209 Ways to Fail: Northern Gateway Conditions Demystified

Douglas Channel, near Kitimat B.C.

After Northern Gateway’s lengthy, contentious joint review process, putting any faith in the ability of the National Energy Board to hold Enbridge accountable may feel foolish. And yet, the National Energy Board (NEB) may be the closest thing to an ally in government this project provides.

Right now, the Northern Gateway oil tanker and pipeline project is in a holding pattern while the federal cabinet reviews the recommendations from the NEB's Joint Review Panel. Barring delays or injunctions from any of the pending legal challenges, cabinet will announce its decision sometime in the next five months.

While there are, of course, all number of other legitimate hurdles, including ongoing First Nations legal challenges and the possibility the province could deny necessary permits, as of right now, cabinet approval and the 209 conditions recommended by the NEB are the only federal government-mandated steps standing in the way of bitumen-loaded tankers and Douglas Channel. Isn't it time they deserved a closer look?

Attaching conditions to approval of an energy project is common practice for the NEB. In theory, they allow the board to hold companies accountable for what they promise to do, while providing strict timelines (and, ideally, penalties) to ensure they comply. In practice, governments have been able to pick and choose the conditions to suit their tastes, as happened with the Mackenzie Gas Project.

However, the changes to the NEB Act in the spring of 2012 weren't all bad. A change in that piece of legislation means government can no longer discard the conditions attached to the recommendation.

In the case of Northern Gateway, conditions run the gamut from recommendations on spill prevention, pipeline coatings and valve placement; to habitat preservation for marine mammals, woodland caribou and freshwater fish; and proof of adequate consultation procedures with potentially affected First Nations.

All of them are grouped into three phases: pre-construction, construction and pre-operation and ongoing operations. Each phase has its own set of conditions, with some requiring an additional level of approval before the NEB will consider it ‘met.’ For Northern Gateway they breakdown as follows:

  • 130 conditions to be met before construction can begin;
    - 55 of which require additional approvals from the NEB or other government bodies.
      
  • 60 additional conditions to be met before the pipeline or marine terminal could start operating;
    - 18 of which require additional approval from the NEB or other government bodies.
      
  • 17 ongoing conditions required during the life of the pipeline project,
    - 2 of which require additional high-level approvals from the NEB.

What the NEB says, goes. Unless it doesn't.

While the NEB Act enshrines conditions recommended by a panel, if a government body strongly opposes certain conditions, it can refer them back to the NEB for reconsideration. At that time, the NEB can decide to make a change to the conditions, but is under no legal obligation to do so.

For most (but not all) of the recommended conditions for Northern Gateway, this is the case. However, the passage of Omnibus Bill C-38 gives the federal cabinet additional powers to alter or supplement certain recommended conditions if they fit within the scope of the Canadian Environmental Assessment Act (or CEAA).

For those who didn’t closely follow the steady dismantling of Canada’s ecological protections in the summer of 2012, a weakened CEAA reduced the number of federally protected navigable waterways in Canada from several million to 162 and limited the scope of environmental assessments to only studying effects of infrastructure development on “fish, aquatic species at risk, migratory birds and federal lands.” Should the federal cabinet choose to use the powers it gave itself through the CEAA, it could alter or reduce some of the specific conditions that seek to protect these areas.

Conditions of Note

Not all of the conditions set for the Northern Gateway pipeline are worthy of study. Most are fairly procedural: requiring regular filings of safety reports, providing lists of company stakeholders and supplying schedules for construction/maintenance and safety testing. Others are more complex. They include:

Consultation with Aboriginal Groups: Throughout the joint review process, Enbridge was regularly criticized for its lack of consultation with First Nations, particularly when it came to traditional land use. As such, it is not surprising that the NEB included these concerns among its conditions.

To meet pre-construction conditions, Enbridge must prove it consulted adequately with all potentially affected First Nations, that it has achievable plans in place to mitigate and repair the damage its construction and operation will cause to these traditional lands and that it has a clear plan in place for ongoing bilateral communication and consultation. According to conditions 53 to 56, all of this needs to happen (and be approved by the NEB) at least a year before Enbridge can begin construction on lands traditionally belonging to First Nations. Any changes must be filed at least six months before construction begins, with a second filing required 90 days prior to starting construction on traditional lands (conditions 89 to 92).

It is worth noting that lack of faith in both Enbridge and the Joint Review Panel’s commitment to listening to concerns from Aboriginal groups forms the basis for the legal challenge tabled last week by the Gitga’at First Nation.

Due Diligence for Watercourse Crossings: The National Energy Board defines watercourses as “permanent or temporary structures that are or will be constructed in, on, under, over, through or across a water body,” saying “these particular locations merit focus because of the associated environmental sensitivities, and complex design and installation activities.”

Each crossing — and the Northern Gateway pipelines have plenty of them — requires extensive documentation, including proof of consultation with Fisheries and Oceans Canada, Environment Canada, the B.C. Ministry of Environment, Alberta Environment and Aboriginal groups. To quote conditions 125 and 126:

Northern Gateway must not commence construction of a watercourse crossing until all pre-construction conditions have been satisfied for the construction spread, region, or work area in which the crossing is located.”

Unfortunately for the waterways, the federal cabinet has the power under the CEAA to dilute the conditions. It is entirely possible that once cabinet completes its review and approval process, these conditions will no longer exist in their current form.

Protecting Animal Habitats: As above, this is another area where the federal cabinet has given itself power to adapt recommended conditions. A portion of Northern Gateway’s inland route runs through habitats of endangered woodland caribou. Its watercourse crossings will impact freshwater fish and the land mammals who feed on them. Its Kitimat Terminal in Douglas Channel risks displacing extensive marine life, including humpback whales and marine birds. At least 17 conditions are devoted to steps Enbridge must take to identify, preserve and remediate these habitats — 15 of them requiring an additional level of board approval and consultation with external bodies at different stages of the project.

Fortunately, the potential impacts of the Northern Gateway project on these animals are the basis for at least twolegal challenges from environmental groups. If successful, these challenges could temporarily delay the project or force the Joint Review Panel process to reopen its investigation.

Marine Spill Preparation and Cleanup: In its advertisements, the Northern Gateway partnership assures the public its marine spill planning and prevention is world-class. Conditions 167 to 169 and 187 require proof those statements are based in reality. At least three years prior to starting operation of Northern Gateway, Enbridge must file proof of its plans for:

  • Marine spill modelling and predictions including, but not limited to six previously requested scenarios.
  • Studying how heavy oil disperses in freshwater and marine bodies and in different types of weather or seasons (particularly important given the new report from Environment  Canada confirming the tendency of bitumen to sink in water when mixed with sediment).
  • A research program studying “varying physical and chemical properties of the oil intended to be shipped from the Kitimat Terminal, product weathering, dispersion and oil/sediment interactions, product submergence, product behaviour and cleanup following in-situ burning, and cleanup and remediation options for sediments and shoreline.”

External bodies that will need to sign off on this work include the National Energy Board, Environment Canada, Transport Canada, the Canadian Coast Guard, the Province of British Columbia, a Scientific Advisory Committee, First Nations and any other consulted stakeholders.

Then, nine months before it can apply to open its terminal, Enbridge must prove it has the financial resources and secured funds for all spills or accidents, including:

  • $950 million for the costs of liabilities for, without limitation, cleanup, remediation and other damages caused by the project during the operations phase. This includes the following components and minimum coverage levels:
  • Ready cash: Within 10 business days after a large spill from any project component, Northern Gateway must have unfettered access to at least $100 million to cover costs, including compensation to third parties for losses and damages in the near term, while insurance claims are being processed. Once used, this source of cash must be replenished immediately to cover the costs of a potential future spill. (emphasis added)
  • Core coverage: At least $600 million that includes third party, stand-alone liability insurance and other financial assurance instruments that comply with the criteria.
  • Financial backstopping for costs that exceed the payout of all other components in the plan (including parental and other third-party guarantees and no-fault insurance): must be in place at all times for a minimum amount of $250 million.

These conditions require access to more funds than any other pipeline project in Canadian history and are somehow still less than the estimated $1 billion US (and counting) Enbridge has spent to date on cleanup efforts for its 2010 bitumen spill in Kalamazoo, Michigan.

Shipping agreements: Above all, this pipeline can’t exist without long-term purchasing agreements from companies willing to buy its bitumen and condensate. At least six months before starting construction, Enbridge must provide proof it has secured buyers for at least 60 per cent of the bitumen or condensate that could be shipped per day in its pipelines. (Conditions 20 and 21) Enbridge is also restricted from holding any more than 10 per cent of its capacity in reserve for non-contract sales. If this pipeline is going to operate, it needs the bulk of its shipping to be on behalf of companies willing to commit to long-term contracts at fixed prices.

At the moment, Enbridge has limited partnerships with ten companies who, according to their final JRP filing, have “among other things, the option to acquire transportation capacity on each pipeline (FP Option Volume) at discounted tolls and to become an equity investor-owner in the project.” None of these companies have agreed to become shipping partners.

Conversely, the Kinder Morgan Trans Mountain Pipeline has binding agreements with 13 shipping companies, all of whom have signed on for increased capacity should the twinning project go forward.

What's the worst-case scenario?

If, as expected, the federal cabinet approves the Northern Gateway project in mid-2014, the National Energy Board could immediately issue its certificate with the final conditions.

Then, if on that same day, Enbridge submits all of its spreads, regions and work areas for the project to the National Energy Board, they would still be a minimum of 210 days (7 months) from breaking ground on Northern Gateway (condition 8b) and a minimum of a year away from technically (not practically) being able to begin construction on First Nations land, which comprises much of the pipeline route and the Kitimat marine terminal.

Even if the NEB decides to relax requirements on condition 8b, another 13 conditions must be met a minimum of six months (180 days) before construction could begin. At the earliest, those looking for opportunities for civil disobedience will need to wait until early 2015 for the chance to chain themselves to the first bulldozer.

Once started, construction of Northern Gateway is projected to take three years. Should every one of the ten pending legal challenges facing the pipeline project fail and if the potential citizen's initiative does not go forward, the absolute earliest a bitumen-laden tanker could leave Douglas Channel for Asia is early 2018 — after the next federal election in 2015.

An Unintentional Ally

For those opposing oilsands expansion, putting faith in the NEB’s oversight feels far from ideal. As Forest Ethics Advocacy tar sands campaigner Ben West told DeSmog Canada: “It is hard to believe the conditions, as weak as they are, would ever be enforced.” Dave Shannon of Douglas Channel Watch was equally blunt, saying: “I pick up that report and sometimes I am tempted to throw it against the wall.”

It is true that the National Energy Board has never before stopped construction of a pipeline project when a company did not meet conditions. But it is also true that before 2012 and the changes to the NEB act, no conditions applied to a project were binding. In many ways, Northern Gateway and its 209 conditions are the first of their kind. Through them, there exists in principle a public pathway to holding Enbridge accountable for its actions and the National Energy Board to task for its enforcement. But more importantly (and perhaps unintentionally), these conditions have opened up the monitoring of this project to the one other body even more invested in ensuring Enbridge never builds Northern Gateway: the majority of British Columbians who oppose it.