Article reproduced from Alberta Oil Magazine, March 2012. Published by Venture Publishing Inc.
On a blustery January afternoon in Calgary, Joe Oliver, Canada’s Minister of Natural Resources, stood behind a podium at the Calgary Chamber of Commerce to address a roomful of industry executives. Officially he was there to discuss regulatory reform and trade diversification, but the focus of his talk shifted quickly to pipelines, and those who would prefer they weren’t built.
In remarks that resembled a stump speech, the minister lashed out at green activists and those he described as “champagne socialists” for delaying TransCanada Corp.’s Keystone XL pipeline indefinitely, and for threatening to do the same to Northern Gateway, the multibillion-dollar West Coast pipeline proposed by Enbridge Inc. He warned that an “unpredictable” and “needlessly complex” regulatory system prevented Canada from reaping “enormous” tax windfalls from the oil sands. He added, to applause: “Bad processes do not produce good environmental outcomes.”
It was not the first time the former investment banker had displayed a flare for bombastic rhetoric. Only a few weeks earlier, he had released an “open letter” to Canadians, accusing “radical” groups of co-opting the Joint Review Panel set-up by the federal government to review the Gateway project. “These groups threaten to hijack our regulatory system to achieve their radical ideological agenda,” the minister wrote. “They seek to exploit any loophole they can find, stacking public hearings with bodies to ensure that delays kill good projects.”
But while environmentalists and a “broken” regulatory system have attracted Oliver’s scorn, another stakeholder went unnamed that afternoon in Calgary. It is no secret that the fate of Northern Gateway, like energy projects throughout British Columbia, could well be decided in the courts. Many First Nations along the route remain wary of Enbridge’s plan to link Alberta with growing oil demand in Asia-Pacific markets.
Yet Ellis Ross, chief councilor of the Haisla Nation in Kitimaat Village (where Gateway, if built, would feed supertankers with raw bitumen), suggests the reluctance to endorse the pipeline runs deeper than fears of a Macondo-scale spill in the Douglas Channel. “It’s not that simple,” he says in an interview. “It comes from a long history of being marginalized and ignored when it comes to commercial projects. Everybody got rich while Haisla lost its resource and became poor. How fair is that?”
The Haisla are an atypical Gateway opponent. The band is decidedly pro-business, having thrown its support behind a liquefied natural gas (LNG) export project proposed by Apache Canada Ltd., plus gained an equity toehold in another, more modest, endeavor called the B.C. LNG Export Co-operative. Both experiences show that relationships between oil and gas firms and First Nations need not be adversarial.
Take the relationship between the Haisla and LNG Partners. It began about eight years ago, when the Houston-based firm started poking around British Columbia’s northwest coast, scouting locations to build a barge-based LNG facility. “They approached our corporate arm,” Ross recalls. “Nobody gets to the council without going through the corporate arm.”
Having grown accustomed to living in the shadow of the nearby aluminum smelter, the community was initially surprised to learn that LNG Partners was looking for a partner. “We thought it was putting the cart before the horse of talking about an equity partnership without talking about rights and title,” Ross says. “We were skeptical, but they proved it.”
So began the Douglas Channel Energy Partnership. In February, Canada’s National Energy Board approved the LNG co-op’s project, which will export up to 26 million tonnes of the supercooled gas over 20 years, with a single train that can process 125 million cubic feet of gas per day slated to begin operations in 2013.
Ross says the community’s support for natural gas, and its continued opposition to Gateway, is rooted in local perceptions that crude oil – its production, transportation and consumption – is an inherently riskier proposition compared to LNG. “We looked at the safety record of natural gas transport,” he says. “If there is a spill, knock on wood, the impact is different from crude oil. Combine that with the safety record and it was a mitigated risk the Haisla was willing to take.” The offer of an equity stake sweetened the deal, leaving little room to prevaricate. “We’re either in or out,” Ross says.
John Carruthers was not surprised by the level of interest in Northern Gateway as public hearings got underway in Kitimaat Village. “There was lots of publicity, as we might have expected, and obviously there was some passionate testimony from Haisla elders and people who feel strongly about their traditional life,” the president of Enbridge affiliate Northern Gateway Pipelines Ltd. says. “We need to answer those questions.”
On Jan. 9, the population of the small aboriginal community temporarily ballooned as the panel charged with reviewing Gateway began a whistle stop tour of communities affected by the export mega-project. Cars at the local recreation center spilled out on to the street. National media turned the local fire hall into a makeshift office. Carruthers says the attention was “another avenue for improved knowledge” about a project Enbridge has been planning in one way or another for at least 10 years.
Consultations with affected First Nations began in earnest in 2008. Carruthers says Enbridge solicited feedback from First Nation communities on the initial project concept. Oil spills emerged as a primary concern. Enbridge says safety is paramount to the project. The technology used to construct the pipeline, for instance, will include stronger steel, regular testing and use something called fusion bond epoxy, an internal coating designed specifically for corrosion protection, to safeguard against a rupture.
Carruthers says Enbridge provided funding to the communities it consulted, so experts could be hired to review environmental impacts and the technical aspects of the project. The gesture wasn’t a tradeoff for permission to construct the pipeline on aboriginal land. There was also a partnership offer on the table. “There is training, jobs and business opportunities,” Carruthers says. “The agreements were made up of a number of different components, including long-term partnerships of 10 per cent equity.”
Equity stakes are far from a novel way to bring First Nations onside with industrial development. In response to feedback, however, Enbridge also offered to finance equity stakes in Gateway. Carruthers says the Calgary pipeline giant is in talks with some of the 40 First Nation communities along the proposed right-of-way, which runs 1,200 kilometers from Bruderheim, Alberta, north of Edmonton, through two mountain ranges and across more than 700 rivers to the town of Kitimat on B.C.’s misty coastline.
The outreach is one part information exchange. Carruthers says many in the affected communities aren’t familiar with Enbridge or its business. The company, in turn, is learning firsthand about traditional land-use practices and a long history of economic marginalization in aboriginal communities. “Traditionally they haven’t benefited from projects in the long-term,” Carruthers says.
Janet Holder, Enbridge’s executive vice-president of western access, says it’s been the company’s practice when it is operating on aboriginal land to encourage “their participation and employment.” She says the Gateway project will be no different. “We would expect there would be at least 15 per cent
Carruthers says the company has struck agreements with roughly half of the affected communities along the route, but he won’t say with whom.
It’s clear, though, that Ellis Ross and the Haisla are not on the list. “We have not been consulted by the Crown either and it’s the Crown’s duty to consult,” Ross says. “If they want to delegate it to a private company they have to talk to us first. The Joint Review Panel isn’t a true consultation by case law.”
Ross has been public about his opposition to Northern Gateway, but the community has yet to make an official decision on the proposed pipeline project. In the meantime, he says, reliable information is increasingly hard to come by. “It’s hard to figure out the real facts because of all the information out there. Even if it’s a verified scientific study there are people who question it. Who do we believe? Who do we trust?”
Therein lies an opportunity, suggests Adam Chamberlain, an environmental, energy and aboriginal lawyer and partner with the Toronto office of Borden, Ladner Gervais LLP. “I think it’s a trend now for a bunch of reasons, but fundamentally, aboriginal communities are looking for a meaningful role in projects,” he says. “And what’s more meaningful than ownership?”
The duty to consult is no longer viewed as an isolated process designed solely to outline a given project’s environmental footprint. Chamberlain, whose experience includes work on environmental assessments of large infrastructure projects, says the current consultation process has changed markedly since the mid-1990s. “The first one I did was back in 1997. Back then it wasn’t even called consultation, but we knew there was an evolving legal requirement.”
Companies consulted with affected communities for different reasons. Some saw it as the right thing to do; others simply wanted to avoid blockades. Slowly, although rhetoric from Ottawa might suggest otherwise, the caricature of First Nations blocking industrial development for its own sake has fallen by the wayside, replaced by a more pragmatic outlook.
Today, Chamberlain says an offer of equity ownership or some sort of business partnership is usually a key aspect of consulting with First Nation communities on commercial projects. But there’s no blueprint to follow and every situation is different. “There’s no magic,” he says. “A lot of it is common sense and the notion of treating people how you want to be treated. Make it clear that you’re in it for the long haul and want to develop a relationship, and then act accordingly.”
Controversy wins headlines, but aboriginal partnerships are possible
Across northern British Columbia, negotiations are taking place for a pipeline project – and it’s not Northern Gateway. The proposed Pacific Trail Pipeline is a critical link for the Kitimat LNG venture. If built, it would carry 700 million cubic feet of natural gas per day from Summit Lake to a new liquefaction plant near Kitimat, where Apache Canada Ltd., together with EOG Resources Canada Inc. and Encana Corp. plan to build a multibillion-dollar export facility.
The 460-kilometer steel ribbon also stands out as an example of co-operation between oil companies and local First Nations. Negotiations are underway on a partnership that could see a group of 15 aboriginal communities whose territory rubs up against the right-of-way buy a 30 per cent stake in the line. An agreement with the provincial government gives the First Nations Limited Partnership (FNLP) up to $35 million to invest in the LNG export scheme.
“A company has to consult with all First Nations no matter what,” says Roland Willson, chief of the West Moberly First Nation, an FNLP member whose territory abuts the Horn River basin in northeastern B.C. “With all this development, a group of like-minded First Nations thought that with the projects transpiring, if we’re OK with development happening, we should be talking about equity.”
That conversation has evolved in tandem with the changing ownership of the proposed $1.1-billion pipeline. It was initially forecast to earn a regulated rate of return under the authority of the B.C. Utilities Commission. Apache then purchased the 50 per cent of the line it didn’t already own from Pacific Northern Gas Ltd., in an effort to streamline ownership from well-head to liquefaction plant.
That raised concerns among members of the aboriginal partnership, who worry the revised ownership structure – capacity on the Pacific Trail line is now reserved exclusively for Kitimat LNG shippers – has put their option for a “meaningful” equity position in the project at risk. “It’s important to realize this group has taken a big leap in the dark and is saying as a group, we’re not opposed to LNG development,” says Robert Metcs of Havlik Metcs Ltd., which represents FNLP in negotiations with Apache. “But they want to see it happen in a way that everyone’s interests are taken care of.”
Could a similar tack work for Northern Gateway? “If we can make this work, we can template the structure and repeat it when it makes sense,” Willson believes. “We have 15 First Nations sitting collectively at a table, which is unheard of. This is more about First Nations working together, more than anything else.”