Diluted bitumen, also known as dilbit, a mixture of oil sands bitumen and natural gas dilutants can seriously harm fish populations, according to research study at Queen’s University and the Royal Military College of Canada published this week.
At toxic concentrations, effects of dilbit on exposed fish included deformities and clear signs of genetic and physiological stress at hatch, plus abnormal or uninflated swim bladders, an internal gas-filled organ that allows fish to control their buoyancy. Exposure to dilbit reduces their rate of survival by impairing their ability to feed and to avoid predators.
Among the other findings from the study were
Embryo toxicity of dilbit was comparable to that of conventional oils.
Developmental malformations increased with increasing dilbit concentrations.
Chemical dispersion broadened the genotoxic effects of dilbit
“This new study provides a clearer perspective on the potential risks to Canada’s aquatic resources of dilbit spills, and a technical basis for decisions on dilbit transportation within Canada,” says Peter Hodson Environment Studies, Biology at Queens. “It reduces some of the uncertainty and unknowns about the hazards of dilbit.”
This study characterized the toxicity and physiological effects of unweathered diluted bitumen (Access Western Blend dilbit; AWB) to a fish used for laboratory studies. Embryos of Japanese medaka (Oryzias latipes) were exposed for 17 days to dilutions of dilbit physically-dispersed by water and chemically-dispersed by dispersants
AWB dilbit exposure was not lethal to medaka, but resulted in a high prevalence of blue sac disease (BSD), impaired development, and abnormal or un-inflated swim bladders. Blue sac is a disease of young trout and other salmonid species; usually caused by unsuitable hatchery water. It turns the yolk sac bluish and is thought to be caused by a lack of oxygen.
The research was funded by Fisheries and Oceans Canada’s National Contaminants Advisory Group and the next stage will determine whether fish species native to Canada will be affected by dilbit exposure. The work also includes the development of genetic markers of exposure to dilbit and toxicity that could be used to assess whether wild fish that survive a spill are still affected.
The research team includes Dr. Valérie Langlois (Environmental Studies, Royal Military College of Canada) and Dr. Barry Madison (Royal Military College of Canada).
Dr. Hodson is also a member of a Queen’s research team tasked to determine whether dilbit spilled into rivers would contaminate bed sediments, specifically areas where fish such as salmon, trout, chars, whitefish and graylings spawn, to the extent that the survival of their embryos would be affected.
The research was published in ScienceDirect and is one of the first studies of dilbit on young fish.
The finding could be significant because both the proposed Northern Gateway pipeline and the proposed Kinder Morgan expansion will cross areas near spawning streams.
The final investment decision for the LNG Canada project is 18 to 24 months ahead, Andy Calitz, CEO LNG Canada said Wednesday.
Calitz said that the project must go through a series of what are called “stage gates” before the respective corporate boards of the partners make that decision. Calitz said the project has already completed three stages, identifying the project, testing the idea, selecting what exactly the proponents are going to do. “Then there is the so-called design stage when all the design experts come in. We are hundred per cent certain we are tackling the next phase.” It is when the design phase is complete and then depending on world market conditions, that the final investment decision will be made.
Caltiz also pointed to one reason that while the LNG Canada project is moving ahead slowly,it appears to be moving faster than the rival Chevron-Apache Kitimat LNG project. That’s because the four investors in the LNG Canada project, Shell, PetroChina, Mitsubishi and KoGas (Korea Gas) are the customers, shipping their own product via the proposed TransCanada Coastal Gaslink pipeline, to the jointly owned terminal that will be built on the old Methanex site in Kitimat.
Caltiz’s comments came at a Vancouver news conference called to announce a joint venture agreement between the four partners. Under today’s agreement, Shell has increased its stake in the project to 50 per cent from 40 per cent; PetroChina will hold 20 per cent and each of Kogas and Mitsubishi Corporation holding 15 per cent. PetroChina and Shell increased their holdings by buying from the other partners.
Calitz said, “They each bring their own gas, they each put their own capacity in the pipeline to be transported by Transcanada, they together own the energy plant, then they lift the cargo in the same proportion, taking in to their own potrfolios, for every cargo that is produced, say for every 100,000 cubic metres, 15 will go Kogas 15 to Mitsubishi 20 will go Petrochina and 50 will go to Shell.”
One reason, along with the volatility and uncertainty of the liquified natural gas market that the Chevron Apache Kitmat LNG project appears to have stalled is a lack of customers. Kitimat LNG has said it is looking for equity partners similar to what was said today about the LNG Canada project.
Asked a general question about environmental concerns, Calitz singled out local concerns about the air shed quality in the Kitimat valley and similar concerns up in Prince Rupert, saying, “We are at all times very sensitive to our environmental impact… In the case of the airshed around the LNG plant, it is being quantified, it;s being looked at cumulatively in Prince Rupert, in Kitimat. We also make sure that we work with the government about the sensitivity of air shed impact to the communities of Terrace and Kitimat. I can confirm your point it is high on our agenda. We understand the issues we all developed energy projects before and will continue to be vigilant.”
He said there were three main concerns that would affect the final investment decision: “Where does the Asian gas price go? Two will we have enough labor and what will the labor rates and labor productivity be and three between the various companies that have a lot of experience in Canada specifically TransCanada pipelines into Kitimat, and the other pipeline company going into Prince Rupert, we need to get those pipelines through the mountains.”
While it may be reading too much into one statement, it appears that LNG Canada and its partners are taking a more careful approach to pipeline construction than the Enbridge Northern Gateway project where that company was always certain its plans for crossing the rugged northwest BC mountains would yield few problems.
The other major factor governing any decision on LNG plants in British Columbia is the volatile marketplace.
Reporters at the Vancouver news conference asked Caltiz about reported talks between China and Russia where Russia, now facing economic sanctions for its actions against Ukraine, would ship natural gas to China and if that would affect BC plans to export LNG to China.
“One can always draw linkages between any two subjects but I would say the linkage is between very weak and non existant,” Calitz said. “The closeest that anyone can come to a linkage is do the events in Europe and Ukraine increase the likelihood of a major pipeline between Russia and China, that’s for Russia and China to decide, but apart from that very very weak linkage.”
That state of prices remains a concern among reports that several Asian nations including the giants India and China plan to form a sort of buyers club, to drive down the high price of natural gas, which in Asia is a percentage of the price of crude oil, while in North America, market conditions have driven the price of natural gas much lower.
“There is a very active daily debate about prices paid for LNG in Asia. That debate, I am sure, will continue as long as the Henry Hub [the North America market price] is at $4 and Europe is at $8 and Asia based is somewhat from 12 to 18 dollars, depending on whether its contract or spot.
“If you ask is that of concern, then every project here will be affected by changes in price, whether the price goes up or down. will impact the final investment decision and it will impact in the way say the Pacific Northwest or the Kitimat LNG project.
“We as an energy project in British Columbia, like all other energy projects, like even from East Africa are looking at production costs and what the Asian prices are. So by 2015, what happens to that price and what happens in those negotiations will feature in the decisions of all the players.”
In a prepared statement, Calitz said,”“While we are in the early evaluation process and a decision to build the project is still a while away, this agreement reinforces our commitment to developing an LNG facility in British Columbia and allows us to proceed with the next steps in our project assessment, We will need to continue to work closely with the provincial and federal government to ensure that the project is economically viable, as well as working closely with First Nations, the local communities, and regulatory agencies, and move forward on a number of commercial agreements and contracts. We remain cautiously enthusiastic about the potential opportunity in B.C. and look forward to exploring it further.”
Premier Christy Clark, who made a brief appearance at the news conference before leaving to a prepare for another sales trip to Asia, was more optimistic, saying: “The private sector doesn’t make billion dollar investment decisions if they don’t think there isn’t going to be a return on it. It’s not for me … to determine what the market looks like, it’s the private sector that does that and I think the answer to them is you would not see those major companies taking the next step signing a joint venture agreement today if they didn’t think there was a market for BC gas.
“The other advantage that BC has that we will never sacrifice is our reputation as a dependable, reliable, honourable trading partner. When people do business in British Columbia on natural gas, they know we won’t play politics with them.They know we will keep our promises about where the tax levels will be and how they’re going to be treated as trading partners. That is a tremendous advantage for us in an unstable world.”
Temporary foreign workers
Asked by a reporter about LNG projects using temporary foreign workers, Clark replied. “The thing about temporary foreign workers is that temporary workers should come for temporary jobs, And in the process of building these huge facilities and pipelines with peaks in construction that we will not be able to meet within British Columbia or even Canada. There’s no question about that.
“Our view is very much British Columbians first, and the way to do that is to make sure people have all the skills training that they need to take advantage of those jobs, second reach out to the rest of the country and then third work with the unions and other organizations when needed to support temporary foreign workers coming in.
“We’ve had remarkable consensus with the trade unions, recognizing the need for some temporary foreign workers at some point in the construction of these projects. That’s why we’ve gone about planning it so carefully because we want to make sure when we will need workers in what skill set in what month and what years. We’re really breaking it down so we can be sure we have exhausted British Colunbia’s potential to fill those jobs before we start to look across the country or around the world.”
Projects on the go
The news release listed the many LNG projects under way from the four partners.
Shell currently has ten LNG projects in operation with approximately 26.1 million tonnes per annum (mtpa) operational LNG capacity, in nine countries, and two projects
with an additional 7.5 mtpa under construction. Shell is also one of the largest LNG vessel operators in the world, with interests in around a quarter of the LNG vessels in operation.
Phoenix Energy Holdings Limited (an affiliate of Petro-China Investment (Hong Kong) Limited) (“PetroChina”) is China’s largest oil and gas producer and supplier, as well as
one of the world’s major oilfield service providers and a contractor in engineering construction. PetroChina officially launched three LNG projects in June 2004, two of
which started operations in the first half of 2011.
Kogas Canada LNG is the world’s largest LNG importer. As the nation’s sole LNG provider, KOGAS currently operates three LNG terminals and a nationwide pipeline network, supplying natural gas fromaround the world to power generation plants, gas-utility companies and city gas companies throughout the country.
Since pioneering the first LNG import to Japan from Alaska in 1969, Mistubishi handles 40 per cent of Japan’s LNG imports and has successfully built a portfolio of LNG export investments across Australia, Indonesia, Malaysia, Brunei, Oman, Russia and North America.
With the joint venture agreement, the group has incorporated a new federal corporation, LNG Canada Development Inc. The project’s corporate offices will continue to be located in Vancouver and Calgary, with the project office based in Kitimat.
Although pegged as a “major milestone” in the development of LNG Canada, the Kitimat social media rumour mill was correct in speculation Tuesday that the news conference concerned a corporate name change and sale of assets. The event was probably more a kickoff for Christy Clark’s upcoming tour of Asia.
Enbridge Northern Gateway will hold two campaign Open Houses to push the yes side for the upcoming Kitimat plebiscite on the controversial project.
Sources have told Northwest Coast Energy News that the first Open House, hosted by Northern Gateway President, John Carruthers, will take place at the Rod and Gun on Tuesday, April 1.
The second Open House will be hosted by Janet Holder, Enbridge’s Executive Vice President of Western Access, on Tuesday, April 8, also at the Rod and Gun.
The sources say that many of the technical and emergency response experts that have appeared at previous Northern Gateway Open Houses and forums will also be present at the campaign events.
Kitimat will vote on the plebiscite on April 12.
The question, as drafted by District of Kitimat Council is:
Do you support the final report recommendations of the Joint Review Panel (JRP) of the Canadian Environmental Assessment Agency and National Energy Board, that the Enbridge Northern Gateway project be approved, subject to 209 conditions set out in Volume 2 of the JRP’s final report?
The federal government’s main consultation with First Nations on the Northern Gateway Joint Review Panel report is limited to just three simple questions that had to be answered within 45 days, according to documents seen by Northwest Coast Energy News.
That despite the fact that the first volume of the JRP report “Connections” is 76 pages and the second volume “Considerations” is 418 pages including the 209 recommendations and appendices and came after two years of hearings and tens of thousands of pages of evidence.
On Dec. 6 and again on Dec. 16, 2013, just prior to the release of the Joint Review Panel report, Brett Maracle, Crown Consultation Coordinator at the Canadian Environmental Assessment Agency for the Northern Gateway project wrote to the First Nations potentially affected by Northern Gateway, saying their response had to be filed within 45 days of the release of the JRP. Since the report was released on December 19, 2013, that made the initial deadline January 31, 2014.
The letter also told the First Nations that if they wanted their positions included in the “Crown Consultation Report” that would be part of the package on Northern Gateway presented to the federal cabinet, that position had to be limited to just two to three pages “given the number of groups involved” with a final deadline of April 16, 2014.
Maracle’s letters used the term Phase IV to define the post JRP consultations, implying there were three earlier stages of consultation, something many First Nations have disputed, especially since the Harper government had earlier maintained that the JRP itself was the constitutionally mandated consultation.
The cabinet has until June 19, 2014, 180 days after the release of the report to approve the issuing of the federal permits for the Northern Gateway project. Consultation with First Nations on projects such as the Northern Gateway is required by the Constitution and has been upheld by the Supreme Court of Canada.
The three questions outlined in the letter were:
Does the Report appropriately character the concerns you raised during the JRP process?
Do the recommendations and conditions in the Panel Report address some/all of your concerns?
Are there any “outstanding” concerns that are not addressed in the Panel Report? If so, do you have recommendations (i.e proposed accommodation measures) how to address them?
Consultation on implementation
The third question appears to confirm what most political observers have said, approval of the Northern Gateway by the Harper cabinet is a a forgone conclusion, since Maracle speaks of “accommodation measures.” When the JRP approved the Northern Gateway project, the panel said that Enbridge’s proposed “mitigation” measures in case of a spill were adequate, something environmental groups and First Nations are now disputing in court.
It appears from the correspondence seen by Northwest Coast Energy News, that the federal government will only consider further specific consultations with First Nations after the approval of the Northern Gateway and only then on the implementation and construction process, rather than consulting on the project as a whole.
The Haisla have filed a document in response to the JRP that notes that
The Haisla Nation needs to understand Canada’s views of the role that future federal decisions might play for the proposed project. In its December 12, 2013 to Mr. Maracle, the Haisla Nation asked the federal government to provide a comprehensive list of the regulatory permits which would be issued the the federal government decision-makers in Haisla Nation Territory in the event the proposed project is approved and describe the consultation process that would occur prior to decisions being on those regulatory permits, within 45 days of the issuance of the JRP Report.
Mr. Maracle’s January 29, 2014 [reply] suggests that the only future federal decisions on the proposed project which may entail consultation are specific watercourse crossing and fish habitat destruction permits issued by Fisheries and Oceans Canada.
One of the problems reaching back to long before the Joint Review Panel hearings began is that the Harper government policy was what they called a “whole-of-government” approach in its consultations with First Nations, saying: “The Crown is open to discussing how consultation with the framework provided will be carried out.”
In their repose, the Haisla say the federal government never defined how the “whole-of-government” approach to First Nations was going to work and noted:
What Canada should have realized is that it has a very real obligation to consult with the Haisla Nation at the deepest end of the consultation spectrum that cannot be pigeon-holed into a one size fits all approach.
Further, the term whole-of-government is misleading, as this approach actually prohibits the majority of government from engaging in consultation.
The Haisla then say: “Documents we have obtained under an Access to Information Request clearly indicate individual departments were asked not to communicate directly with the Haisla Nation.”
The response goes on to say:
Further questions at federal government witnesses during the JRP process confirmed that federal departments had not met with the Haisla Nation since the commencement of the JRP process. While these witnesses were reluctant to confirm that they had been prohibited from meeting with us, they repeatedly referred to the “whole-of-government” approach to consultation as their reason for not meeting.
Canada’s “whole-of-government” approach clearly limited engagement to a strict process with no opportunity for real engagement.
The Haisla are telling the Harper government:
It is clear that the Haisla Nation that we are the very earliest stages of consultation with Canada about the proposed project….It is clear to the Haisla Nation that the 45-day period within which Canada has unilaterally determined face-to-face meetings with all the Aboriginal groups potentially affected by the proposed project will occur is not an adequate amount of time to complete a meaningful consultation process.
The Haisla Nation are calling on the federal cabinet to postpone its decision on the Northern Gateway project to allow time for adequate consultations with First Nations, according to the Haisla response to the Joint Review Panel, seen by Northwest Coast Energy News.
The Joint Review Panel report and recommendations were released on Dec. 19, 2013 and the cabinet has 180 days from that point to recommend approval of the project.
The Haisla argue that Section 54 of the National Energy Board act allows the Governor-in-Council, the federal cabinet, to extend the timeline if it wants to, if recommended by the Minister of Natural Resources.
So far, the Harper government has refused to extend the deadline. The Haisla response document says Chief Counsellor Ellis Ross spoke to Minister of Natural Resources Joe Oliver on the telephone requesting the extension, but, according to the document, all Oliver did was point to the legislation that calls for the 180 day response to a joint review report.
The Haisla response document also has a long lists of what the Haisla say are flaws in the Joint Review Panel report.
In correspondence with the Haisla, Brett Maracle, Crown Consultation Coordinator at the Canadian Environmental Assessment Agency for the Northern Gateway project, says:
the process set out by the Government of Canada in the Aboriginal Consultation Framework was finalized after receiving and carefully considering input from Aboriginal groups….The Government of Canada believes the process outlined in the Aboriginal Consultation Framework provides for a deep level of meaningful consultation with Aboriginal groups with Phase IV being the final step prior to a decision being made on the Project.
The Haisla dispute there has been any “deep level of meaningful consultation,” citing in the document a long list of attempts to engage the federal government with little or no response.
In their response, the Haisla Nation Council says:
Canada, has, to date, refused to engage in meaningful consultations with the Haisla Nation. Instead Canada has unilaterally imposed what it calls a “deep level meaningful consultation” process which is fundamentally flawed for a number of reasons…
The document lists attempts by the Haisla to engage with ministers and government departments including requests for a meeting with then Environment Minister Peter Kent, prior to the opening of the JRP formal hearings in Kitamaat Village in January 2012. Although the Haisla requested a meeting with Kent, several times in 2011, no meeting ever occurred. It was not until April 19, 2012, four months later that Kent replied to the Haisla saying he had asked the President of the Canadian Environmental Assessment Agency to meet with the First Nation prior to the start of the JRP hearings. However, it was apparently impossible to schedule such a meeting in December, 2011.
To which the Haisla reply:
For over six years, Canada ignored Haisla Nations requests for meetings. Once the JRP’s oral hearings process commenced, Canada further closed the door on any opportunity for a meeting until the JRP Report was release. This refusal to consult was baseless. The ongoing JRP process was not a rational or justifiable basis for Canada’s refusal to consult…
Canada has yet to meet with the Haisla Nation to discuss the proposed project, other than to tell the Haisla Nation it is only engaging through the JRP process for now. This is not consultation. It is, perhaps, at best an initial step towards a consultation process.
Ignoring the Eyford report
In March 2013, Natural Resources Minister Joe Oliver flew to Terrace for a photo op to announce the appointment of Douglas Eyford to consult First Nations on the Northern Gateway project. Oliver then flew back to Ottawa without meeting anyone in the region. Eyford’s report Forging Partnership Build Relationship was released in November, 2013.
The Haisla say:
Mr. Eyford’s Report recommended that Canada should consider undertaking early engagement to address Aboriginal interests that may not be dealt within a regulatory process. The Haisla Nation has been seeking such early engagement from Canada since the proposed project was first announced.
Mr. Eyford’s Report also recommended that Canada should engage and conduct consultations n addition to those in regulatory processes, as may be required, to address issues and facilitate resolutions in exceptional circumstances. The Haisla Nation also asked for this, identifying early that this proposed project was an exceptional circumstance due to the significant potential impacts on the Haisla Nation.
The Haisla Nation Council response was sent to Brett Maracle, Crown Consultation Coordinator at the Canadian Environmental Assessment Agency for the Northern Gateway project. The Haisla also sent copies of the response to Joe Oliver, the Minister of Natural Resources, Gaetan Caron, Chair of the National Energy Board, Leon Aqlukkaq, Minister of the Environment, Bernard Valcourt Minister of Aboriginal Affairs and Northern Development, Gail Shea, Minister of Fisheries and Oceans, BC Premier Christy Clark, Steve Thomson, BC Minister of Forests, Lands and Natural Resources and Mary Polak, BC Minister of the Environment.
In the response, seen by Northwest Coast Energy News, the Haisla are objecting to both the government’s and the JRP’s attitude toward the idea of consultation as well as some of the specific findings by the panel. The Haisla also fault the JRP process for refusing to take into consideration reports and studies that were released after the evidentiary deadlines.
Overall, the Haisla say
The JRP report is written in a way that prevents an assessment of how or whether the JRP considered Haisla Nation concerns and of how whether the JRP purports to address the Haisla Nation’s concerns. Further the JRP Report is lacking n some of the fundamental justification required to understand how arrived at its recommendations.
So what are the Haisla concerns?
In the document filed with the Canadian Environmental Assessment Agency, the Haisla say:
The proposed project carries with it an inordinate amount of risk to Haisla Nation Territory. The Haisla Nation is being asked to play host to this proposed project, despite the risk the proposed project poses to the land waters and resources relied on by the Haisla Nation for sustenance and cultural heritage. The risk includes a huge risk to Haisla Nation aboriginal rights to trap, hunt and fish, to gather seafood and gather plant materials. It could result in significant damage to the Haisla Nation cultural heritage—its traditional way of life…..
The terminal site is one of the few areas suitable for terminal development in our territory. It is also home to over 800 Haisla Nation Culturally Modified Trees (CMTs). Northern Gateway proposes to irrevocably alter the land, the use of the land and access to this land for the duration of the proposed project, which is anticipated to be at least 80 years. This irrevocable alteration includes the felling of our CMTS….
By seeking to use Haisla Nation aboriginal title land for the proposed project, Northern Gateway will be effectively expropriating the economic value of this land. Northern Gateway is proposing to use Haisla Nation aboriginal title land for a project with no benefit to the Haisla Nation and which is fundamentally at odds with Haisla Nation stewardship principles.
Obstructed clear understanding
The Haisla say that “Canada has failed to adhere is own framework” for the JRP because in the Aboriginal Consultation Framework says “Federal departments will be active participants in the JRP process to ensure the environmental assessment and consultation record, is as accurate and complete as possible.”
The Haisla say “Canada provided limited written evidence to the JRP” and goes on to say that the “federal governments not only failed to provide relevant information but also obstructed a clear understanding of project impacts.”
Among the evidence relevant to Northern Gateway that the federal government was “unable or unwilling to provide” includes:
Natural Resources had expertise on acid rock damage and metal leaching but did not include evidence on that in their evidence
Fisheries and Oceans did not have a mandate to conduct an assessment of the potential toxicological effects of an oil spill.
Environment Canada did not review or provide information on the spills from pipelines.
The federal government witnesses were unable to answer questions about the toxicity of dispersant.
Environment Canada was asked if it had studies of the subsurface currents and the movement of submerged oil. Environment Canada told the JRP did not measure hydrodynamic data but relies on DFO. DFO cold not provide any witnesses to the JRP with expertise on subsurface currents.
In the formal response on the JRP report, Haisla also say:
The JRP has concluded that the risk of a large spill form the pipeline in the Kitimat River Valley is not likely, despite very significant information gaps relating to geohazards, leak detection and spill response.
The JRP has concluded that a large spill would result in significant adverse environmental effects. However, the JRP appears to base a finding that these effects are unlikely to occur on an unreasonable assumptions about how widespread the effects could be or how long they would last. The JRP has not considered the extent to which a localized effect could impact Haisla Nation.
The JRP relies on the concept of “natural recovery” as mitigation of significant adverse effects. The Haisla Nation asked the JRP to compel information from Northern Gateway about the applicability of its evidence to species found in Haisla National Territory. The JRP, however, refused to compel this evidence from Northern Gateway.
The JRP has accepted at face value that Northern Gateway would shut down its pipeline within 13 minutes in the event of a rupture and has failed to consider the effects of a large spill that is not detected with this timeframe through the control centre (or was in the case of Kalamazoo, is detected by the control centre but is systematically mischaracterized and ignored).
As part of the consultation process the Haisla want 22 changes to the JRP report, changes which echo the Haisla Final Written Argument that was filed at the end of the hearings.
The Panel should find that potential impacts to asserted Haisla Nation aboriginal rights and title from the proposed project are such that project cannot be found to be in the public interest in the absence of meaningful consultation… The current status of engagement and the federal government imposition of a 6-month time limit to complete consultation raise serious concerns that meaningful consultation will not be possible. Therefore the proposed project is not in the public interest.
Among the others are:
The JRP should have determined the significant of adverse effects to rare ecological communities that cannot mitigated.
The JRP should have provided more information to allow a reasonable assessment of the risk of a spill from the pipelines.
The JRP would have considered all factors to contribute to the risk of a spill.
The JRP should have found that Northern Gateway’s assessment of the toxicity of an oil spill because it did not consider the full range of products to be shipped nor did it consider the potential pathways of the effect of a toxic spill, whether from a pipeline, at the marine terminal or in the case of a tanker spill
The evidence had not demonstrated that Northern Gateway’s spill response would be able to mitigate the effects of a spill either at the pipeline, at the Kitimat marine terminal or from a tanker spill.
The JRP did not consider the impact of the Kitimat Marine Terminal on their cultural and archaeological heritage, including culturally modified trees.
The Haisla Nation in their response to the Crown on the Northern Gateway Joint Review Panel details four studies, three Canadian and one American that were released after the Joint Review evidentiary deadline had passed, evidence that the Haisla say should be considered in any consideration of the Northern Gateway pipeline, terminal and tanker project. (The American report from the National Oceanic And Atmospheric Administration was released after the JRP final report)
JRP chair Sheila Leggett’s constant citing of rules of procedure and her stubborn refusal to consider new evidence and studies in a dynamic situation that was changing rapidly was one of the reasons that many people in the northwest said the JRP had lost credibility.
The Haisla say: “It is incumbent upon Canada to consider and discuss the information in these reports as part of a meaningful consultation process…” and then lists “key findings” that have potential impacts on aboriginal rights and title:
The West Coast Spill response for the government of British Columbia which found:
Most oil spilled into the marine environment cannot be cleaned up
There is a disconnect between planning and actual repose capability
Canada’s spill response is “far from world class.”
The Transport Canada Ship Oil Spill Preparedness and Response study:
Douglas Channel will go from low risk to high risk for pills if the project goes ahead
The study recommends preparation for a “true worst case discharge” rather than “the credible worst case discharge” as proposed by Northern Gateway
Canada needed a much more rigorous regulatory regime covering tankers.
The joint federal government technical report on the properties of bitumen from the Canadian Oil Sands:
There are uncertainties on how diluted bitumen would behave in a marine environment.
Northern Gateway did not provide adequate information about sediment levels to allow for proper study of interaction with diluted bitumen
Dispersant may not be effective.
Weathered diluted bitumen would “reach densities at which it will sink freshwater without mechanical or physical assistance.”
The US National Oceanic And Atmospheric Administration report on Transporting Alberta Oil sands:
Diluted bitumen has “significant differences from conventional crudes.’ (The JRP used conventional crude as a benchmark in its findings)
The physical properties of diluted bitumen “fluctuate based on a number of factors.
Pipeline operators may not have detailed information related to products in the pipeline at the time of a spill
There is a lack of experimental data on the weathering behaviour of oil sands product which limits the ability of spill response organizations “to understand and predict the behaviour and fate of oil sands products in freshwater, estuarine and saltwater environments.”
The Haisla Nation have filed a challenge to the Northern Gateway Joint Review Panel with the Federal Court of Appeal requesting that court quash the JRP findings.
The Haisla suit comes at a time that a coalition of environmental groups and the Gitxaala Nation are asking for court reviews of the JRP. The court challenge also comes at time when the District of Kitimat Council has maintained its position on an April 12 plebiscite asking the residents of Kitimat if they approve of the Joint Review Panel’s findings on the Northern Gateway project.
Late Wednesday, the Gitga’at Nation at Hartley Bay also announced they are challenging the JRP.
The Haisla argument filed by Jennifer Griffiths of Donovan and Company, representing the Haisla Nation, points to the Scope of Factors governing the JRP saying the proponent (Enbridge Northern Gateway) must “provide a sufficient description of the local setting to allow the Panel, other regulators, the public and others to clearly understand the rationale for environmental assessment decisions.”
The application asks that courts order that:
the findings be referred back to the JRP for further consideration
the Panel obtain and consider the necessary information about marine environment and freshwater and marine fish habitat
the Panel provide its assessment of effects of the project on Haisla Nation cultural heritage
the court direct the Panel to provide it assessment of the adequacy of Crown consultation to date
the Panel reconsider its public interest assessment after considering adequacy of consultation, impacts on cultural heritage and impacts on aboriginal rights and interests
that the JRP report “as issued on December 19, 2013, does not contain the recommendations required” under the Canadian Environmental Assessment Act.
In the Haisla challenge, the Nation argues the Panel erred by:
making findings about potential impacts to the marine environment and freshwater and marine fish habitat without having before it information it was required to consider under the Scope of Factors
failing to assess the environmental effects of the project on Haisla Nation cultural heritage
failing to provide a rationale for its conclusion that there would be no adverse environmental effects on cultural heritage
failing to provide a rationale for its conclusions regarding significant adverse effects, including but not limited to the conclusion that, after mitigation, the likelihood of significant adverse environmental effects resulting from project malfunctions are very low
failing to provide a summary of comments received from interested parties on potential conditions
concluding that a large spill from pipeline facilities, terminal or tankers is unlikely
concluding that, after mitigation, the likelihood of significant adverse environmental effect resulting from the project malfunctions or accidents is low
fails to justify its conclusion that a large spill from pipeline facilities terminal or tankers is unlikely
fails to justify its conclusion that, after mitigation, the likelihood of significant adverse effects resulting from the project malfunctions is very low.
Fails to provide a rationale for the conclusion that there would be no adverse environmental effects on cultural heritage
The Haisla challenge also says the Joint Review Panel failed “to conduct its assessment in a precautionary manner” when it recommended:
that the project is not likely to result in significant adverse effects with respect to freshwater fish and fish habitat
that project is not likely to result in significant adverse effects with respect to marine fish and fish habitat
recommended that the project is not likely to cause significant adverse environmental effects in Canada on cultural heritage
concluded that a large spill from the pipelines, terminal or tanker is unlikely
concluded that the project is in the public interest.
The Haisla challenge also argues that the “Panel failed to observe procedural fairness in the hearing and deliberation” by:
failing to extend timelines a reasonably requested by parties
failing to consider all the information available to it about the large spill of oil as a result of the rupture of the Enbridge pipeline in Kalamazoo, Michigan
failing to assess impact on aboriginal rights or interests in its public interest assessment
failing to fully consider the submission of the Haisla Nation on potential conditions for the project.
The challenge also deals with the issue of cultural modified trees, especially the JRP’s finding that “impacts to Haisla Culturally Modified Trees can be mitigated” and by concluding “that impacts to Haisla Nation Culturally Modified Trees can be mitigated by including a condition that Northern Gateway file a plan to protect and manage post-1846 CMTS.” The part of the challenge dates back to time when Enbridge surveyors entered Haisla traditional territory without permission and as part of the survey cut down or damaged cultural modified trees.
On the afternoon of January 22, the Gitga’at Nation at Hartley Bay also announced they were filing a challenge to the JRP.
A news release from the Gitga’at says “the Joint Review Panel erred in law, including by failing to properly consider all evidence provided by the Gitga’at, whose culture and way of life would be severely threatened by supertanker traffic, shipping bitumen from Alberta and importing condensate from Asia and elsewhere.”
The application states that while the Gitga’at are resilient, they are also highly vulnerable to threats to their local ecosystems and community well being from impacts cause by increased tanker traffic. The negative impacts to Gitga’at society, culture, identity, health, and economy will only increase in the event of an oil spill, with the impacts increasing with the size and consequences of the spill. Traditional foods harvested from the sea comprise the largest portion of the Gitga’at diet.
On January 16, Ecojustice lawyers, representing ForestEthics Advocacy, Living Oceans Society and Raincoast Conservation Foundation, filed the lawsuit seeking a court order to prevent Cabinet from relying on the flawed JRP report to approve the proposed pipeline.
“The JRP did not have enough evidence to support its conclusion that the Northern Gateway pipeline would not have significant adverse effects on certain aspects of the environment,” said Karen Campbell, Ecojustice staff lawyer. “The panel made its recommendation despite known gaps in the evidence, particularly missing information about the risk of geohazards along the pipeline route and what happens to diluted bitumen when it is spilled in the marine environment.”
The humpback whale recovery strategy identifies toxic spills and vessel traffic as two threats to the iconic species’ survival and recovery — all relevant information that should have been considered during the review hearings.
The District of Kitimat Council is in chaos. We’re not referring to Monday’s chaotic meeting where often it was hard to figure out what Councillors were saying and where they were going.
We are referring to “Chaos” as it is defined in physics, “sensitive dependence on initial conditions,” known to most people as the “butterfly effect” (the exaggerated notion that a butterfly flapping its wings in one place could cause a storm in another place). Or we could suggest that Kitimat Council has a critical case of bad karma that is now coming back to haunt them.
How can you trust a council that doesn’t understand and follow its own motions?
District Council claims it is neutral on the Enbridge Northern Gateway project. That is wrong.
District Council decided, in violation of its own resolutions, to do absolutely nothing about the Northern Gateway Project until they have to. Doing nothing is not neutrality. Doing nothing is a default notion that actually tilts council in favour of the Enbridge Northern Gateway project. Doing nothing has meant that Council has become incapable of dealing with Gateway related issues within its own jurisdiction because they have no idea of what is going on.
A tale of two motions
So what were the initial conditions? As Peter Ponter pointed out in his presentation to Council Monday night, the original motion on neutrality called on Council to take an active part in the Joint Review proceedings.
”I move that the Mayor and Council of District of Kitimat go on record neither opposing nor supporting the Enbridge Pipeline Super Tanker Proposal and that we wish to, as a Mayor and Council, with our community, take part in the 1-2 year environmental assessment process and the Joint Review Panel to learn and understand whether this will be a beneficial project to Kitimat, the Northwest and British Columbia.
That motion was carried unanimously.
So then what happened? Nothing. The District of Kitimat did register as a government participant in the proceedings but did nothing to actually actively participate “to learn and understand whether this will be beneficial project to Kitimat….”
With the 2011 election over, the new council, sitting for the first time in 2012, was asked to reaffirm its position. At that time, Phil Germuth presented a motion that council survey the residents of Kitimat to find out what their position was on the Northern Gateway project. Our report here and Kitimat Daily’s report here.
At the time Councillor Mario Feldhoff said:
“The perfect time for the community to indicate whether they support is to reflect upon the JRP report. Do we agree with their submissions? Otherwise, our emotions are getting ahead of us and we may be perceive as being late in the game but, we may have, from my perspective, informed comment from the citizenry after they have had a chance to read a report from the JRP would be preferable in my opinion, in opposed to getting a sense of how people feel about things right now.”
So, in fact, there was not one neutrality motion as Council now maintains.
There were two separate motions, on two separate aspects of neutrality. The first called for council to remain neutral but to participate in the Joint Review Panel. The second called for council to survey the community on their feelings after the completion of the JRP.
The two motions did not, repeat not, cancel each other out. But that was, in effect, what happened. The council seems to have decided that Feldhoff’s comment was actually a motion, and that after that January 2012 meeting, they should do absolutely nothing but wait until the Joint Review Process was complete.
Every time after January 2012, when council was asked about anything, they said we are waiting for the Joint Review Process to be complete, even though council had unanimously passed a motion saying it would take part in the JRP. That is proof of Kitimat Council’s incompetence.
We will repeat that in the long history of regulatory hearings, public inquiries and even coroners inquests there have always been a role for neutral parties, represented by competent and properly instructed counsel, who vigorously look out for their client’s interests, without taking an advocacy position on a matter before the tribunal. The District of Kitimat could have, in fact, should have, actively participated and where necessary in the Joint Review and have its representatives ask tough questions of every side on all matters relevant to the District of Kitimat.
Participation didn’t happen, and, unfortunately, that is now all water under the Kitimat River Bridge.
A gift of prophecy
The bigger problem is that a majority on Kitimat council believes that it has the gift of prophecy, naively believing that the Joint Review Panel understands all mysteries and all knowledge. A majority of members on Kitimat council have blind faith, believing that the JRP can safely move pipelines across mountains.
With its gift of prophecy, Kitimat Council believes that all is right with the Joint Review Panel, that its 209 recommendations are gospel and thus council approves a vote question not about the Northern Gateway project but the Joint Review.
Faith is the operative word, for apart from dropping into listen from time to time, council did not participate in the proceedings in any way, and thus did not experience the many flaws in the Joint Review process that led some people to say as early as the middle of 2012 that the JRP had no credibility.
There are already court challenges to the Joint Review Panel. (Update. A media count as of January 23 says there are now 10 court challenges to the JRP)
Most important for Kitimat, a challenge filed by the Haisla Nation which, among the many flaws it finds with the JRP report, says the JRP improperly concluded that a large spill is unlikely either from the pipeline itself, the terminal facilities or the oil tankers tasked with navigating B.C.’s coastal waters.
It doesn’t do much for the already strained relationship between the District of Kitimat and the Haisla Nation that Council continues its uncritical support of the JRP while the Haisla are challenging it in court. That the Haisla motion to the Federal Court of Appeal includes challenges to the procedural unfairness of the JRP proceedings.
The Gitxaala First Nation says Joint Review Panel ignored issues surrounding aboriginal rights and title.
A coalition of environmental groups have told the federal court there was not enough evidence before the JRP to support its conclusion that the Northern Gateway pipeline would not have significant adverse effects on the environment; one key part of the suit is the fact that the JRP refused to consider the federal humpback strategy for Douglas Channel.
Although it is unlikely that the courts will throw out the Joint Review findings before the April vote, it might just happen. At that point, a plebiscite question based on the JRP would look pretty silly.
Who runs the Kitimat River?
We now come to the long term consequences of a do nothing council. We have to ask if the District of Kitimat Council will become lame ducks, at least in some part of town, because they have stood by and, in their misplaced faith in the National Energy Board, ceded the right to decide what happens in Kitimat to the NEB?
According to a report in the Toronto Star, using the new rules under the omnibus bills, this week the National Energy Board approved expansion of the Enbridge Line 7 pipeline in southern Ontario, without a hearing and without notifying Hamilton, the municipality involved (the pipeline actually goes through Hamilton) because the municipality was not “affected in any way” by the project. Since the media got on to the story, Enbridge has kindly said to Hamilton “we have heard and understood it and assured them directly that we will include them in all future consultation and activity on this project.”
There is already one pipeline along the west bank of the Kitimat River, Pacific Northern Gas. If the LNG projects go ahead, as well as more molecule traffic on the PNG pipeline there will be the Coastal Gas Link serving Shell and the Pacific Trails Pipeline serving Chevron and Apache. If it goes ahead, the Northern Gateway Pipeline will mean four pipelines along the west bank of the Kitimat River.
Four pipelines along the banks of the Kitimat River all under the benign eye of the National Energy Board in Calgary since they have “expertise” on pipelines and water courses.
The NEB has shown recently it doesn’t have much respect for municipalities. While the actual regulations under the DFO-NEB deal are likely to be unclear for some time, we know that what the NEB’s mandate is, to promote the oil and gas industry in this country, not to protect rivers and streams. So if the people of Kitimat, especially those who fish the Kitimat River or work in the Service Centre are in the way of what NEB bureaucrats in Calgary decide is best for us and those three, maybe four, pipelines, well too bad, eh? The NEB has the mandate to act in the national and public interest, not the residents of Kitimat.
Kitimat Council with its blind faith in the National Energy Board may very likely be a case of be careful what you wish for, sitting uselessly in the chambers at Northwest Community College while the NEB in Calgary carves up the District’s jurisdiction and does what it thinks is best for the oil patch.
Thus the Council deliberations become a sounding brass or a tinkling cymbal, meaning nothing.
The costs for Enbridge to clean up the 2010 Marshall, Michigan oil spill now far exceeds the maximum estimate that the Joint Review Panel gave for a major spill on the Northern Gateway Pipeline and also exceeds the amount of money the JRP ordered Enbridge to set aside to deal with a spill. Enbridge’s cleanup costs have also now edged past the higher liability amount requested by the Haisla Nation.
According to the US firm Enbridge Energy Partners’ filing with the United States Securities and Exchange Commission, as of September 30, 2013, the cost of cleanup was $1.035 billion US, not including possible additional fines and penalties that might be imposed by US authorities in the future.
In its decision, the Joint Review Panel estimated the cost a major oil spill from the Northern Gateway project would be about $693 million. As part of the 209 conditions, the JRP ordered Enbridge to set aside “financial assurances” totaling $950 million.
Note all costs in this article are for a pipeline breach. The Joint Review Panel had different estimates for a tanker spill and the liability rules for marine traffic are different from pipelines.
In its filing for the third quarter of 2013, with the SEC, Enbridge Energy Partners say that the cost up until September 2013 had “exceed[ed] the limits of our insurance coverage.” The same filing says that Enbridge is in a legal dispute with one its insurers.
Lakehead Line 6B Crude Oil Release
We continue to perform necessary remediation, restoration and monitoring of the areas affected by the Line 6B crude oil release. All the initiatives we are undertaking in the monitoring and restoration phase are intended to restore the crude oil release area to the satisfaction of the appropriate regulatory authorities.
As of September 30, 2013, our total cost estimate for the Line 6B crude oil release is $1,035.0 million, which is an increase of $215.0 million as compared to December 31, 2012. This total estimate is before insurance recoveries and excluding additional fines and penalties which may be imposed by federal, state and local governmental agencies, other than the Pipeline and Hazardous Materials Safety Administration, or PHMSA, civil penalty of $3.7 million, we paid during the third quarter of 2012. On March 14, 2013, we received an order from the EPA, or the Environmental Protection Agency, which we refer to as the Order, that defined the scope which requires additional containment and active recovery of submerged oil relating to the Line 6B crude oil release. We submitted our initial proposed work plan required by the EPA on April 4, 2013, and we resubmitted the workplan on April 23, 2013. The EPA approved the Submerged Oil Recovery and Assessment workplan, or SORA, with modifications on May 8, 2013. We incorporated the modification and submitted an approved SORA on May 13, 2013. The Order states that the work must be completed by December 31, 2013.
The $175.0 million increase in the total cost estimate during the three month period ending March 31, 2013, was attributable to additional work required by the Order. The $40.0 million increase during the three month period ending June 30, 2013 was attributable to further refinement and definition of the additional dredging scope per the Order and associated environmental, permitting, waste removal and other related costs. The actual costs incurred may differ from the foregoing estimate as we complete the work plan with the EPA related to the Order and work with other regulatory agencies to assure that our work plan complies with their requirements. Any such incremental costs will not be recovered under our insurance policies as our costs for the incident at September 30, 2013 exceeded the limits of our insurance coverage.
According to the SEC filing, the breakdown of costs include $2.6 million paid to owners of homes adversely impacted by the spill.
Despite the efforts we have made to ensure the reasonableness of our estimates, changes to the recorded amounts associated with this release are possible as more reliable information becomes available. We continue to have the potential of incurring additional costs in connection with this crude oil release due to variations in any or all of the categories described above, including modified or revised requirements from regulatory agencies in addition to fines and penalties as well as expenditures associated with litigation and settlement of claims.
The material components underlying our total estimated loss for the cleanup, remediation and restoration associated with the Line 6B crude oil release include the following: (in millions)
Response Personnel & Equipment $454
Environmental Consultants $193
Professional, regulatory and other $388
Total $ 1,035
For the nine month periods ended September 30, 2013 and 2012, we made payments of $62.3 million and $120.9 million, respectively, for costs associated with the Line 6B crude oil release. For the nine month period ended September 30, 2013, we recognized a $2.6 million impairment for homes purchased due to the Line 6B crude oil release which is included in the “Environmental costs, net of recoveries” on our consolidated statements of income. As of September 30, 2013 and December 31, 2012, we had a remaining estimated liability of $265.9 million and $115.8 million, respectively.
As for insurance, Enbridge Energy Partners say:
The claims for the crude oil release for Line 6B are covered by the insurance policy that expired on April 30, 2011, which had an aggregate limit of $650.0 million for pollution liability. Based on our remediation spending through September 30, 2013, we have exceeded the limits of coverage under this insurance policy. During the third quarter 2013, we received $42.0 million of insurance recoveries for a claim we filed in connection with the Line 6B crude oil release and recognized as a reduction to environmental cost in the second quarter of 2013. We recognized $170.0 million of insurance recoveries as reductions to “Environmental costs, net of recoveries” in our consolidated statements of income for the three and nine month periods ended September 30, 2012 for the Line 6B crude oil release. As of September 30, 2013, we have recorded total insurance recoveries of $547.0 million for the Line 6B crude oil release, out of the $650.0 million aggregate limit. We expect to record receivables for additional amounts we claim for recovery pursuant to our insurance policies during the period that we deem realization of the claim for recovery to be probable.
In March 2013, we and Enbridge filed a lawsuit against the insurers of our remaining $145.0 million coverage, as one particular insurer is disputing our recovery eligibility for costs related to our claim on the Line 6B crude oil release and the other remaining insurers assert that their payment is predicated on the outcome of our recovery with that insurer. We received a partial recovery payment of $42.0 million from the other remaining insurers and have since amended our lawsuit, such that it now includes only one insurer. While we believe that our claims for the remaining $103.0 million are covered under the policy, there can be no assurance that we will prevail in this lawsuit.
The Joint Review, Enbridge and Michigan
The Joint Review Panel based its finding on the Marshall, Michigan spill on the figure of $767 million from the summer of 2012 –again showing the limitations of the JRP’s evidentiary deadlines since the costs are now much higher.
The JRP quoted Enbridge as saying:
Northern Gateway considered the high costs of the Marshall, Michigan spill, which were at least $252,000 per cubic metre ($40,000 per barrel), to be an outlier or a rare event because the spill occurred in a densely populated area, because the pipeline’s response time was abnormally long, and because there was the prospect of potentially lengthy legal proceedings.
Enbridge assured the JRP that the corporate culture and management changes and equipment upgrades since the Marshall, Michigan spill lowered that chances of a similar event.
The company based its models for the JRP on much smaller spills, including one spill at Lake Wabamun, Alberta from a train not a pipeline (Vol. 2 p 357)
Enbridge’s risk assessment did not “generate an estimate of economic losses caused
by a spill.”
The JRP says Northern Gateway relied on its analysis of literature, and spill events experienced by Enbridge and other liquid hydrocarbon carriers in Alberta and British Columbia. After assessing all of this information, Northern Gateway regarded the high costs of a cleanup as “conservative”–meaning the company expects costs to be lower than its estimates in evidence before the JRP.
In Northern Gateway’s view the most costly pipeline spill incident would be a full-bore oil pipeline rupture, with an estimated cost of $200 million, and an extremely low probability of occurrence.
In their evidence, the Haisla (and other First Nations and intervenors) were doubtful about Northern Gateway’s assurances. The Haisla asked that Enbridge have a minimum of $1 billion in liability, an amount Enbridge has now exceeded in Michigan.
Haisla Nation estimated the cost of damage to ecosystem services because of a terrestrial oil spill from Northern Gateway’s pipeline would be in the range of $12,000 to $610 million for a 30-year period.
The Haisla’s cost estimates were based on values for environmental goods and services and probabilities of spills that were independent of Northern Gateway’s parameters for estimating oil spill costs. In contrast to Northern Gateway’s estimated spill frequency and costs, the Haisla predicted that spills would occur more often and placed a higher value on damages to environmental goods and services.
Haisla Nation argued that Northern Gateway overestimated its ability to detect and respond to a spill. In the Haisla’s view this resulted in the cost of a spill and the requisite financial assurances being understated. Haisla cited several factors, including: remote location, limited access, challenging terrain, seasonal conditions, and river flow conditions that would cause the cost of cleaning up a spill in the Kitimat River valley to be significantly greater than the costs associated with Enbridge’s Marshall, Michigan spill.
For these reasons, Haisla proposed that Northern Gateway should be required to obtain a minimum of $1 billion of liability coverage through insurance and financial assurances. Haisla said that Northern Gateway should file annually the report from an independent third party assessing the financial assurances plan. (Vol 2 p359)
In response Northern Gateway said:
Northern Gateway said that Haisla’s findings were based on a number of fundamental methodological flaws and a lack of probability analysis to support the high frequency of occurrence of oil spill events. Northern Gateway argued that Haisla’s estimates of ecosystem service values were inflated because they were based on values from unrelated studies. In Northern Gateway’s view, Haisla relied on high passive use values that were not justified.
As it has in most of its decision, the JRP accepted Northern Gateway’s evidence, including its explanation of the Marshall, Michigan spill and then went on to base its spill cost estimates not on a pipeline breach but on the 2005 railway spill at Lake Wabumum, near White Sands, Alberta.
The Panel accepts that the cleanup costs for the Marshall, Michigan spill were orders of magnitude higher because of the extended response time. In this application, the Panel accepts Northern Gateway’s commitment to complete the shutdown in no more than 13 minutes after detection. For this reason the Panel did not use the Marshall spill costs in its calculations. The spill volume and the resulting costs are directly dependent on the Northern Gateway’s control room staff and the pipeline control system fully closing the adjacent block valves no longer than 13 minutes from the detection of an alarm event, as well as the amount of oil which would drain out of the pipeline after valve closure due to elevation differences.
The Panel decided on a total unit cost of $138,376 per cubic metre ($22,000 per barrel). This is midway between the unit cost of $88,058 per cubic metre ($14,000) per barrel proposed by Northern Gateway and the unit cost of $188,694 per cubic metre ($30,000 per barrel) for the Lake Wabamun spill. It is about one-half of the Marshall spill’s unit cost. Giving weight to the Lake Wabamun costs recognizes actual costs experienced in a Canadian spill and the greater costs of spills in high consequence areas. In these areas, individuals, populations, property, and the environment would have a high sensitivity to hydrocarbon spills. The deleterious effects of the spill would increase with the spill volume, the extent of the spill, and the difficulty in accessing the spill area for cleanup and remediation.
Using these spill volume and unit cost values in the calculation below, the Panel estimated the total cost of a large spill could be $700 million. Total cost of a spill = 31,500 barrels x $22,000 per barrel = $693 million, or $700 million when rounded up.
The Panel based the financial assurances requirements for Northern Gateway on a spill with a total estimated cost of $700 million and directs Northern Gateway to develop a financial assurances plan with a total coverage of $950 million that would include the following components:
i. Ready cash of $100 million to cover the initial costs of a spill;
ii. Core coverage of $600 million that is made up of stand-alone, third party liability insurance and other appropriate financial assurance instruments, and
iii. Financial backstopping via parental, other third party guarantees, or no fault insurance of at least $250 million to cover costs that exceed the payout of components i. and ii.
The financial backstopping would be available to fill the gap if the spill volumes or unit costs were under-estimated or if the payout from the core coverage would be less than 100 per cent.
The Panel noted that:
The evidence indicates that there is some probability that a large oil spill may occur at some time over the life of the project. In these circumstances the Panel must take a careful and precautionary approach because of the high consequences of a large spill. The Panel has decided that Northern Gateway must arrange and maintain sufficient financial assurances to cover potential risks and liabilities related to large oil spills during the operating life of the project.
Northern Gateway committed to investing $500 million in additional facilities and mitigation measures such as thicker wall pipe, more block valves, more in-line inspections, and complementary leak detection systems. This initiative should enhance the safety and reliability of the system and help reduce and mitigate the effects of a spill, but it would not eliminate the risk or costs of spills. This initiative is not a direct substitute for third party liability insurance and does not eliminate the need for liability insurance or any other form of financial assurance to cover the cost of a spill. (p 361)
So the JRP decision comes down to this, if you accept Northern Gateway’s position that pipeline spills are rare and mostly small, then the company has the financial resources to cover the damage. If, however, Northern Gateway is wrong and the costs of a pipeline cleanup exceed the $950 million required by the Joint Review Panel, as has happened in Michigan, then those JRP conditions are already obsolete.
(Northwest Coast Energy News encourages all readers to read the complete JRP report and SEC filing since space and readability does not permit fully quoting from the report)