Kinder Morgan’s Trans Mountain Expansion Project (the “Project”) received National Energy Board (the “NEB”) approval on May 19, 2016. Pursuant to its responsibilities under s. 52 of the National Energy Board Act (the “Act”), the NEB issued a 553-page report detailing its belief that the Project is in the public interest and recommending that the Federal Governor in Council approve the Project, provided it meets 157 conditions. If the Governor in Council also approves the Project, he will then direct the NEB to issue the necessary Certificate of Public Convenience and Necessity (“CPCN”) for the Project to proceed.

The federal government has committed to make its final decision on the Project in December, 2016. If approved, the twin lines (the current pipeline plus the new twinned line) will carry nearly 900,000 barrels of crude oil a day, beginning as early as 2018, from Edmonton to the Westridge Marine Terminal in Burnaby. At that point, oil would be loaded onto tankers for export to Washington State, California, and Asia.

The NEB was required to weigh all relevant evidence on the record, including evidence gathered from the public hearing process regarding the benefits and burdens of the Project, and come to a recommendation on whether the Project is in the public interest. On May 19, 2016, it did just that.

Weighed Benefits + Burdens

Benefits

The NEB determined that, collectively, the benefits associated with the Project are “considerable“.

Of the listed benefits, the NEB labelled the following five as “considerable“:

market diversification; job creation; competition among pipelines; considerable government revenues; and local and regional economic growth from direct spending on pipeline materials.

The benefits labelled “modest” include:

the establishment of a Community Benefit program; enhanced marine spill response; and development of the capacity of local and Aboriginal individuals, communities, and businesses.

Burdens

Despite identifying a number of concerns, the NEB determined that, if approved by the Governor in Council, many of the issues underlying its concerns can be mitigated through the conditions attached to the CPCN, amended CPCNs, and other associated regulatory instruments. The NEB assessed the likely success of these mitigative options in reaching its recommendation, but some residual burdens remain.

Significant Burdens: Southern Resident Killer Whales, Cultural Practices and Greenhouse Gas Emmissions

Of the listed residual burdens, the NEB labelled three as “significant“. The NEB concluded that increased tanker traffic in the Salish Sea will have a significant negative effect on already-endangered southern resident killer whales and coastal First Nation’s cultural practices involving the whales. Additionally, future vessel traffic would contribute to an increase in Canadian greenhouse gas emissions, which, despite amounting to a small percentage of Canada’s overall emissions, will be “significant”.

In 2001, the Committee on the Status of Endangered Wildlife in Canada designated the southern resident killer whales as endangered and listed their population in Schedule 1 of the Species at Risk Act (SARA). The southern resident killer whale population is acoustically, genetically, and culturally distinct from other killer whales. There are only approximately 80 whales that make up this small population, including the world’s oldest known killer whale, a 102 year-old named “Granny”. Noise and crowding from vessels interrupts social communications used to find mates and identify predators; causes displacement from preferred habitats; disrupts nursing and foraging behavior; and scares away prey. Also, some ships’ use of sonar technology can negatively interfere with the whales’ super-nitrogen-saturated blood, sometimes causing hemorrhaging and subsequent death.

In response to the NEB’s report, the Raincoast Conservation Foundation (“Raincoast“) commented that increased tanker traffic in the Salish Sea will seriously jeopardize the survival of BC’s endangered southern killer whales, increasing the likelihood that their numbers will decline and the probability that they will ultimately become extinct in Canada and the United States. Raincoast submitted its analyses and findings to the NEB, as well as evidence on the substantial threats that the Project presents to Fraser River salmon. Many activists, including Raincoast, believe that the commencement of this Project will be a legal violation of SARA.

Modest Burdens: Municipal Development, Aboriginal Land Use and Non-Aboriginal Land Use

The burdens labelled “modest” include: potential constraints on municipal development; Aboriginal groups’ ability to use the land and water for traditional purposes during construction and operation; and landowners’ and land users’ ability to use the land and water during construction and operation. Construction and routine maintenance activities will cause temporary, limited effects on recreational and commercial hunting, fishing, agricultural practices, and access to property, and will cause nuisance disturbance such as noise. Additionally, Aboriginal groups’ activities directly affected by the Westridge Marine Terminal will persist for the operational life of the Project, as traditional activities will not occur within the expanded water lease boundaries. The NEB asserts, however inconvenient this may be, that long-term traditional resource use patterns will “likely adapt over time.”

Acceptable Impacts: Spill Risks

With regards to spills from pipelines, tank terminals, pump stations, the Westridge Marine Terminal, and/or a Project-related tanker, the NEB claims that there is a very low probability of a spill, but that it may result in significant damage. Consequently, the NEB labelled this level of risk as “acceptable“. However, while the NEB deems this an acceptable risk, the Tsleil-Waututh Nation commented that their concerns for the potential negative impact of an oil spill on the local economy and the irreparable damage to their traditional lands and water is “simply a risk too great to accept.” We expect the finding regarding spill risks will be one of the many issues raised by groups challenging the NEB recommendations.

Disconnect Between Burdens and Benefits

Another interesting outcome of the weighing processes is the finding that the perceived benefits are mainly national or regional in scope while the residual burdens are predominately local, forcing British Columbia stakeholders (including First Nations) to shoulder the larger share of potential consequences. Not surprisingly, Mayor Gregor Robertson spoke out in response to the report, reiterating his vehement opposition and “outrage”. In his statement, Robertson asserts, “Vancouver is leading the country in economic growth and our brand as a green, clean, and sustainable city, valued at $31 billion, benefits all of Canada. This project is not in Vancouver, BC, or Canada’s interest.” Similarly, Burnaby Mayor Derek Corrigan responded with a vow to “fight this out to the bitter end” and even swore he will lie down in front of a bulldozer to stop the pipeline.

Ultimately, however, the NEB placed significant weight on economic benefits when weighing the benefits and residual burdens and concluded that this Project is in the best interest of the Canadian public.

Conditions

Kinder Morgan will have to address 157 conditions covering a wide range of matters, including protection of the environment, consultation with those affected (including Indigenous communities), socio-economic matters, and emergency preparedness and response. A complete list of the NEB’s conditions can be found in Appendix 3 of the report, located here.

Environmental

The NEB considers environmental protection as part of its public interest mandate under the Act. The NEB also has a mandate to conduct environmental assessments under the CEAA 2012. Ultimately, the NEB concluded that the Project is not likely to cause significant adverse environmental effects, provided Kinder Morgan implements the Trans Mountain environmental protection procedures and mitigation and complies with the NEB’s conditions. The conditions require that Kinder Morgan exert considerable effort to prevent or avoid environmental impacts and, if impacts are unavoidable, to minimize and reduce them. Where residual effects remain, measures can be taken to offset those effects on a local and regional level.

Of the 157 conditions, there are 49 geared specifically towards protecting the environment, including air emissions and greenhouse gasses. Most of the environmental conditions span the entire life of the Project, with specific conditions related to pre-construction, pre-operation, and operational phases of the Project. Specifically, the environmental conditions include the following:

9 conditions considering “air quality and greenhouse gases”;

9 conditions considering “water quality”;

14 conditions considering “soil, vegetation, and wetlands”;

14 conditions considering “wildlife and wildlife habitat”;

10 conditions considering “fish and fish habitat”; and

3 conditions considering “marine mammals”.

There is considerable overlap, as many of the conditions are applicable to multiple affected groups. For example, Condition No. 47 mandates Access Management Plans be included within the updated Environmental Protection Plans required by Conditions 72 and 78. Each of these plans must address issues related to soil, vegetation, fish and fish habitat, and wildlife and wildlife habitat.

The conditions include protection, management, mitigation, and restoration plans for wildlife, marine, and ecological communities, such as the Fugitive Emissions Management Plans; Wetland & Grasslands Survey and Mitigation Plan; and Caribou Habitat Restoration Plan. There are also numerous reports and assessments that Kinder Morgan will have to supply prior to construction, including a hydrogeological report relating to the aquifer at Coldwater Indian Reserve No. 1. This report must include information such as quantification of risk posed to groundwater supplies on the reserve in the event of leaks, accidents, or malfunctions from the Project.

The conditions also include various offset measures. Regarding the “air quality and greenhouse gases” conditions, the NEB would impose Condition 142, requiring Kinder Morgan to develop an offset plan for the Project’s construction-related greenhouse gas emissions. To provide the most accurate estimate of emissions required to be offset, Condition 140 will require Kinder Morgan to quantify the total direct greenhouse gas emissions after all construction activities are complete. Construction-related greenhouse gas emissions are not reportable under any federal greenhouse gas regulations, allowing the NEB to predict that these offset measures will be “above and beyond” the mitigation measures implemented for the Project. With the inclusion of Condition 142, the Greenhouse Gas Emissions Offset Plan, this Project is the first to be required to have plans to offset emissions. Other affected groups with specific offset plans include: riparian habitats, grasslands, wetlands, caribou, rare ecological communities and rare plant populations.

Some of the most serious threats Kinder Morgan’s pipeline poses for marine mammals (i.e. the southern resident killer whales) cannot be mitigated by the NEB’s conditions. While Condition 132 mandates a “Marine Mammal Protection Program”, the program merely focuses on summarizing the effects from the operations of Project-related marine vessels.

Indigenous Engagement

As part of the NEB’s conditions, Kinder Morgan would be required to continue consultation with Indigenous groups throughout the life of the Project. Kinder Morgan said it is committed to working with Aboriginal groups to address Project-related interests and concerns. The company described this as an ongoing and iterative process that is part of the ongoing dialogue with Aboriginal groups. This process is said to include regional workshops with Aboriginal groups to discuss Environmental Protections Plans (EPPs) and Emergency Management, including mitigation measures to minimize Project-related effects. Kinder Morgan is required to file with the NEB, at least 6 months prior to commencing construction, an Aboriginal, local, and regional skills and business capacity inventory for the Project, including plans for communicating employment and business opportunities to Aboriginal communities. Additionally, for the first five years after commencing operations, Kinder Morgan must file with the NEB annual reports on engagement for each Aboriginal group consulted, including summaries of issues and concerns raised and the measures taken to address or respond to those issues and concerns. Engagement and consultation is said to cover a wide range of matters, including protection of municipal and community water sources; traditional land use; and traditional marine resource use.

However, despite Kinder Morgan stating its commitment to “continuation” of an “effective Aboriginal Engagement Program that satisfies all parties ,” a number of Aboriginal groups raised concerns in their written evidence and submissions filed with the NEB about Kinder Morgan’s consultations, including:

Adams Lake Indian Band,

Asini Wachi Nehiyawak Traditional Band,

Cheam First Nation, Chawathil First Nation,

Coldwater Indian Band,

Cowichan Tribes,

Katzie First Nation,

Lyackson First Nation,

Métis Nation of Alberta Gunn Métis Local 55,

Métis Nation of British Columbia,

Matsqui First Nation, Michel First Nation,

Musqueam Indian Band,

Nooaitch Indian Band,

Pacheedaht First Nation,

Stk’emlupsemc Te Secwépemc,

Stó:lō Collective,

Snuneymuxw First Nation,

Squamish Nation,

Tsartlip First Nation,

Tsawout First Nation,

Tsawwassen First Nation,

Tsleil-Waututh Nation, and

Upper Nicola Band.

Many of the unsatisfied Aboriginal groups point to inadequate consultation, while Tsawwassen First Nation stated in written evidence that Kinder Morgan actually mischaracterized its engagement with the Nation through Aboriginal Engagement Logs filed by the company. Kinder Morgan acknowledged its errors and omissions, and accepted the updated information on consultation filed by Tsawwassen First Nation. And yet, despite numerous Aboriginal groups providing written submissions claiming disrespectful, misreported, inadequate, and/or nonexistent consultation, the NEB concluded that Kinder Morgan met its expectations, including those set out in the NEB’s Filing Manual.

The Government of Canada has said that, commencing at the close of the NEB’s hearing record and ending with a Governor in Council decision on the Project, the Major Projects Management Office will coordinate consultation meetings between the Government and Aboriginal groups to conduct a “meaningful two-way dialogue to determine if there are any concerns related to the Project that have not been fully addressed by the NEB’s draft conditions or the proponent’s commitments to that point in the process.” These consultations are also intended to consider proposals from Aboriginal groups for accommodation measures to further address outstanding issues or concerns that could be considered by the Crown.

Conditions or Chimera?

In response to the report, Ian Anderson, president of Kinder Morgan Canada, announced that Kinder Morgan is pleased with the NEB’s recommendation, describing the 157 conditions as “rigorous” and “achievable”. Meanwhile, Mayor Robertson said the city has no faith that the NEB’s conditions, however rigorous, will prevent the “inevitable catastrophe” of an oil spill in the harbor. Robertson is not alone in his skepticism, as many believe there is no guarantee that the NEB’s conditions will be complied with at all. The NEB’s report states that it will hold Kinder Morgan accountable for meeting its regulatory requirements throughout the lifecycle of the Project, but many question whether the NEB has adequate structures in place to deliver on that promise.

In a report by the federal commissioner of the environment and sustainable development, tabled in the House of Commons in January, the NEB was accused of not doing enough to track whether pipeline companies are complying with conditions set out when projects are approved. The report warned that the national regulator needs to do more to keep track of pipeline projects after Commissioner Julie Gelfand found the systems set up by the NEB to check whether companies are keeping their promises when building and operating pipelines to be “outdated” and “inaccurate”. Following this report, the NEB committed to an action plan intended to address all of the commissioner’s findings by the end of 2016.

The Next Step in the Process

In January, Natural Resources Minister James Carr and Minister of Environment and Climate Change Catherine McKenna announced that pipeline projects will face new environmental regulations and additional reviews. In creating additional assessments which follow a different mandate than the NEB’s review, the Liberal government intends to restore public trust and confidence in Canada’s environment assessment process.

On May 17, 2016, two days before the NEB issued its report, the federal government announced the members of the new, three-member panel who will look into the proposed expansion of Kinder Morgan’s Trans Mountain pipeline.

The members, announced by Carr, are:

Annette Trimbee, president of the University of Winnipeg and former deputy finance minister in Alberta.

Tony Penikett, the former premier of Yukon and author of Reconciliation: First Nations Treaty Making in British Columbia; and

Kim Baird, former elected chief of Tsawwassen First Nation.

You can find our previous article on the ministerial panel here.

While the panel cannot overrule the NEB’s recommendation, they will be responsible for “meaningful consultation” with Indigenous people along the route, accommodating their rights and interests where appropriate, and assessing the upstream pollution from the oil fields. The panel’s findings are to be reported to Carr in November, a month before the federal cabinet must make a final decision on whether to approve Kinder Morgan’s Project. After that, if the federal government sticks to its timelines, we expect its decisions on the Trans Mountain Expansion in December.

All of this, of course, does not take into account the British Columbia environmental assessment process currently underway following the Coastal First Nations court decision. For a discussion on this case and the provincial process, click here.

To discuss Trans Mountain or the development of other large infrastructure projects in British Columbia, contact Rob Miller, Practice Group Leader for the First Nations Economic Development Group: rob@millertiterle.com or Tyson Lamarsh: tyson@millertiterle.com.