SEARCH our ARCHIVE of over 14,000 articles
Vol. 13, No. 29 Week of July 20, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

Legislature hears First Nations issues

Duty to consult a potential challenge for a pipeline builder in Canada, as is Canadian regulatory system, a Mackenzie holdup

Kristen Nelson

Petroleum News

AGIA hearings to date have focused largely on Alaska issues, since the Alaska Gasline Inducement Act is the State of Alaska’s attempt to encourage a North-Slope-to-market gas pipeline.

A July 13 AGIA hearing targeted Canadian issues: How will the regulatory climate in Canada impact an Alaska natural gas pipeline going through that country to U.S. markets? And would the impact be different for a TransCanada gas pipeline than for the BP-ConocoPhillips Denali project?

Alaska legislators got answers to some cross-the-border questions from Canadian attorneys, who provided an overview of Canadian regulatory and First Nations issues.

Below is a summary of Canadian issues addressed by the attorneys, and a sampling of legislators’ questions.

Three legal regimes

There are three legal regimes related to First Nations in Canada, said Keith Bergner, a partner in the Vancouver, B.C., law firm of Lawson Lundell: areas with no settled claims; those with settled claims from the late 1800s or early 1900s; and areas with modern settlements reached since the 1970s.

In areas with no settled claims, the Supreme Court of Canada said in 2004 that when the crown — the Canadian government — has knowledge of the potential existence of aboriginal rights and contemplates action it has a duty to consult with the relevant First Nation. That duty applies to federal, provincial and territorial governments, but does not extend to third parties such as project proponents, Bergner said.

But while the legal duty belongs to the crown, it can delegate procedural aspects of consultation and Bergner said that in practice proponents have been carrying the lion’s share of the burden because governments haven’t established processes to deal with the duty comprehensively.

Historic settled claims

In areas with historic treaties, numbered treaties dating from 1871 through 1923, the government of Canada struck a bargain with First Nations. The language of Treaty No. 8, for example, allows Indians in the treaty area the “right to pursue their usual vocations of hunting, trapping and fishing throughout the tract surrendered ... saving and excepting such tracts as may be required or taken up from time to time for settlement, mining, lumbering, trading or other purposes.” Oil and gas, Bergner said, falls under “other purposes.”

While the crown has the treaty right to take up land, the Canadian Supreme Court said in 2005 that it has the legal obligation to consult before exercising that treaty right because of potential adverse impact on First Nation rights.

Modern land claims settlements are the third legal regime. Bergner said these are agreements reached since the 1970s, most successfully north of the 60th parallel, where there are 16 settled claims in Yukon, the Northwest Territories and Nunavut. South of the 60th parallel there are only four settled claims, with a fifth under way.

Unlike earlier treaties — Treaty 8 is a couple of pages — modern treaty settlements are thick detailed documents covering rights and obligations of First Nations and government, with extensive discussion of consultation, Bergner said.

Proponents doing deals

In Canada the government hasn’t quite figured out how to discharge these new legal obligations of consultation, so project proponents are going out and doing deals, Bergner said.

Proponents aren’t required to consult, but it’s awfully nice to have consent and things go quicker and smoother, he said. So to blow away legal uncertainty, proponents have negotiated access or benefit agreements. While not a legal requirement, this makes project approvals go faster and eliminates a source of challenge.

While there is no formula for such agreements, Bergner said common elements on the First Nations side are jobs, contracting opportunities and financial considerations, while project proponents get legal certainty. Such agreements also typically contain ongoing formalized communication that keeps the First Nation and the project proponent — and sometimes government as well — at the table discussing issues as they arise.

The alternatives — judicial reviews, appeal, judicial injunctions and potential delays — are not pretty, Bergner said.

Any project will face First Nations consultation challenge

Sen. Hollis French, D-Anchorage, chair of the Senate Judiciary Committee, brought Bergner to the table, based, French said, on the fact that Bergner wasn’t aligned with either side and has written on the crown’s duty to consult.

Asked by French if TransCanada is in any better position than any other potential pipeline builder in the Yukon and British Columbia, Bergner said any project using land in Canada is going to face the consultation challenge. He did say authorizations TransCanada has in place “arguably” give it a few steps down the path.

As for TransCanada’s ability to negotiate with First Nations Bergner said he’s never acted for TransCanada, so has no inside information. They’re a pipeline company; they build pipelines; and they get it done in Canada, so to date TransCanada has met this challenge, he said.

Schedule aggressive

Loyola Keough, a partner in the Calgary law firm of Bennett Jones, retained by the administration to look at issues that could impact TransCanada’s proposed timeline, said they looked at challenges the TransCanada project would likely encounter based on the firm’s experience with pipeline projects over the last 10 years.

Keough said they concluded the TransCanada timeline is an aggressive one at 5.5 years for the regulatory process, and they leaned more toward seven years. There are challenges in Canada, he said, in addition to First Nations.

Asked by Sen. Charlie Huggins, R-Wasilla, the chair of the hearing, what number the administration used, Revenue Commissioner Pat Galvin said TransCanada showed first gas in 2018, but factoring in a range of probabilities and working with Keough, the administration thought 2020 was more likely for first gas. Galvin said TransCanada’s timing is realistic, but on the aggressive side of the curve, which is appropriate for a project proponent’s planning purposes.

If the project could take seven years instead of five to get permitted, could it take forever? Rep. Carl Gatto, R-Palmer, asked Keough.

Keough said they had that in mind during the analysis and did not see any showstoppers. He said they looked in detail for anything on the regulatory approval side that could be a project killer but didn’t find anything. Commodity economics are another issue he said, and are probably always a risk, but they didn’t identify any issues that would prevent TransCanada from getting approvals.

A 5.5-year timeline for those approvals is possible, he said, but would need a lot of things to go right. He said in his firm’s experience, things tend to slip and they believe realistically approvals could take 18 months beyond the TransCanada projection.

Some advantages

Gatto asked if any other company could succeed in getting Canadian approvals on a better time scale and Keough said that TransCanada has some advantages going into the process because of the Northern Pipeline Act and the unique agreement between the Canadian and U.S. governments dating back 30 years. Keough said he’d never seen this type of arrangement before.

The NPA was enacted during the first effort to move North Slope gas to market beginning in the late 1970s. That effort was killed by dropping commodity prices in the early 1980s.

TransCanada has a certificate and rights of way in the Yukon.

Keough echoed Bergner’s comments, noting that TransCanada is the largest pipeline company in Canada and has a track record of getting projects done.

Socioeconomic issues

Asked by Rep. Sharon Cissna, D-Anchorage, about socioeconomic impacts being negotiated in agreements with First Nations, Bergner said socioeconomic issues play a role in both negotiations between government and First Nations and in negotiations between project proponents and First Nations.

In negotiations with project proponents, First Nations can include not just jobs and contracting but such things as scholarship opportunities. In one recent negotiation a community wanted a new soccer field — a way to provide more things for youth in an isolated community. A regulator wouldn’t argue you to do that, he said, but the First Nation and the project proponent agreed on it.

Keough said this has evolved: First Nations used to want short-term benefits, now in infrastructure projects First Nation groups want longer-lasting socioeconomic impacts.

Huggins asked if an equity position came up in negotiations and Keough said yes, they were seeing more and more of that. Bergner noted that while an interest in equity ownership was an increasingly common request, there aren’t many agreements that ultimately provide for that because an equity interest is essentially an investment and for many First Nations, which are relatively small, such an investment would mean they would have a lot of eggs in a single basket.

New proponents

Sen. Joe Thomas, D-Fairbanks, asked about the status of TransCanada’s rights of way as land claims are settled. Bergner said existing third party rights are not on the table in settling land claims. Private land, easements or other interests have been identified and exempted in settlements.

TransCanada’s existing easements are identified and are not part of settlement lands, he said.

Thomas asked if a new proponent would have to start from scratch and Bergner said if a new proponent was crossing settlement land they would have to deal with First Nations.

Sen. Bill Wielechowski, D-Anchorage, asked about possible parallels between delays in the Mackenzie Valley project and an Alaska project.

Bergner said Mackenzie has faced numerous challenges — regulatory, First Nations and financial terms with the Canadian government and any project proponent of a similar or larger-scale project across Canada is going to be compelled to look at the Mackenzie project and learn some lessons.

He said the regulatory process for the Mackenzie Valley project tried to incorporate a number of different regimes: Environmental assessments were combined into a joint review panel created for that project. This is not something an Alaska pipeline project would have to face. The joint review panel has been the slowest moving part of the project, he said.

Keough said there have been delays due to many agencies involved in the Mackenzie project and the separation into two separate tracts, environmental issues being dealt with by the joint review panel and the separate National Energy Board process got unwieldy. At some point the two tracts have to come together, he said, but it took a long time for them to even get close.

There were also delays because of changes in the project resulting in six rounds of information requests.

Under the Northern Pipeline Act the Northern Pipeline Agency would act as a single window for consideration of all needed federal approvals, so the model likely to apply to an Alaska Highway pipeline would “differ materially” from the one used for Mackenzie.

The TransCanada view

Tony Palmer, TransCanada vice president for Alaska gas pipeline development, said he agrees in the main with both Keough and Bergner, but with some differences — from a businessman’s view.

Mackenzie began from ground zero, Palmer said, while TransCanada holds certificates for the Alaska project.

Mackenzie has a plethora of regional boards with regulation by NEB, he said; TransCanada has a single-window regulatory agency.

Much of the land through which the Mackenzie pipeline would run is owned by First Nations, while the TransCanada route is over crown or private land, Palmer said.

Mackenzie had no pre-existing land rights while TransCanada holds an existing easement through the Yukon.

And, Palmer said, Mackenzie has no underlying legislative authority for coordinated decision making, while TransCanada has the Northern Pipeline Act.

The Canada threat

Wielechowski asked if Canada could shut the Alaska project down.

Bergner said he agreed with Keough, that there are regulatory challenges, not showstoppers, and those challenges are not fatal to the project.

Keough noted that the Canadian government committed to the Alaska project some 30 years ago, agreeing with the United States on principles. Canada then took “unprecedented” action and passed the Northern Pipeline Act and granted a certificate.

Foothills used those approvals to build additional facilities in the late 1980s, so they’ve been used and honored and are valid today, he said.

Wielechowski said there has been the suggestion that Canada might hold an Alaska gas pipeline hostage in exchange for continued export to the U.S. of oil from the tar sands, and asked Keough if political issues had been evaluated.

Keough said they’d not done a detailed evaluation of political games and said he’s not aware of any parties who think a political oil-vs.-gas game would be a good idea. The reaction of Canadian industry to oil sands concerns, he said, has been to start an educational program because there is a lot of misinformation out there.

He also noted that Canada is a close trading partner of the U.S. and a transit pipeline treaty has been in use for decades allowing Canadian oil and gas to move from Canada into the U.S. and back into eastern Canada. It has been used primarily to Canada’s advantage, but would apply to an Alaska project, Keough said.

Denali quicker, cheaper?

Rep. Mike Kelly, R-Fairbanks, asked if there would be any advantages for Denali in getting through Canada.

There are potential delays associated with right of way for any company, Keough said, including work remaining for TransCanada in the Yukon, and rights of way it has yet to acquire in B.C. and Alberta.

Whether another party would have a timing advantage, he said it could avoid some issues TransCanada would face under the Northern Pipeline Act because a number of parties have questioned whether TransCanada’s current proposal fits squarely within the project contemplated by the Northern Pipeline Act.

Whether someone succeeded with arguments about the Northern Pipeline Act, those arguments could take time, Keough said.

A new proponent would go directly to the National Energy Board, use the Canadian Environmental Assessment Act and work with the Yukon. Some things would have more clarity, but it may take time to draw those bodies together.

Keough said he’d be hard pressed to suggest a Greenfield project would have an advantage in time.

Palmer said he’s knocked down a number of these straw men associated with the Northern Pipeline Act in the past: The route isn’t different, he said, it’s the same as originally contemplated. And on issues of size of pipe or volumes the language in the act is permissive, he said, noting he has yet to hear the substantive argument behind any of these suggestions.

As to requirements, Keough said if TransCanada is proactive and meets modern standards even under the umbrella of the Northern Pipeline Act, the substantive issue at the end of the day will be whether you meet modern standards — that’s what people will focus on, he said.

Did you find this article interesting?
Tweet it
Digg it
Print this story | Email it to an associate.

Click here to subscribe to Petroleum News for as low as $69 per year.

Petroleum News - Phone: 1-907 522-9469 - Fax: 1-907 522-9583
[email protected] --- ---

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©2013 All rights reserved. The content of this article and web site may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law subject to criminal and civil penalties.