Providing coverage of Alaska and northern Canada's oil and gas industry
February 2013

Vol. 18, No. 7 Week of February 17, 2013

LNG warning flags; Canada’s First Nations ponder legal fight

The National Energy Board has granted Canada’s third LNG export permit, this one for Shell-operated LNG Canada to process the equivalent of 3.23 billion cubic feet per day over 25 years.

Combined with the other two licenses, for Chevron’s Kitimat LNG and the BC LNG Export Co-operative’s Douglas Channel project, that raises British Columbia’s commitment to produce to 4.8 billion cubic feet per day, almost 25 percent more than the province’s total current out.

It represents another bold step toward the grand dream of British Columbia Premier Christy Clark, who wants LNG in her province to match the oil sands in Alberta as a source of jobs and government revenues.

But, if Clark is keeping an eye on her rear-view mirror, she will notice that the progress towards piecing together LNG ventures — which currently involves eight partnerships — is being threatened by First Nations’ challenges like those that have stalled and threatened to derail the plans by Enbridge and Kinder Morgan to run pipelines from the Alberta oil sands to tanker terminals on the British Columbia coast.

Water one of concerns

The message from aboriginal communities is starting to gain momentum and attention.

The Carrier Sekani Tribal Council, CSTC, a coalition of eight First Nations whose territorial land covers the bulk of the pipeline rights of way to carry natural gas to liquefaction plants on the Pacific Coast, said that unless it is consulted and involved in the approval process it will not allow those pipelines to go ahead.

Separately, the Fort Nelson First Nation, in the heart of massive shale gas deposits in the Horn River formation of northeastern British Columbia, is ready to engage in a legal fight over the use of hydraulic fracturing to extract shale gas and the associated pipelines.

“We are not going to let them get away with it,” Lana Lowe, director of land and resources for Fort Nelson, told the Globe and Mail.

“The major concern is what happens in five years when it’s all systems go and we have 10 oil companies drilling our land and taking all our water.”

She said her community views LNG development as a “disaster waiting to happen” and is preparing to wage a legal battle.

Right of way, bitumen issues

Adding to the aboriginal concerns, the Gitxaala Nation and the Gitga’at First Nation say LNG exports from the terminal and by tanker would have serious adverse impacts on their aboriginal rights and titles, with the Gitxaala arguing the application is “deficient and premature.”

CSTC Chief Terry Teegee said the LNG pipelines are at risk because there are no agreements in place for First Nations to assess the projects and Chief Reg Louis said his community is not prepared to risk the environment, native land title rights and future generations for the sake of engaging in business activities.

Louis said the Canadian government has stripped environmental protections to make it easier for projects to gain approval.

Teegee said “we are raising the alarm that (the LNG) projects are at risk. While there have been some initial discussions with CSTC and our member First Nations there are no agreements in place for our First Nations to review or understand the cumulative impacts of these projects.”

Setback to earlier deal

That stance is a setback to a deal struck four years ago by the CSTC to take advantage of a British Columbia government offer of C$32 million to help First Nations acquire a 30 percent equity stake in the 280-mile Pacific Trail pipeline which is designed to ship natural gas to a liquefaction terminal for the Chevron-operated Kitimat LNG project.

It is estimated that if First Nations take advantage of that proposal they could collect C$522 million over the first 30 years of the pipeline’s operation.

The First Nations battle against bitumen exports has also expanded, with Coastal First Nations, CFN, a coalition of nine communities, abandoning participation in the regulatory review of Enbridge’s Northern Gateway application, saying the C$280,000 they had available to participate in the process could not compete with the C$250 million Enbridge is spending on a team of lawyers.

The CFN informed the regulatory review panel that it was dismayed at the process and the fact that the Canadian government had removed the final decision on Northern Gateway from the panel.

Executive Director Art Sterritt said the review had simply become “gamesmanship.”

Energy corridor planned

Taking an altogether different direction, leaders of the aboriginal business community have formed Eagle Spirit Energy Holdings aiming to create a First Nations-owned energy corridor to carry oil, natural gas and electricity.

The idea holds out hopes of large equity stakes in pipelines, major construction contracts and participation in spill response measures for First Nations.

Eagle Spirit President Calvin Helin said that if First Nations can secure an equity role in new pipelines “they will be a lot more conducive to wanting to see projects develop in their territory (especially) if they are going to get a fair share of what’s going on and be in a position of reasonable stewardship and control.”

Also joining the initiative is Aquilini Development and Construction, run by a Vancouver family that owns the Vancouver Canucks of the National Hockey League and has struck deals with First Nations to develop native land in British Columbia.

Aquilini President David Negrin said his company believes an oil pipeline across British Columbia is inevitable, although a natural gas pipeline may come first.

But unlike Enbridge, which has offered a 10 percent equity stake in Northern Gateway to First Nations, Eagle might offer 50 percent, with the balance likely going to Aquilini, he said.

Negrin said every First Nation along the pipeline corridor would be offered jobs in building and monitoring the facility, working at a refinery if one was built and working at ports.

The biggest challenge is posed by unresolved land claims in British Columbia that often involve overlapping territories, preventing communities from working together and adding to the difficulty of reaching agreement on a pipeline rights of way.

—Gary Park

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