The Haisla Nation have filed an application with the National Energy Board for their own liquified natural gas export project, according to industry newsletters.
There is nothing at this point in the public section of the NEB website, probably due to the holiday weekend. Northwest Coast Energy News is contacting Haisla leaders for confirmation.
According to both the Daily Oil Bulletin and Natural Gas Intelligence the Haisla have formed three companies, Cedar 1 LNG Export, Cedar 2 LNG Export and Cedar 3 LNG Export, and have applied to the NEB for three standard 25 year export licences.
According to Natural Gas Intelligence:
The filings with the National Energy Board (NEB) envision construction starting in 2017-2020 of a network of six jetties or docks jutting out from Haisla land on the shore of Douglas Channel for floating LNG vessels. Each requested export license would enable operations by two jetties.
The plan calls for a mini-armada of six mobile processing plants, with each one capable of converting up to 400 MMcf/d of gas into liquid cargo for overseas deliveries.
Work is under way with international tanker firm Golar LNG to commission construction of the vessels in Singapore at the Keppel Shipyard, according to the applications.
With the project still in planning stages, Cedar LNG did not disclose cost estimates. Names of prospective partners in the terminals; Asian customers, BC gas suppliers and pipeline service providers were also undisclosed. Discussions are under way on all fronts with an array of industry participants, Cedar told the NEB.
The Hasila are partners in the stalled BC LNG project that ran into trouble when the original Texas based investors got into financial difficulty. AltaGas, parent company of Pacific Northern Gas, is also involved in Triton, a floating LNG project that would be at an old log sort on Douglas Channel, the same site as the BC LNG project.
Map of current LNG and other projects in the Kitimat area from the BC airshed report. (Environment BC)
The cost of the Kitimat Modernization Project has jumped to $4.8 billion US, Sam Walsh CEO of Rio Tinto, the parent company of Rio Tinto Alcan said Thursday as the company released its results for the first six months of 2014.
In its report. Rio Tinto said.
In February 2014, the Group announced that a review of major capital projects had identified a project overrun in relation to the Kitimat Modernisation Project. The overrun evaluation is now complete and has identified the requirement for additional capital of $1.5 billion to complete the project. This was approved by the Board in August 2014, taking the total approved capital cost of the project to $4.8 billion. First production from the Kitimat Modernisation Project is expected during the first half of 2015.
The weakening Canadian dollar appears to have improved the overall bottom line for the RT aluminum division, with underlying earnings of $373 million 74 per cent higher than in the first half of 2013:
The main drivers were growing momentum from the cost reduction initiatives, a weaker Australian and Canadian dollar and a further rise in market and product premiums, with 61 per cent of the Group’s primary metal sales sold as value added product generating a superior price. This was achieved despite a nine per cent decline in LME prices over the period which lowered earnings by $265 million.
LNG deal
The report also contains details of the deal between Rio Tinto Alcan and LNG Canada for the old Eurocan dock, indicating that LNG Canada will not likely commit to a deal until the Final Investment Decision is made:
On 12 February 2014, Rio Tinto entered into an option agreement with LNG Canada, a joint venture comprising Shell Canada Energy, Phoenix Energy Holdings Limited (an affiliate of Petro-China Investment (Hong Kong) Limited), Kogas Canada LNG Ltd. (an affiliate of Korea Gas Corporation) and Diamond LNG Canada Ltd. (an affiliate of Mitsubishi Corporation) to acquire or lease a wharf and associated land at its port facility at Kitimat, British Columbia, Canada. LNG Canada is proposing to construct and operate a natural gas liquefaction plant and marine terminal export facility at Kitimat. The agreement provides LNG Canada with a staged series options payable against project milestones. The financial arrangements are commercially confidential.
According to The Australian other aluminum operations aren’t doing so well, and the newspaper says that RT is starving under performing units in favour of the “good bits.”
The qualifier is that there is still much work to do on the aluminium front, Rio having splurged $US38bn on the acquiring Alcan in 2007.
Aluminium’s contribution to underlying earnings increased from the $US214m in the previous corresponding period to $US373m. But returns remain miserable, and that is from the good bits.
The underlying loss was $US182m, an increase from the $US158m loss previously. At least the bad bits of aluminium are being starved of capital expenditure, with Walsh putting them on the private equity-type approach to running a business.
But is has to be wondered how much longer the pain will be endured. And there is increasing chatter that closures are on the cards, with the long-term future of Rio’s Australian smelters the real concern.
Making money
Overall Rio Tinto is making money with earnings up 21 per cent, according to the report:
Sam Walsh said “Our outstanding half year performance reflects the quality of our world-class assets, our programme of operational excellence and our ability to drive performance during a period of weaker prices. These results show that our current strategic and management focus is making a meaningful contribution to cash flow generation.
“During the first half we have increased underlying earnings by 21 per cent to $5.1 billion and enhanced operating cash flow by eight per cent. We delivered what we said we would, exceeding our $3 billion operating cash cost reduction target six months ahead of schedule while producing record volumes and driving productivity improvements across all our businesses.
“We have decreased net debt by $6.0 billion compared with this time last year, through our stronger operating cash flows, sharply reduced capital spend and proceeds from divestments. We are confident Rio Tinto’s low cost, diversified portfolio will continue to generate strong and sustainable cash flows over the coming years. This solid foundation for growth will result in materially increased cash returns to shareholders, underscoring our commitment to deliver greater value.”
Net income increased 156 per cent to $4.4-billion while revenues were $24.3-billion. Rio Tinto said it reduced operating costs by $3.2-billion, exceeding its $3-billion target six months ahead of schedule.
New boss?
Despite the good news, the financial press is already speculating that Sam Walsh who is 64, may not last long as boss of Rio Tinto. His contract expires at the end of 2015. The Financial Times is quoting analysts as saying despite Walsh’s desire to stay on, the company is already looking for a successor.
According to the FT these include
Andrew Harding, head of iron ore, holds the job that was previously Mr Walsh’s, running Rio’s most important division, and for that reason is probably a front runner. Aged 47, he is a 21-year Rio veteran and previously ran its copper business. Chris Lynch, finance director since 2013, is the only executive on Rio’s board other than Mr Walsh and is another industry veteran, but at 60 is only a few years younger than Mr Walsh.
Alan Davies, head of diamonds and minerals, and Harry Kenyon-Slaney, head of energy, also have important operational experience across commodities and lengthy Rio careers but like Mr Harding are relatively new to their current roles. The heads of the other mining businesses are also relatively new to Rio. Jean-Sébastien Jacques, head of copper, joined Rio in 2011 from Tata Steel while Alfredo Barrios came to the group from BP only in June and is running aluminium.
Chevron is sticking with the Kitimat LNG project but won’t make a Final Investment Decision until it has signed sales and purchase agreements for between 60 and 70 per cent of the natural gas, Chevron’s vice-chairman and executive vice-president of upstream operations, George Kirkland told investment analysts in a conference call Friday.
“We need to get partnership resolved and Apache has to move through the issues s and we need to get a new partner in. That needs to happen. That’s quite obvious,” Kirkland added.
Other factors, Kirkland told the call, are final test results from the Liard and Horn River natural gas play in northeast British Columbia and finalization of the “pipeline corridor.”
Kitimat-Liard-Horn package
Although the residents of Kitimat are focused on the LNG terminal at Bish Cove, remarks both by Kirkland today and by Apache CEO Steve Farris Thursday, it appears that energy industry views Kitimat LNG as part of a “package” (a term used by both) that includes the Liard and Horn River gas fields and the connecting Pacific Trails Pipeline.
Kirkland also said Chevron has no interest in any further investment beyond the 50 per cent it already holds. “We have 50 per cent of the interest in Kitimat-Liard-Horn River assets. That’s right in the middle of the sweet spot where we like to be where we’re committing people to run the projects and operations. We don’t want more than 50 per cent but we do have available some small amount of working interest that we would provide to a LNG buyer.
“There’s always been a plan for us and Apache to have some working interest that could be sold down to buyers, so they would be part of the development and they would be in the value chain. That has not changed.”
Kitimat LNG’s rival project LNG Canada, run by Shell, has buyer partners in KoGas, Mitsubishi and PetroChina.
Kitimat LNG under construction at Bish Cove, September 2013. (Robin Rowland/Northwest Coast Energy News)
Final Investment Decision
One analyst asked Kirkland if the Final Investment Decision would come at the end of 2014, as previously announced, or in 2015. Instead, Kirkland said, “We will reach FID shortly after having 60 to 70 per cent gas committed to an SPA- a sales and purchase agreement. That is the critical decision maker and for both timing and the investment decision, irrespective of what happens with Apache. We’re driven, once again, by having a sales contract or sales contracts that gives us 60 to 70 per cent of the gas committed at an economic price.”
On the Kitimat terminal, Kirkland said, “We’ve got work going on, FEED [Front End Engineering and Design] work on the plant itself.
“We have to understand cost and schedule on that plant… We’re not spending huge money but it is a lot of money in terms of hundreds of millions of dollars. Now that is critical for us to have all that so we can deal knowledgeably with buyers. We have to understand cost. We have to understand resource, so we can deal with the particulars of pricing.
“We are not going to do a project unless it’s economic. We’ve always told you we’re not going to build that project unless we have 60 per cent of the gas sold. If you understand the project it makes sense.”
“I am not concerned if Apache leaves,” Kirkland said. “I think we could easily step in and be the operator of the upstream. I am confident there. Apache has been very good to work with in the early stages of the assessment of Liard.
“I think we’re in good shape but we need clarity, we need to get closure on the partnership and as I mentioned we have to do the work where we deal with buyers and understand costs and understand economics. We are very value driven, we are not going to go FID until we understand the economics of that sale.”
Confident on assets
Kirkland said that the company is confident about the assets in the Liard and Horn River regions but is waiting for final results from some test wells in the Liard.
“We can check off our confidence level on the Horn River. Resources are already high. We’ve already done that appraisal. So the focus on the resource sector is on the Liard, with some appraisal there and getting some production work. The wells where we need to get some production data will be complete by the end of the year. So that’s a really important step forward.”
Kirkland also hinted at the potential problems with the Pacific Trails Pipeline, where there is still a dispute with the Wet’suwet’en First Nation. “We’re going to focus on the pipeline and the end of the pipeline corridor. That’s important and we’re putting some money into that to finalize the pipeline routing, get all our clearances and then we’ve got work going on.”
Slide from the Chevron second quarter results presentation showing other LNG projects (Chevron)
Overall Kirkland was enthusiastic about other liquified natural gas projects in Australia and elsewhere in the world. Chevron Corporation reported earnings of $5.7 billion for the second quarter 2014, compared with $5.4 billion in the 2013 second quarter. Sales and other operating revenues in the second quarter 2014 were $56 billion, compared to $55 billion in the year-ago period.
Company CEO John Watson said a news release, “In Australia, our Gorgon and Wheatstone LNG projects continue to reach important interim milestones. Gorgon remains on track for expected start-up in mid-2015. We are also advancing the development of our liquids-rich, unconventional properties in the United States, Canada and Argentina.”
Apache will “completely exit” the Kitimat LNG project, company CEO Steven Farris told investors Thursday as the company reported its second quarter results.
The pull out from Kitimat is part of a plan by Apache to spin off assets that are not part of its “base business” so it can concentrate on its “North American onshore assets.”
“We have said for some time that Canada is part of our North American onshore portfolio,” Farris told analysts in a conference call.
“Certainly we have two businesses up there. [in Canada] We have a business which is a base business with respect to the Duverney Shale and Monteny shale and some of the other things we working on there. We also have the Kitimat-Horn River- Liard. Kitimat -Horn River -Liard is part of our LNG project which we reindicated today that we intend to exit.”
A long view of the Kitimat LNG project at Bish Cove, Sept. 14, 2013. (Robin Rowland/Northwest Coast Energy News)
The Horn River and Liard natural gas fields would have served the LNG project. The divesture could either be as a complete package or sold separately perhaps through the capital markets. The Duverney Shale and Monteny shale plays are considered North American assets, while the Horn RIver Liard plays are considered international because the product from there would be sold in Asia via an LNG terminal.
Chevron, the 50 per cent partner with Apache in Kitimat LNG, said it would have no comment on the Apache move until its own investor conference call Friday morning.
Apache also intends to divest its stake in the Australian Wheatstone LNG project, where Chevron is also a partner.
It was about 18 months ago, Farris said, that Apache changed its focus to “enhancing its North American onshore resource base… We’ve also made it clear that there are no sacred cows as our efforts continue.”
Change in company strategy
Apache CEO Steven Farris. (Apache)
Farris and other executives repeatedly emphasized on the call that the Kitimat and Wheatstone sales were part of an overall change in company strategy.
“I have to honestly say that the complete exit by Apache will not have an impact on Kitimat going forward one way or another,” Farris said.
“Whether we’re in it or not, they will contact with world class reserves and frankly Chevron and Apache are way a head of anybody else in that arena. We’ve always been in a position that we felt we could not be in these LNG projects. I think it’s important that we state that.”
Some other financial analysts on the call seemed a little skeptical about the move, with a couple of questions focused on whether Apache was giving up long term investments.
“In terms of business and priority of capital and time frame of LNG specifically Kitimat it make sense for someone to own it who has a different timeline,” Farris said.
As for the timing of the sale, both Farris and Chief Financial Officer, Alfonso Leon, would not give specifics. “We haven’t decided on a specific timeline, we are working on a number of different opportunities,” Leon said. “Each of them has a different timeline associated with it. So we will make decisions as we reach decision points. Specificaly on the separation work flow…it is not something that will be executed on an imminent basis. Work has been underway but there is still significant work ahead of us.”
The executives would not say how much Apache has spent on Kitimat LNG so far, but it has been estimated at $2 billion just this year.Upgrading the old forest service road to a modern highway capable of supporting heavy truck traffic was estimated to cost $25 million Kitimat LNG officials said late last year.
Fair price
As for the selling price, Farris said that company will hold out for the best deal, saying that Apache has got a “fair price” for international assets that is has already sold, adding that when it comes to Kitimat and Wheatstone. “We won’t sell at prices that don’t make sense,” whether that comes from a package deal with the northeast BC shale assets or through the capital markets.
Overall, Apache Corporation is making money, announcing second-quarter 2014 earnings of $505 million Net cash provided by operating activities totaled approximately $2.3 billion in second-quarter 2014, compared with $2.8 billion in the prior year, with cash from operations before changes in operating assets and liabilities totaling $2.2 billion, compared with $2.6 billion in second-quarter 2013.
In the quarterly report news release, Farris said, “Record-setting performance by our Permian Region continues to drive strong results for the company… Apache’s onshore North American liquids production increased 18 percent on a pro forma basis in the second-quarter 2014 compared with the same period a year ago”
Although some enviromental groups and First Nations are claiming victory in the Apache divestiture, it is clear that those activities had negiligble impact on the decision, which was driven in part by the demands of a New York hedge fund and by the growing uncertainty in the LNG market as Asian countries seek natural gas at much lower North American prices. As the old Godfather movies often said, “It’s not personal, it’s business.”
Apache’s exit, however, does increase the uncertainty in both the short term and long term development of LNG export terminals in northwestern BC, and clearly shows that Premier Christy Clark made a mistake in promising that the provincial economy will boom thanks to LNG.
Both Premier Clark and LNG Minister Rich Coleman were unavailable to the media Thursday. Coleman’s office did send an e-mail tothe media saying, “With 16 LNG proposals involving over 30 partners, we recognize partnerships will change over time, as companies make decisions that make commercial sense for their business. It’s the nature of the business and the energy sector.”
Shell reports
Little noticed in the media attention over Apache, was the fact Royal Dutch Shell also issued its quarterly report early Thursday. Unlike Apache, Shell is still investing in LNG projects around the world, and getting returns from existing LNG projects, while divesting under performing natural gas assets both upstream and downstream. There is no mention of LNG Canada and Kitimat in the report. In a statement issued with the quarterly report Royal Dutch Shell Chief Executive Officer Ben van Beurden commented in part:
I am determined to get a tighter grip on business performance management in the company, and improve thebalance between growth and returns. Our financial performance for the second quarter of 2014 was more robust than year-ago levels but I want tosee stronger, more competitive results right across the company, particularly in Oil Products and NorthAmerica resources plays….
Sharper accountability in the company means that we are targeting our growth investment more effectively,focusing on areas of the business where performance improvement is most needed, and driving asset sales innon-strategic positions….
We see attractive growth opportunities there such as natural gas integration and liquids-rich shales. We are taking firm actions to improve Shell’s capital efficiency by selling selected assets and making tougher project decisions. We have completed some $8 billion of asset sales so far in 2014. This represents good progress towards our targets to focus the portfolio, and to maintain the financial framework in robust health.
A New York hedge fund, also known as an aggressive activist investor, which just bought a huge stake in Apache, is urging the company to get out of the Kitimat LNG project.
Numerous media reports say that Jana Partners recently bought a one billion dollar stake in the Houston and Calgary based oil and natural gas producer.
Bloomberg reports that Jana is a $10 billion hedge-fund firm run by Barry Rosenstein “known for pushing corporate managements to make changes”
According to both Bloomberg and theWall Street Journal, Jana wants Apache to get out of LNG projects in both Canada and Australia and concentrate on the United States. Bloomberg says
Jana said it has “engaged in discussions with management” and urged Apache to sell its international businesses to focus on U.S. shale opportunities, exit its investment in liquefied natural gas, and be more forthcoming about how much oil and gas lie beneath its holdings in West Texas’s Permian basin, among other demands.
The Wall Street Journal says Jana believes that Apache should free up cash flow:
by exiting two major projects in Canada and Australia that aim to export natural gas, which will take years and billions of dollars to fully develop. If the company doesn’t take further steps to increase its value,
“Investors are unimpressed by [Apache]’s global diversification and have voted with their feet,” Jana wrote in a letter to investors on Monday that was reviewed by The Wall Street Journal.
Investors apparently consider the Kitimat project a drain on Apache’s capital, so far costing $2 billion in 2014. The hedge fund said the company had poor performance compared with rivals, several of which are pure-play companies that drill exclusively in U.S. shale formations such as the Permian Basin. Jana also wants Apache to consider selling itself.
According to the Wall Street Journal, Apache raised $10 billion from selling assets around the world. In both February and May Apache said it is looking for a buyer for some of its stake in Kitimat LNG.
In Australia,Bloomberg says Apache is in early discussions with potential buyers for its stake in the $27-billion Wheatstone LNG project in Western Australia, which like Kitimat LNG it operates in partnership with Chevron. First LNG deliveries from Wheatstone are expected in 2016.
Bloomberg quotes a Jana newsletter as saying that selling Wheatstone and its stake in Kitimat would free $3 billion to $4 billion cash to fund share buybacks and reduce future spending risks.
A Calgary-based spokesman for Apache told the Financial Post said joint marketing efforts for LNG by the company and Chevron on the project are progressing, but did not offer detail. It is well known that Kitimat LNG has had a problem finding customers for the project, due to the increasing volatility of the LNG marketplace.
The Shell-led LNG Canada project has customers in the partners, KoGas, Mitsubishi and PetroChina but is also under pressure due to growing costs.
Apache management has been active over the past 12+ months managing the portfolio. Since the February 2014 analyst meeting where the baseline expectation was that the LNG business would be retained (selling down the 50% interest in Kitimat has been a consistent goal), there has been a change in Apache’s messaging on the topic. Recent investor presentations and press articles have suggested all or part of Wheatstone could be monetized (we remove LNG capex from our EV/DACF target multiple valuation as a result). From this perspective, Jana’s proposal is likely to reach more sympathetic ears at Apache (today relative to 6 months ago), in our view. The good news for current shareholders is that the substance of the activist proposal has likely already been substantially evaluated by management and a process to this end could already be underway, if not nearing completion.
According to the Hedge Fund Letters, Jana is a very aggressive investment company
Jana Partners’ core investment strategy is primarily based upon a value-oriented (interestingly towards both value and growth stocks) and event-driven investment methodology with the ever-present tagline being “ignore the crowd”. Mr. Rosenstein…is often an activist investor, using Jana Partner’s capital (sometimes combined with others’, most famously with Carl Icahn) infusion into a company to promote change against management directives that he perceives as detrimental to shareholders.
1. Why was the study suddenly released after the province said it was “privileged?”
2. Did the apparently rushed release mean that the study, as far as the public is concerned, is incomplete?
3. While most people in Kitimat believed that the study would be a wide ranging look at all parameters of industrial development in the valley, it was limited to just two factors, sulphur dioxide and nitrogen dioxide.
4. It appears that everyone involved were consulted prior to the release with one key execption, the District of Kitimat. Why?
5. The study appears to have changed in its criterion from the time of the request for proposal and the final release one issue—an oil export terminal, which went from “crude” in the request for proposal to refined in the final report.
Clouds over Douglas Channel. (Robin Rowland/Northwest Coast Energy News)`
While the study is spun has a showing that industrial development in the Kitimat Valley can proceed as long as the environment is properly managed, the gaps and the spin will likely bring doubt to the results. That means that a wider ranging and truly independent study of the air shed is needed so that both residents and industry can then make the proper decisions.
In October 2013, the Ministry of the Environment issues a “request for proposal” to “study potential cumulative effects to environment and human health from existing and proposed industrial facilities in the Kitimat airshed.” to be filed by March 31, 2014.
The Province will fund a $650,000 scientific study to help inform regulatory and policy development for future industrial activity in the Kitimat area. The goal is to ensure the potential impacts from industrial air emissions are clearly understood prior to new projects being approved and in operation.
The Kitimat Airshed Impact Assessment Project will look at the cumulative effects of existing and proposed industrial air emissions in the airshed. These include emissions from: an existing aluminium smelter, three proposed LNG terminals, a proposed oil refinery, a crude-oil export facility, and gas-turbine-powered electrical generation facilities. The study will focus on sulphur dioxide and nitrogen dioxide emissions from these facilities.
The study will assess the impact of emissions through a number of scenarios, including their potential effects on water and soil, as well as on vegetation and human health from direct exposure.
With that news release, it appears that many people assumed that “cumulative effects of existing and proposed industrial air emissions in the air shed,” would include all possible scenarios and contaminants.
The report, when it was released on Friday, covered just the “focus” sulphur dioxide and nitrogen dioxide and no other factors in air quality.
Crude or refined oil export?
As Northwest Coast Energy News noted that the report, as released, doesn’t include any references to the Enbridge Northern Gateway project, even though Northern Gateway is a source of “proposed industrial air emissions in the air shed.” The request for proposal also mentions “a crude-oil export facility” but the report as issued concerns a marine terminal for Black’s refinery
The products will be exported via a marine terminal on the Douglas Channel. Projected volumes include 320,000 barrels per day of diesel fuel, 110,000 barrels per day of gasoline and 60,000 barrels per day of jet fuel.
The map in the main report clearly shows that the study concerned the “Kitimat Clean Refinery Port” not a crude oil export facility—in other words likely Enbridge Northern Gateway.
Kitimat excluded
On October 21, 2013, District of Kitimat Council endorsed a motion by former Councillor Corinne Scott:
“The BC Government has recently announced a budget of $650,000 to study the cumulative effects on the air quality due to the proposed industrial development in the District of Kitimat. It would be beneficial to have a representative from the District of Kitimat as an active participant on the committee to provide input and feedback as the study progresses.”
At the time Chief Adminstrative Officer Ron Poole told council that the minister’s office had called and promised to “involve the District.”
At that meeting, Councillor Mary Murphy reported that member were “vocal” at the Union of BC Municpalities that it was essential that Kitimat be involved. Councillors suggested that the study be wide ranging and include emissions already in the area and residual emissions left over from the closed Eurocan and Methaex operations.
The provincial final air shed report makes no mention at all of the District of Kitimat, Eurocan or Methanex.
In April, 2014, after the March 31, reporting deadine, the District and Council had heard nothing from the province. So in April, District Council passed a motion asking for a report on the status of the study.
Crown Privilege
In June, the province refused to release the report to lawyers involved in a suit against the Environmental Assessment Board which is challenging Rio Tinto Alcans’ permit to increase sulphur dixoide emission in the valley. According to the Globe and Mail, Dennis Doyle, a lawyer with the Ministry of the Attorney General, in the RTA suit, wrote to the Environmental Law Centre in Victoria
In a follow-up letter dated June 12, Mr. Doyle said, “On the matter of the Kitimat Airshed Study I am instructed that this report was prepared to guide development of government policy on industrial development in the Kitimat area and to assist the executive council in its ongoing deliberations. It is not a report that was prepared for the Respondent and played no part of the decision-making process for the permit amendment which is now under appeal.”
The EAB told the province to respond to that question by July 18. Instead there was a hastily called news conference and the report was released. However, a close look at the report shows that it was likely rushed to meet the EAB deadine and was incomplete—rather surprising for a report that was supposed to be complete by March 31.
Rushed report
What evidence is there that the report was rushed out by the Ministry of the Environment? The most compelling indication is that instead of a public-friendly Summary Report with an executive summary and clear conclusions, there was nothing more than a short Power Point presentation.
Most people in Kitimat who follow the energy debate are familiar with the approach of combining a readable summary with technical data. It is most evident in the report of the Enbridge Northern Gateway Joint Review, which issued a relative short summary, Connections along with the long technical report, Considerations.
Let’s take as a prime example, the original report on the Kitimat airshed commissioned by Rio Tinto Alcan. In that case, ESSA Technologies Ltd of Vancouver, the company hired by the RTA Kitimat Modernization Project to study the effects of increased sulphur dioxide emissions in the Kitimat Valley, issued three documents, an easy to understand 37-page summary report, a much longer 456 page Technical Assessment Report and a third 332 page volume of appendices, technical data and tables.
It was the same company, ESSA Technologies, that was retained by the province to do the much larger study of the airshed. However, the only public-friendly information was the 16 page highly simplified Power Point presentation.
The ESSA summary report for RTA shows in plain language, the reasons for its conclusions that the increased sulphur dioxide from KMP on human health “is characterized as moderate, an acceptable impact, but in need of closer scrutiny with moderate monitoring.” That report also outlines the limitations and uncertainties of the study.
There was no similar plain language summary released for the overall provincial air shed study, even though it was produced by the same company and came to similar conclusions. To find any limitations or uncertainties in the provincial air shed study you have to do a computer search for those key words.
So it is apparent that intended audience for the report is not really those who live in Kitimat, where over the past five years there is wide knowledge that a summary release along with a technical report is considered a standard procedure.
Kitimat not consulted
At the Friday news conference, reporters asked Environment Minister Mary Polak several times about the delay in releasing the report, and then why it was suddenly released.
In answer to the initial question, Polak said, “We had always intended to release it.” She refused to comment on the claim of cabinet privilege, saying that was the responsibility of government lawyers at the Ministry of the Attorney General. She said that the government had received the March 31 report “by the end of April and “it went through quite a rigorous and thorough review by different agencies… we are satisfied now that the findings have been given the kind of rigorous overview and we’re pleased with what has resulted from that.”
Polak said the Haisla Nation were consulted before the commissioning of the report.
Asked again about who the BC government consulted during the review period, she replied, “There were a number of other groups involved in technical review, so not just Ministry of Environment, you’ll be aware of Northern Health authority, but Ministry of Natural Gas Development, Health Canada, Environment Canada and also specialist reviewers from the Province of Quebec, the University of Helsinki, UBC, also private consultants. Then we spent some time going over and having a technical review with Gitga’at and Coastal Coastal First Nations. So it was a matter of ensuring that we had done the very best review of the work before the occasion on which we released it.”
Which leaves one big question, why was the Province of Quebec and the University of Helsinki consulted and Kitimat, despite requests, was not?
Not in the report, not my department
The provincial government called for a report on the “cumulative effects of existing and proposed industrial air emissions” and noted it would focus “ focus on sulphur dioxide and nitrogen dioxide emissions from these facilities.” It is clear that the report did not go beyond the narrow focus on those two substances.
At the Vancouver news conference, a reporter asked Polak why green house gases were not included.
She replied, “That’s not what this study was intended to look at. This department deals with pollutants and pollution and protecting our environment from it, whereas GHG [green house gas] emissions are dealt with in our department around climate change and climate action. These particular substances have an immediate impact on human health and vegetative health and the receiving environment generally unlike GHGs which are a more global impacted and of course have an impact on climate change. This study only looked at those pollutants sulphur doixide and nitrogen dioxide
Then a second reporter asked here about particulate matter, to which Polak replied, “Coming from the Fraser Valley I am very aware of the impact of particulate matter. Any industrial development that we permit in British Columbia or receives an environmental assessment certificate, particulate matter and the release of particulate matter is one of the things that gets evaluated as we determine whether or not to grant those permits. Or to put stipulations on those permits in order to ensure a reduction or management of particulate matter. That’s where that’s dealt with and we have some pretty good understanding of how that operates. We also have some modelling from this study.
“The reason this study didn’t report on that because we hadn’t asked them to. We specifically wanted to get at the issue of sulphur disoxide and nitrogen dioxide but please do not take frm that because it’s not in the study, it doesn’t get looked at. It simply gets looked at in a different process. In this case it was the understanding of the Kitimat air shed with respect to sulphur dixoide and nitrogen dioxide that we needed to have a better answers and better information.”
In other words, despite what the original proposal said: “The goal is to ensure the potential impacts from industrial air emissions are clearly understood prior to new projects being approved and in operation,” the provincial government is content to wait until the permit phase to consider particulate matter, rather than include particulate matter in the long term planning for the air shed.
And for green house gases, the same attitude seems to apply, either it’s not her department or it will be dealt with sometime in the future.
What’s going on in the air shed?
Although the provincial government has been able to spin that the air shed report clears the way for more industrial development in the region, the report isn’t much help for long term planning for those both for and against industrial development in the valley.
First one has to wonder just how comprehensive was the study, even when it comes to sulphur dioxide and nitrogen dioxide?
The report for Rio Tinto Alcan for just one substance—sulphur dixoide—from one industry—aluminum smelting–led to a 456 page technical report with 332 pages of appendices.
The provincial technical report adds one more substance, nitrogen dioxide, and adds four LNG facilities, an oil refinery, different export terminals for those industries, and two hydro generating stations plus related shipping, including a passing mention of vehicular and train traffic. The new report is 363 pages, including the appendices. (It should be noted that the air shed report does reference some of the information in the RTA report)
The various studies for the Enbridge Northern Gateway, which often contained material on air emissions, included a much longer list of what in industry jargon are called CPOC “chemicals of potential concern,” including chemicals that might be released in trace amounts from the Northern Gateway terminal, but may be of more concern from LNG projects. Who knows unless those substances are studied?
As was required by the Joint Review Panel, Enbridge also studied potential problems from accidental release of air-borne contaminants from the Northern Gateway project. There is no mention of accidental release in the current air shed study.
Although the increase in truck traffic in Kitimat is clearly visible to people who live in the town, the air shed report also speculates that with LNG and a possible refinery, there will also be a significant increase in rail traffic coming into Kitimat, hauled, of course, by diesel locomotives, which the report says is “expected to be conservatively captured within the background concentration adjustment.”
Can the Valley “handle industrial expansion”
Stakeholders in the region from the District of Kitimat to the Gitga’at First Nation to various environmental groups asked for a comprehensive review of what is going to happen in the Kitimat air shed with industrial expansion.
So the answer to the question can the valley “handle industrial expansion” after the flawed and limited report from the provincial government is not “yes,” but “we don’t know yet.”
It appears that the report is part of Christy Clark’s ongoing campaign that LNG will save the provincial economy.
There are two factors the report ignores.
First the energy companies are going to make their final investment decision on cold hard facts, including their own assessment of the potential problems from the air shed, not spin from the provincial government.
Second, until there is a proper air shed study, the First Nations, including the Haisla in Kitimat, the Gitga’at at Hartley Bay, the Kitselas in Terrace will not have solid evidence to make a decision on the details of the LNG or refinery development on their traditional territory and increased ship traffic along the coast and that will come into immediate conflict with the Supreme Court ruling on the Tsilhqot’in decision and the finding that “Whether a particular use is irreconcilable with the ability of succeeding generations to benefit from the land will be a matter to be determined when the issue arises.”
There is a new Orwellian phrase used by both the federal and provincial government. Every report is “independent” and “science-based,” although all they all tend to support the policy of the commissioning agency.
What the Kitimat Valley, Douglas Channel and the Terrace region need is a truly independent and truly science based and truly comprehensive evaluation of the air shed. At the moment, that doesn’t exist. It should whether it comes from industry or if the local governments can find the budget to fund a proper study or some combination of the two.
The long awaited Kitimat air shed study, released by the province Friday, July 17, 2014, says “that with proper management, Kitimat’s ai rshed can safely accommodate new industrial growth” without major affects on either human health or the environment. Link to news release :Study shows Kitimat airshed can handle new industrial development
The Kitimat Airshed Assessment looked at the cumulative effects of industrial air emissions, primarily sulphur and nitrogen oxides, and their potential impacts on both human health and the environment from
Rio Tinto Alcan’s existing aluminium smelter and its planned modernization
David Blacks proposed “Kitimat Clean” oil refinery at Onion flats
Four proposed LNG facilities; Shell-led LNG Canada, Chevron lead Kitimat LNG, the floating Douglas Channel LNG at the old log dump and a second floating LNG project called Triton.
BC Hydro gas turbine powered electrical generation facilities in Kitimat and near Terrace
Predicted increased to marine shipping in Douglas Channel.
The study was divided into two zones.
Health results were first examined for Kitimat townsite, the Kitimat Industrial Service Centre and Kitamaat Village.
The wider study included Gitga’at Old Town, Hartley Bay (Kulkayu), Kitimat-Stikine, Kitselas, Kitsumkaylum, Kshish, and Terrace.
Enbridge missing
There was one big factor missing from the study, it does not include the Enbridge Northern Gateway project, although the consultants who did the study do cite a couple of the air quality studies that Enbridge filed with the Northern Gateway Joint Review Panel. That despite the fact the Joint Review Panel under Condition 82 required that Enbridge file with the NEB for approval, at least four months prior to commencing construction, “an Air Quality Emissions Management and Soil Monitoring Plan for the Kitimat Terminal.”
The JRP report acknowledged that emissions from the Enbridge terminal would be minimal but would contribute to the cumulative effect of pollutant emissions from other industries and required Enbridge to consult with the District of Kitimat, the environment ministries and other industries in planning for emissions.
The map from the airshed study also shows that the possible marine terminal for David Black’s proposed Kitimat Clean refinery project is at or close to where the proposed Enbridge Northern Gateway terminal would be.
Health and environment
The study looked at proposed emission levels and the effect of emissions elsewhere in the world and then compared those studies with the Kitimat Valley. It found that the risk of sulphur dioxide was “directly related to proximity to industrial area”–largely the Kitimat Service Centre area–and that there would be a minor increase in respiratory incidents of 0.5 per cent to 2 per cent, with a slight increase of nitrogen dioxide but those were within existing guidelines.
As for environmental impact, the study says nitrogen dioxide impacts will be low. There wil be “some increased risk of soil impacts” from sulphur dioxide. The study says there will be “no negative impacts to vegetation across all scenarios” but did find “potential for acidification” of seven small lakes. Lakelese Lake is not one of those affected.
The study also doesn’t include particulate matter and although it does consider climate change, did not take into consideration possible increase of green house gases in the Kitimat Valley.
The consultants, Esssa Technologies of Vancouver, based its findings on an earlier study by Rio Tinto Alcan on emissions from the Kitimat Modernization Project and worked on those findings by adding new industries and a greater area to the models they used.
The province and industry says they will continue to monitor air, water, soil and vegetation “to ensure these values are protected.”
The higher levels of sulphur dioxide emissions from the Rio Tinto Alcan Kitimat Mondernization Project will be allowed to continue under the current permit. Environment Minister Mary Polack told reporters that will only change if the current court challenge to the sulphur dioxide levels are successful.
A map by Essa Technologies and Environment BC of the Kitimat valley airshed study shows locations for existing and proposed industrial or infrastructure development. It does not include the proposed Enbridge Northern Gateway project.
What Northern Gateway Joint Review said about emissions in the air shed
Among the 209 conditions imposed on the Enbridge Northern Gateway project is No. 82, an Air Quality Emissions Management and Soil Monitoring Plan.
Northern Gateway must file with the NEB for approval, at least 4 months prior to commencing construction, an Air Quality Emissions Management and Soil Monitoring Plan for the Kitimat Terminal…
This plan must include:
a) a description of the baseline, pre-construction conditions, informed by relevant modelling results and recent, existing monitor data;
b) locations of both air and soil monitoring sites on a map or diagram, including the rationale for the locations selected and the timing for installation;
c) methods and schedule of ambient monitoring for contaminants of potential concern in air (e.g., NO2, SO2, and H2S) and in soils (e.g., pH; major plant nutrients K, P, N, and S; and trace metals), and emissions source tracking;
d) data recording, assessment, and reporting details;
e) a description of the public communication and complaint response process;
f) additional measures that will be implemented as a result of monitoring data or ongoing concern;
g) the criteria or thresholds that will require implementing additional measures;
h) a description of the plan updating process;
i) a summary of Northern Gateway’s consultation with Environmental Canada and the British Columbia Ministry of Environment regarding the Air Quality Emissions Management and Soil Monitoring Plan. This summary must include any issues or concerns raised regarding the plan and how Northern Gateway has addressed or responded to them; and
j) a summary of discussions with the District of Kitimat and local or regional industrial emitters regarding collaborating on the plan’s design and implementation.
One of the things that the Joint Review Panel noted in requiring Enbridge Northern Gateway to have an updated plan and to collaborate with Kitimat and other industries is that levels of acceptable sulphur doixide in the atmosphere are changing and much of Northern Gateway’s modelling was based on standards that were becoming obsolete.
In the Joint Review Panel report, section 8.7, the JRP said:
Northern Gateway assessed changes in the atmospheric environment, including a modelled assessment of criteria air contaminant, hazardous air pollutant, and greenhouse gas emissions. Criteria air contaminants assessed by modelling included sulphur dioxides, nitrogen oxides, carbon monoxide, hydrogen sulphide, and particulate matter. Hazardous air pollutants were also modelled and included total volatile organic compounds (VOCs), benzene, toluene, ethylbenzene, and xylene (combined, BTEX), as well as hydrogen fluoride.
The provincial air shed report considered only two contaminants, sulphur dioxide and nitrogen dioxide.
Northern Gateway said there would be minimal atmospheric emissions from the construction and operation of the pipeline. The focus was on the Kitimat marine terminal.
The modelled assessment for the Kitimat Terminal included emissions associated with terminal operations, with the largest sources being vehicle traffic and
hydrocarbon storage tanks Northern Gateway used the conservative assumption of continuous ship berthing…emission rate) in order to capture the worst case scenario of concurrent adverse meteorology and maximum potential emissions. From the model results, Northern Gateway predicted that sulphur dioxide associated with operating the Kitimat Terminal would exceed the provincial air quality objectives (Level A) for all time periods. This after mitigation.
Environment Canada said that Northern Gateway took appropriate measures in designing and siting its proposed facilities to minimize adverse effects on air quality. It acknowledged Northern Gateway’s commitments to adopt best practices and to use economically-feasible best-available technologies in designing the Kitimat Terminal to minimize effects on air quality.
Northern Gateway ackknowledged that “due to the project interacting with nearby topographical features, where the largest sulphur dioxide emissions are from the
marine vessels, the highest concentrations were predicted to occur infrequently and immediately adjacent to the terminal fence line.
Northern Gateway, Transport Canada, the Heiltsuk First Nation and other stakeholders did acknowledge that eventually the vessels coming to Kitimat “would be subject to the reduced sulphur fuel requirements associated with the joint United States-Canada North American Emission Control Area.
Based on this, marine fuel sulphur requirements permitted in Canadian coastal waters (200-nautical-mile limit) would be 1.0 per cent in 2012, reducing further to 0.1 per cent by 2015. Northern Gateway predicted that sulphur dioxide emissions from marine vessels should be approximately 96 per cent lower than modelled once these new international fuel standards take effect. Northern Gateway also predicted exceedances of provincial air quality objectives in the area for carbon monoxide, particulate matter, hydrogen sulphide, and total reduced sulphur.
Northern Gateway said there “no exceedances of hazardous air pollutant guidelines were predicted as a result of the project itself” but there could be a cumulative effect with other industries in the Kitimat waterfront.
The Joint Review Panel ruled:
By the Kitimat Terminal’s proposed in-service date, there will have been significant changes to the number and magnitude of existing air emission sources since
the provincial emission inventory of 2000 was compiled, and since Northern Gateway completed its modelling assessment.
Regarding the sulphur emissions attributable to the terminal, marine vessel berthing would account for 97 per cent. Given that Northern Gateway used conservative assumptions regarding berthing in the modelling and that regulations coming into force regarding the sulphur content of marine fuels would further decrease predicted missions, the Panel finds that the modelling results presented in the application and subsequent filings are not predictive of the realistic potential effects on local air quality.
Based on the filed information about sulphur dioxide emissions, the Panel is satisfied that new modelling based on the updated information would indicate that sulphur dioxide associated with the Kitimat Terminal’s operations would not exceed provincial air quality objectives.
The Panel requires that further modelling, reflecting the current level of activity, equipment, and marine sources, must inform Northern Gateway’s design of the Air Quality Emissions Management and Soil Monitoring Plan for the Kitimat Terminal.
Updated modelling would be used to inform the monitoring program’s design, as well as to help ensure that the monitors are placed effectively to monitor both human and environmental health.
Cumulative effects on the atmospheric environment
Northern Gateway said that, during the Kitimat Terminal’s operations, tank maintenance and marine berthing would add a potential measureable contribution to regional cumulative environmental effects from air emissions. Northern Gateway incorporated the existing industrial sources in the Kitimat area in its modelling assessment, using the British Columbia Ministry of Environment’s emissions inventory. At the time the modelling was run, the available emission estimates from 2000 were used to characterize the existing sources in the airshed.
The Joint Review panel noted that over the time of the hearings”it heard of many changes to the industrial make-up of the Kitimat area since the 2000 emissions inventory was developed.”
Combining these with the predicted project emissions, the model results indicated predicted exceedances of regulatory thresholds for sulphur dioxide, carbon monoxide, particulate matter, hydrogen sulphide, and total reduced sulfur, though not at every averaging period.
Northern Gateway said that, due to the existing large emission sources and the region’s complex meteorology and topography, the exceedances are primarily attributable to the other industrial activities around Kitimat and not from the project itself.
Because there would be adverse project effects remaining after mitigation that could combine with the effects of other past, present, and future projects, and because cumulative effects are of primary concern, the Panel’s significance recommendation is given below in its analysis of cumulative effects.
The Panel finds that the emissions associated with the Kitimat Terminal’s operation would be minimal compared to the existing sources presented.
Although the modelled cumulative emissions exceeded many regulatory thresholds, the exceedances were predicted based on an out-of-date emissions inventory, and were predicted to occur prior to adding emissions from the project. Based on the information about sulphur dioxide emissions on the record, in addition to the modelling included in the application, the Panel is satisfied that new modelling based on updated information would indicate that sulphur dioxide associated with the Kitimat Terminal’s operations would not contribute to an increased exceedance of provincial air quality objectives, either through limited emissions or berthing management to limit emissions in particularly adverse conditions.
One small step for the Supreme Court of Canada, one giant leap for mankind.
A barely-noticed* part of the unanimous Supreme Court of Canada decision on Thursday recognizing the rights and title of the Tsilhqot’in First Nation to their traditional territory may—may— change the way resource companies operate, not just in Canada but around the world.
Members of the Spirit of Kitlope Dancers, VIcki Amos, Sandra Grant, Gail Amos and Roberta Grant, celebrate the Supreme Court decision at the Hailsa-owned old hospital site, June 26, 2014 (Robin Rowland/Northwest Coast Energy News)
The ruling isn’t just about consultation, reconciliation and accommodation, it’s about the future.
A close reading of the decision, written by Chief Justice Beverly McLaughlin says the Crown, in its relations with First Nations, cannot “deprive future generations of the benefit of the land.”
While the ruling applies only to First Nations, it upholds the First Nations’ concept of “stewards of the land” for the future and thus could protect the environment for all future generations, aboriginal and non-aboriginal, in Canada and perhaps around the world.
The ruling says:
Aboriginal title, however, comes with an important restriction — it is collective title held not only for the present generation but for all succeeding generations. This means it cannot be alienated except to the Crown or encumbered in ways that would prevent future generations of the group from using and enjoying it. Nor can the land be developed or misused in a way that would substantially deprive future generations of the benefit of the land. Some changes — even permanent changes – to the land may be possible. Whether a particular use is irreconcilable with the ability of succeeding generations to benefit from the land will be a matter to be determined when the issue arises.
While the Supreme Court ruling was about a case in British Columbia, where previous decisions have shown that in that province, aboriginal title was not extinguished at the time of European settlement and, what the court calls, “declaration of sovereignty,” by the colonial powers, the decision is already seen as applying to First Nations across the country where they can prove long term use of the land.
Already there are those in the business community and among the conservative pundits who are raising the alarms about First Nations blocking resource development.
Perhaps, just perhaps, some big corporations are quietly approving the Supreme Court decision because it gives responsible companies a roadmap for their operations, that roadmap will, as the years go by, reduce, not increase, uncertainty.
Some companies, including the world’s biggest corporations are now thinking about the future. It is likely those companies are already planning new procedures and practices that will comply with the Supreme Court’s requirement of consultation and consent on First Nations’ traditional territory.
In May, at an LNG event in Vancouver, I was speaking to a high ranking energy executive whose responsibilities cover half the planet.
“Everything has changed in the past five years,” he told me. “Once all we had to do is talk to presidents and prime ministers, now we listen to everybody.”
What changed, he said, was the rise of social media, Facebook and Twitter. “In one case five women in one small town shut down a project that would have been worth millions.” (He would not tell me the specifics and assured me it was true but he wasn’t prepared to give the details because it wasn’t his company that was involved).
“Not all my colleagues agree with me,” he said, “But in the end it’s good for business, if we genuinely engage with a community, we actually save on costs and get into profit sooner.” He said that smart companies in the energy sector have staff constantly monitoring social media, not to identify “enemies” but so top management can be aware of growing issues that may complicate their future operations.
This company generally, so far, has good relations with First Nations in British Columbia (although its record elsewhere in the world has been questionable at times in the past).
The entrance to the Kildala Arm off Douglas Channel, September, 2013. (Robin Rowland/Northwest Coast Energy News)
If truly responsible resource and other companies either willingly or are compelled to change their practices and investment decisions on First Nations’ land so that those projects consider future generations, and still make a profit, (which my source says they can) then it is likely that the companies will then adopt those practices in other parts of Canada where Rights and Title are not an issue and then around the world.
To use a marketplace phrase, it isn’t going to be “an easy sell.” For more than half a century now, the world has been plagued by the idea from Milton Friedman and other economists that a corporation has only one responsibility to its bottom line and “shareholder value.” With companies that still follow the no responsibility culture, comes the race to the bottom and the environmental degradation we have seen increasing in recent years.
As The Globe and Mail reported, the Business Council of British Columbia, an intervenor, said in its submission
Business groups say the Tsilhqot’in’s approach to title threatens the economy. “A territorial approach undermines the ability of corporations, and indeed First Nations, to ensure the global competitiveness that is required to attract capital … within natural resource sectors dependent on the land base,” a coalition of B.C. business groups, intervening in the case, told the Supreme Court in its written argument.
For years now global competitiveness has been used an excuse for deliberately ignoring or turning a blind eye to practices that “substantially deprive future generations of the benefit of the land.”
Even if no high court in any another country matches or cities the Supreme Court of Canada decision, (and they should for the rights of all indigenous people) smart companies will increasingly recognize their responsibility not to “deprive future generations of the benefit of the land.”
If those companies don’t change, as the years go on and the environmental crisis worsens, courts in other nations will likely cite the Supreme Court of Canada and force those companies to be responsible.
In the long term, in the future cited by the Chief Justice, those companies that do work toward a true “benefit of the land” for everyone will have a competitive advantage, perhaps not in the coming years, but certainly in the coming decades.
To use another phrase, respecting the rights and title of First Nations and the stewardship of the land will be a “net benefit” to Canada in the 21st century, even if the bean counters don’t believe it.
Legal recognition of the concept of stewardship by a high court might also save the planet from total disaster.
*(Barely-noticed: I can only find one media account that mentions in passing, an op ed opinion piece in the Globe and Mailby Vancouver lawyer Albert Hudec Aboriginal court ruling won’t resolve real-world resource issues)
The response to the Joint Review Panel decision on the Northern Gateway, beginning in December and continuing until this Canada Day, both in the public and in the media is sharply divided by the Rocky Mountains.
A lof of Albertans, most of the energy companies and many in the media, especially the Toronto-based business press, keep telling Canadians that the NEB is an independent, quasi-judicial body, that carefully weighs the scientific and other evidence before coming to a conclusion.
Prime Minister Stephen Harper stands up in Question Period and from his prepared script also claims the JRP and NEB are independent bodies.
Most of those writing about the attitude of the National Energy Board have never attended a single hearing, As for the Joint Review,. those from the major media who did attend were only there for the opening and closing sessions.
Members of the Northern Gateway Joint Review Panel, left to right, Kenneth Bateman, chair Sheila Leggett and Hans Matthews make notes at the June 25, 2012 hearings at the Haisla Recreation Centre, Kitamaat Village. A map of Douglas Channel can be seen behind the panel. (Robin Rowland/Northwest Coast Energy News)
In British Columbia, those attended the Northern Gateway Joint Review sessions saw a strange and arcane bureaucratic system with rules of evidence and procedure often tilted toward a proponent in the energy sector.
Those rules of evidence were created for the cosy club atmosphere of the NEB in Calgary where mostly there are friendly hearings attended only by the proponents and energy sector lawyers. Those same rules were infuriating to those in northwest British Columbia trying and failing to persuade the JRP to take seriously many of the concerns of the region. The rules of evidence and procedure were baffling to lawyers practicing in BC; even the highly experienced lawyers from the BC Department of Justice were chewed out by the JRP in Prince George for not following proper procedures.
The tail fins of a humpback whale are seen in Douglas Channel near Bish Cove, as a fishing boat speeds toward Kitimat harbour in a rain storm on Aug. 21, 2013. (Robin Rowland/Northwest Coast Energy News)
The JRP seemed to believe that time stopped at the evidentiary deadline, and although it acknowledged that Northern Gateway was a 50 year project, the panel didn’t need to know anything new.
A careful reading of the two volumes of the Joint Review Panel report and decision clearly shows that JRP finding was not, as one columnist called it, a triumph of science over emotion, but a proceeding that was biased from the outset to find in favour of Enbridge. It is clear that even though the Joint Review Panel did impose 209 conditions on Northern Gateway, reading those almost 500 pages one sees time and time again that Northern Gateway’s evidence and assurances were accepted at face value, while the panel treated the evidence and testimony from opponents with a much higher level of skepticism.
Moving to Calgary
One of my sources once told me that the “NEB is nothing more than an extension of the Petroleum Club.” In the 1991 budget, then Prime Minister Brian Mulroney moved the NEB headquarters from Ottawa to Calgary as a political gift to Alberta.
At that time the move was also seen as practical, Alberta was still complaining no one in Ottawa was listening to it. So if the Conservative government moved the NEB to Calgary, it would be there listening to the oil patch. NEB offices were scattered across the country, consolidating them in Calgary seemed, at the time, to be a way of saving taxpayers’ money and enhancing internal communications.
Seen now, about 25 years later, it’s clear the NEB move from its Ottawa headquarters and regional offices to Calgary was a disaster waiting to happen. Over the past quarter century, despite its claims of independence, the NEB and its staff have become so embedded in the oil patch energy culture of Calgary that (probably subconsciously) the NEB has shown that it is largely incapable of really taking seriously the culture of British Columbia on issues such as the Northern Gateway and Kinder Morgan projects. The NEB Calgary culture is also colliding,with the concerns and culture of other parts of the country as diluted bitumen pipelines head eastward.
The Conservative omnibus bills that gutted environmental protection and speed up the review process has made things much worse–at least until this week.
Now the Supreme Court has sent a shot across the bow of the full steam ahead National Energy Board, compelling the board to put much more weight on the concerns of First Nations.
The decision upholding the Tsilhqot’in claim to its traditional territory means the NEB and any future joint review panel (whether involving multiple federal agencies or federal agencies and a province) are going to have to take the concerns of First Nations and indeed all Canadians a lot more seriously—and the future of the planet as well, as described in the first part of this analysis. Chief Justice Beverly McLaughlin wrote that on First Nations` traditional territory:
that it is collective title held not only for the present generation but for all succeeding generations. This means it cannot be alienated except to the Crown or encumbered in ways that would prevent future generations of the group from using and enjoying it.
“Future generations” is the key phrase.
Future generations could undermine that whole world view of the Joint Review Panel, since the panel so casually dismissed the fears of a major disaster on the coast, saying it was “unlikely” and could be “mitigated.”
The JRP basically had a so-what attitude to British Columbia, arguing that since parts of the British Columbia environment had already been degraded any future environmental problems would be minimal and could be “mitigated.”
Public interest
While in the introduction to its definition of the Public Interest, the JRP says
If approved and built, the Enbridge Northern Gateway Project could operate for 50 years or more. Sustainable development was an important factor in our environmental assessment and our consideration of the public interest. The project would have to meet today’s needs without compromising the ability of future generations.
Sounds like that might match the Chief Justice. But, as the old saying goes, the devil is in the details. And just a few paragraphs later, the JRP says:
Our assessment of the project’s effects on residents and communities Considering Northern Gateway’s project design, its commitments, and our conditions, we concluded that the project’s potential effects on people’s land, water, and resource use could be mitigated. We were not persuaded that construction and routine operations of the project would have a negative effect on the social fabric of communities in the project area. We also were not persuaded that the project would adversely affect the health and well being of people and communities along the route or in coastal areas. We found that the net overall economic effects of the project would be positive and would provide potential benefits and opportunities to those individuals and businesses that choose to participate in the project.
“Trust Enbridge”
The JRP’s attitude toward a major disaster was “trust Enbridge.”
We found that some level of risk is inherent in the Enbridge Northern Gateway project, and that no party could guarantee that a large spill would not occur. We found that a large spill, due to a malfunction or accident, from the pipeline facilities, terminal, or tankers, is not likely.
We found that Northern Gateway has taken steps to minimize the likelihood of a large spill through its precautionary design approach and its commitments to use innovative and redundant safety systems, such as its commitments to address human error, equipment failures, and its corporate safety culture. These commitments and all others made by the company
Oh well, the ecosystem will recover eventually—a conclusion that could be reached only by ignoring the evidence from Prince William Sound, site of the Exxon Valdez spill.
We found that, in the unlikely event of a large oil spill, there will be significant adverse environmental effects, and that functioning ecosystems recover through mitigation and natural processes.
We found that a large oil spill would not cause permanent, widespread damage to the environment. The extent of the significant adverse effects would depend on the circumstances associated with the spill. Scientific research from past spill events indicates that the environment recovers to a state that supports functioning ecosystems similar to those existing before the spill. We found that, in the unlikely event of a large oil spill, there would be significant adverse effects on lands, waters, or resources used by residents, communities, and Aboriginal groups.
We found that, in rare circumstances, a localized population or species could potentially be permanently affected by an oil spill. Scientific research from a past spill event indicates that this will not impact the recovery of functioning ecosystems.
In other words, some communities, probably aboriginal communities, would have be sacrificed in the public interest and the economics of Alberta while the economy of that part of British Columbia would be destroyed.
Will the JRP have to start over?
The environmental law community and First Nations leaders are already taking a look at another paragraph in the Supreme Court judgement. Paragraph 92 in lawyer speak.
At the celebration of the Supreme Court decision, on June 26, Gerald Amos welcomed the suggestion from lawyers that the ruling could force a re-examination of Northern Gateway. (Robin Rowland/Northwest Coast Energy News)
One of the many reports comes from West Coast Environmental Law which noted in an e-mail
[T]he Tsilhqot’in decision, Canada’s highest court brings home the implications of this for Enbridge and other project proponents:
Once title is established, it may be necessary for the Crown to reassess prior conduct in light of the new reality in order to faithfully discharge its fiduciary duty to the title-holding group going forward.
For example, if the Crown begins a project without consent prior to Aboriginal title being established, it may be required to cancel the project upon establishment of the title if continuation of the project would be unjustifiably infringing.
And what about the overhaul of environmental legislation in 2012 to smooth the way for pipeline and other industrial development?
The court notes: “Similarly, if legislation was validly enacted before title was established, such legislation may be rendered inapplicable going forward to the extent that it unjustifiably infringes Aboriginal title.”
Reset
In other words, the Supreme Court decision resets everything.
It could nullify the recent decision by the Prime Minister to permit the Northern Gateway to go ahead. Or it could mean, especially given the number of court challenges just to the JRP, that, in light of the Tsilhqot’in decision the panel will be ordered by a court to go back to the drawing board and reconsider its findings.
Then there are the pending challenges to the Harper decision allowing the Northern Gateway to go ahead. Sources told Northwest Coast Energy News that the first of a number of court challenges were to be filed last week. It is likely that after the holiday weekend, lawyers will be rewriting their filings and their briefs in light of the Tsilhqot’in decision and presenting the Federal Court with those challenges some time in July.
The justices of the Supreme Court did allow a public interest exemption on the use of First Nations land for a larger purpose, but there must now be genuine consultation and the public interest will likely have be proven beyond a reasonable doubt, it can’t just be the whim of a prime minister with a tame, unquestioning caucus who decides what is in the public interest.
Who consults whom?
In the decision, Chief Justice McLaughlin wrote:
Governments and individuals proposing to use or exploit land, whether before or after a declaration of Aboriginal title, can avoid a charge of infringement or failure to adequately consult by obtaining the consent of the interested Aboriginal group
and later
The right to control the land conferred by Aboriginal title means that governments and others seeking to use the land must obtain the consent of the Aboriginal title holders. If the Aboriginal group does not consent to the use, the government’s only recourse is to establish that the proposed incursion on the land is justified under s. 35 of the Constitution Act, 1982.
Compare that again with what the JRP said. As with the environmental impact it begins by saying:
The Panel finds that the magnitude, extent, and potential impacts of this project required an extensive program of public consultation. The Panel considers thorough and effective consultation to be a process that is inclusive of, and responsive to, all potentially-affected groups and individuals.
Then the JRP says:
The Panel notes that, among potentially-affected parties, there were differing perspectives on what constitutes a thorough and effective process of consultation. There were also different views among some parties about how consultation should occur, and their roles and responsibilities during consultation.
And then:
The Panel believes that it is critical for all parties to recognize and understand their respective roles and responsibilities for achieving effective dialogue during consultation. The Panel noted the principles of thorough and effective consultation at the beginning of this chapter. The Panel finds that these principles require that a process must provide timely, appropriate, and effective opportunities for all potentially-affected parties to learn about a project, provide their comments and concerns, and to discuss how these can be addressed by the applicant.
So what does it mean?
The JRP starts off by giving Northern Gateway a slap on the wrist:
The applicant [Enbridge] must be genuinely responsive. Affected parties have an ongoing and mutual responsibility to respond to opportunities for consultation, to communicate concerns they may have, and to discuss how these can be addressed.
But then it goes on in the same paragraph:
Consultation requires trust, mutual respect, and relationship-building. All parties have an obligation to seek a level of cultural fluency, in order to better understand the values, customs, needs, and preferences of the other parties involved in the consultation process. All parties may be required to adjust their expectations in response to the information, concerns, and interests raised and considered through the process. The Panel observed that this approach did not always occur in this proceeding.
Get the phrase “all parties.” It is clear here that the JRP is taking on the First Nations and other opponents for not seeing Northern Gateway’s point of view, since it accepts, as seen below, Northern Gateway’s contention that it is doing a good job with consultation,
And the word “trust.” Again the Alberta-bound JRP (the panel had no members from British Columbia, two from Alberta, one from Ontario) are saying “trust Enbridge.”
Unfortunately after a decade of operating in the northwest, and despite its spin, Enbridge has failed time and time again to establish trust with First Nations and it has equally failed to establish trust with a significant number non-aboriginal residents of the northwest.
The companies developing LNG projects have, for the most part, established a level of trust.
The joke up here is now so old it’s a cliche (but still unknown to the eastern media) where an LNG executive says, “We look at what Enbridge did and do the exact opposite.”
The Panel accepts Northern Gateway’s view that consultation is a process which should ensure that all parties are better informed through consultation, and that it involves being prepared to amend proposals in light of information received. In this regard, the Panel notes that Northern Gateway made numerous changes to the design and operation of the project in response to input provided by the public, landowners, governments, and stakeholders
In fact, Northern Gateway is still fumbling the ball.
It is true that Northern Gateway did change its plans and put another $500 million into the plans for the project–after a lot of public pressure and growing controversy during the JRP hearings over its plans.
JRP Chair Sheila Legget during the final arguments in Terrace, June 17, 2013. (Robin Rowland/Northwest Coast Energy News)
Equally telling was Northern Gateway’s dismissal in its final arguments (arguments accepted by the JRP) that there was no earthquake hazard in the region, despite two major earthquakes at Haida Gwaii and southern Alaska just months earlier, both of which shook Kitimat.
In the final oral arguments, Northern Gateway’s lawyer Richard Neufeld summarily dismissed the fears of the Haida and Heiltskuk First Nations about destruction of the herring spawning beds because, he said, first, the chances of a tanker disaster were unlikely and second, even if there was a tanker disaster it was even more unlikely that it would occur during the spawning season. (Not that the spawning season matters, herring beds in San Francisco Bay are still damaged years after a spill there).
Now with the Tsilhqot’in decision, Enbridge can no longer summarily dismiss those fears. The companies who have proposed liquefied natural gas projects are meeting with anyone, including avowed opponents, and opening dialogues, even if both sides continue to disagree. Despite its spin, accepted by the political pundits and eastern business media, those who live in the northwest know Northern Gateway’s consultations and engagement, so far, have mostly been with friendly groups and friendly audiences.
The Supreme Court decision is going to change that attitude in the coming weeks. If Enbridge wants Northern Gateway to go ahead, the company is going to have to genuinely engage with First Nations. Given all the damage created by Enbridge over the past decade, that engagement is unlikely to change anything.
The Supreme Court decision is going to have one more consequence.
Eventually, in a few years, the decision will negate that stupid attitude from the conservative media and some in the business community that the people of northwestern British Columbia are against all development. That was never true but it’s a convenient excuse for those columnists and conservatives not to question their own assumptions.
If the reporters and columnists had bothered to come up here, if the press-release dispatching business leaders had bothered to leave their executive suites, they’d know what northwestern BC wants is responsible and sustainable development, not quick in and out profits.
The Supreme Court decision means that any future industrial development in the northwest will be much different from anything seen in the past because First Nations must be involved from the beginning.
Given its sorry track record, it is unlikely that Enbridge will be part of that development. but others will profit, yes profit, from that failure.
In the coming years it is also likely that there will be a new approach to development from the National Energy Board after they begin to see their narrow oil-patch friendly approach and rulings struck down by the courts quoting the Tsilhqot’in decision.
The Haisla Nation have purchased the old hospital site in downtown Kitimat from the BC government and are planning what will likely be a multi-million dollar development across from City Centre that will include a condominium-hotel, a new shopping mall and a restaurant.
Premier Christy Clark came to Kitimat Tuesday to announce the sales agreement along with Haisla Nation Chief Counsellor Ellis Ross. The agreement also involves the District of Kitimat indicating the beginning of building a new phase in the sometimes strained relationship between the district council and the First Nation.
Haisla Nation Chief Counsellor Ellis Ross presents BC Premier Christy Clark with a gift to mark the sale of the hospital lands to the First Nation. (Robin Rowland/Northwest Coast Energy News)
On the day that the Conservative government approved the Northern Gateway pipeline project, all sides pointed to the hospital site agreement as an example of partnership that could lead to development of liquefied natural gas and other industrial projects in BC’s northwest.
The old pink hospital, built when there were plans for a Kitimat with 50,000 people was closed in 2002 when the new Kitimat General Hospital was opened. The old building was dismantled and then imploded in 2005 at a cost of $1.9 million. Five years later, in 2010, the land was transferred from Northern Health to the province.
That began four years of negotiations with provincial ministries, the Haisla Nation and the District of Kitimat, so that the First Nation could purchase the land which is on their traditional territory.
The land has sat idle since 2005, although it is prime real estate as the economy of Kitimat begins to boom with the growth of industrial projects like the $3.3 billion Rio Tinto Alcan Kitimat Modernization project at the aluminum smelter as wells the Shell-led LNG Canada and the Chevron-led Kitimat LNG projects.
“It’s an important land transfer from the perspective of the community because this land has sat empty for too long,” Clark said. “It’s time for economic development. It will be such a big part of creating lots of energy, lots of jobs in the community but it’s really a demonstration of the partnerships that we’re going to have to have to make LNG and prosperity work in British Columbia”
Haisla Chief Counsellor Ellis Ross speaks at the ceremony transferring the old hospital lands to the Haisla Nation (Robin Rowland/Northwest Coast Energy News)
Haisla Nation Chief Counsellor Ellis Ross told reporters, “This is an example of how things should be done” in regard to First Nations rights and title. “Case law dictates how consultation must take place and if you respect and abide by them I think it proves we can actually come to a solution. BC’s not going anywhere, Canada’s not going anywhere, and First Nations aren’t going anywhere. None of us are going to get 100 percent of what we want. Where do we find that middle ground? It’s possible to do it if you actually take a page out of BC’s book and learn from the mistakes they made ten years ago to today where they’re doing things right.”
Both remarks were clearly intended to send a message to the federal government and Enbridge about consultations on the controversial Northern Gateway pipeline and tanker project.
Clark concentrated on showing the connection between the land deal and future liquefied natural gas development.
Kitimat Ground Zero
“There are over 13 LNG proposals for British Columbia, all of them are at various stages of developments and if anyone of those and we certainly hope it will be more than one reaches final investment decision, that is going to mean a lot of change,” Clark said.
“To make sure this happens, it means opening our doors, opening our doors to First Nations and of course the Haisla were ready and eager to walk through that door, working with labour to make sure we can build a workforce, working with educational institutions across the province to make sure we are
ready to be sure that British Columbians are first in line for those jobs.”
Premier Christy Clark at the Kitimat ceremony (Robin Rowland/Northwest Coast Energy News)
“This site is really about nation building, it’s about community building and it’s about partnerships. This transfer of land will enable the Haisla to commercially develop this piece of property and that is going to mean huge opportunities in this community. It’s going to open up economic growth. It’s going to be a big benefit for Kitimat and the entire surrounding region on this piece of land that has sat empty for far far too long.
“We’re going to continue to work with the Haisla that have shown such vision and courage in leading the argument for LNG across this country and we want to make sure, as Ellis says that this property gets developed as soon as you possibly can. We’re very happy to work with the region of Kitimat, with industry with labour with First Nations to make sure we’re growing this opportunity for the future.
“We’re here because this was the day that worked for everybody. If there is a message for the country is that liquefied natural gas is a nation building opportunity. Ground zero is right here in Kitimat, this community is going to build our country the way that energy has built the country in the past. We have the resources in British Columbia to create hundreds of thousands of jobs and prosperity for every Canadian. I really want Canadian to know that this is not just a BC project. It’s not just a northwest BC project. It’s all these projects that are of national importance.
Ross did not put a cost on the project, since the first step is to do a survey for environmental remediation of the site.
An agreement in April between the Haisla and the District of Kitimat on how the lands will be developed was hailed at the ceremony as a step in healing the sometimes strained relationship between the District and the First Nation.
Ross praised the District of Kitimat for “their willingness to sit down and work with us,” adding that Tuesday’s agreement will lead to discussions on other issues.
Ross said Tuesday’s agreement is “a small step but significant” step in making the Haisla Nation members “self-determining from the ground up,” so they can get jobs without being dependent on either the Haisla Nation Council or other levels of government.
The Spirit of Kitlope dancers opened the land transfer ceremony. (Robin Rowland/Northwest Coast Energy News)
Northern Gateway
At the end of her speech, Clark deliberately brought up Northern Gateway, saying that “no heavy oil” project, including the Enbridge Northern Gateway, has met the province’s five conditions to proceed.
“We settled the five conditions, they’re very clear, they’ve been on the table for a very long time now,” Clark said. “It is up to the proponent in the private sector to figure how, if and when they’re going to be able to meet them. None of them have yet. So I want to assure people, that whatever decision the federal government announces today, our five conditions are not changing and none of the proposals have met those conditions, so we don’t support any of the projects as they stand.”
On the other hand, Clark said the proposed liquefied natural gas projects are “meeting all those five conditions. The companies that have invested in natural gas here in British Columbia are going to show the country that you can do business in British Columbia and we do it in a way that protects our environment and respects First Nations. We are proving we can do it, because we’re proving we can do it with LNG,”
Ross repeated that the Haisla are opposed to the Northern Gateway Project and that should the government’s decision approve the project, the next step is to go to court. He said that consultation by both the federal government and by Enbridge since the first contact in 2009 has been inadequate.
He told reporters, “One of the five conditions is that aboriginal interests are met and on behalf of the Haisla, I can say that one of the conditions that without a doubt that has gone wrong. The rest of the conditions are up to BC.”
There is nothing at this point in the public section of the NEB website, probably due to the holiday weekend. Northwest Coast Energy News is contacting Haisla leaders for confirmation.
