesting Enbridge should have done more to openly communicate with First Nations — a sore point with aboriginal communities from the outset and now representing what could be the ultimate game-breaker.
The concept of diversifying Canada’s oil export markets beyond the United States was first floated a decade ago by Enbridge.
It got stalled in mid-2007 when PetroChina quit as one of the potential shipping partners, lashing out at oil sands producers and the Canadian government for their failure to help it aggregate enough shipping volumes to underpin a possible 49 percent equity stake for the Chinese state-run giant.
Fresh start in 2009 The venture got a fresh start two years later, backed by 10 companies that have signed precedent agreements to buy volumes from Northern Gateway, by which time it was entangled in a double bind — the rapid emergence of shale oil across North America and the highly sophisticated, well-funded environmental organizations that identified the oil sands as the planet’s “dirtiest” oil and vowed to do everything possible to stop oil sands expansion, using Keystone XL as their launching pad.
Undaunted, Enbridge plugged on, filing a regulatory application, entering a fractious public hearing phase that lasted 18 months and, with the financial backing of its partners, spending more than C$500 million to reach the current point.
The JRP said that the environmental, societal and economic burdens of a large spill, while unlikely and not permanent, would be significant, but credited Enbridge’s efforts to mitigate any accidents through its “precautionary design approach” and plans to use “innovative safety systems.”
“The likelihood of significant adverse environmental effects resulting from project malfunctions or accidents is very low,” the JRP said.
Beginning of the fight The environmental organizations brushed off those calming observations, declaring that the JRP report is merely the beginning of their fight to scuttle Northern Gateway.
Many First Nations along the pipeline route from Alberta to a deepwater port at Kitimat on the northern British Columbia coast issued the same threats.
Grand Chief Stewart Phillip, of the Union of British Columbia Indian Chiefs, said he was “deeply disappointed” by the JRP’s conclusion that during construction and routine operations Northern Gateway would not have a significant impact on the ability of aboriginal people to use their land, water and resources.
He said the JRP’s failure to deal with aboriginal concerns over the prospect of a “catastrophic oil spill or a serious pipeline rupture on our coast or in the mountains” had set the stage for a legal battle that could grow into civil disobedience.
“The indigenous people (of British Columbia) have made our position very clear,” Phillip said. “We now look forward to a long, protracted battle — legally, politically and, if necessary, on the land.”
Ellis Ross, chief councillor of the Haisla First Nation in northwestern British Columbia and a backer of plans to export LNG, said aboriginal opposition to Northern Gateway has only hardened.
“Our concern was the remediation in response to an oil spill and I don’t think that got covered off at all,” he said.
Other First Nations leaders provided variations on the same theme, all pointing to an early start on the legal front, echoing an announcement by a coalition of environmental groups that a war will now be waged against the Canadian government as it weighs the project’s fate.
“I’m convinced now — and I think a lot of people share this feeling — that our government and its processes no longer belong to the people,” said Gerald Amos, chairman of the Friends of Wild Salmon Coalition of northwestern British Columbia. “They belong to the big oil companies.”
The call for wider consultations Enbridge Chief Executive Officer Al Monaco was quick to latch on to the JRP’s call for wider consultations with First Nations.
“As a company, we want to do the right thing. We want to engage and we want to understand their concerns. We would like an opportunity to have that discussion,” he said.
Monaco said Enbridge is “not celebrating” the JRP’s findings, adding he viewed the conditions as “expectedly tough” without containing any “real major surprises.”
He said the Northern Gateway objective has not just been to obtain regulatory approval. It is committed to “making sure that people understand the project well ... (and have) comfort around the technical and safety aspects.”
Canada’s Natural Resources Minister Joe Oliver said the JRP report was a “rigorous, open and comprehensive science-based assessment. We will thoroughly review it, consult with affected aboriginal groups and then make our decision.”
Formal discussions planned
Less than two weeks before the JRP report became public, officials in the Harper government notified aboriginal leaders who participated in the JRP hearings that formal discussions aimed at meeting the government’s duty to consult and accommodate their concerns would begin early in 2014.
But the letter cautioned that the scope of consultations would be confined to the pipeline project itself and not get sidetracked into negotiating treaties with First Nations. Many observers believe aboriginal communities will use Northern Gateway as leverage to assert their land claims.
A school of thought is also taking shape that Northern Gateway will fail, leaving Kinder Morgan’s plans to triple capacity on its Trans Mountain system to 890,000 bpd as the only survivor of the industry, partly because it operates on a long-established right of way to Vancouver, and Harper’s strongly held view that opening markets in Asia is vital to development of the oil sands and to generate the revenues needed to support domestic programs such as health-care and education.
Industry argument Almost lost in the clamour surrounding the JRP report is the industry’s argument in support of pipelines and market access.
Greg Stringham, the Canadian Association of Petroleum Producers vice president of oil sands and markets, said the JRP report is an “important milestone in the process to achieve market diversification for Canada’s valuable oil products.”
He said CAPP estimates that over the next 15 to 20 years Canada will need to “find a home” for another 2.5 million to 3 million bpd of output.
Stringham left no doubt that such volumes will require either approval of a substantial list of pipeline projects, or some other alternatives. .
The pipelines include Northern Gateway and the Trans Mountain Expansion, Keystone XL’s proposed 830,000 bpd, TransCanada’s Energy East project to ship 1.1 million bpd to Ontario, Quebec and New Brunswick and possibly open routes to Europe and Asia and Enbridge’s Line 9 reversal to deliver 300,000 bpd to Ontario and Quebec.
All of those proposals hang in the balance, pending the outcome of Northern Gateway.
Stringham touched on the challenges by suggesting the JRP has “opened the door ... but that’s all it has done” for Northern Gateway, while doubting that all of the concerns raised by opponents could be resolved.
Like Monaco, Stringham was reluctant to speculate on what might happen if Northern Gateway dies because of drawn-out legal battles. But that seems to be the project’s destiny.
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