Canada: Positive Recommendation - National Energy Board Conditionally Approves Trans Mountain Expansion Project

Last Updated: May 25 2016
Article by Alan Ross

Most Read Contributor in Canada, September 2016

On May 19, 2016, the National Energy Board ("NEB") issued a 533-page report recommending that the Governor in Council ("GIC") approve Kinder Morgan Canada Inc.'s $6.8 billion Trans Mountain Expansion Project ("Project"), subject to 157 conditions. The Project would expand Trans Mountain's existing oil pipeline system between Edmonton, Albertaand Burnaby, B.C., nearly tripling the capacity to ship oil from 300,000 barrels per day (bpd) to 890,000 bpd.

Trans Mountain filed its facilities application with the NEB in December 2013. The Project includes approximately 987 km of new pipeline, new and modified facilities, such as pump stations and tanks, and the reactivation of 193 km of existing pipeline. Almost 90 per cent of the pipeline route for the Project parallels existing disturbance, including the right-of-way for Trans Mountain's existing pipeline. The expected in-service date for Trans Mountain is 2019.

Key Findings

The NEB undertook its assessment pursuant National Energy Board Act ("NEB Act") and the Canadian Environmental Assessment Act, 2012 ("CEAA 2012"). The NEB concluded that the Project is in the Canadian public interest. Specifically, in reaching its decision, the NEB assessed the benefits and burdens of the Project. Key NEB findings include:

  • There are a number of important benefits for Canada, such as increased access to diverse markets for Canadian oil, long-term jobs directly related to the Project across Canada, the development of capacity of local and Indigenous individuals, communities and businesses, benefit from direct spending on pipeline materials in Canada and considerable government revenues from the Project.
  • With the implementation of Trans Mountain's environmental protection procedures and mitigation and the NEB's recommended conditions, the Project would not likely cause significant adverse environmental effects.
  • The NEB had no finding of significant adverse environmental effects pursuant to the CEAA 2012. However, it found effects related to increases in marine shipping as part of its overall public interest determination which considered the environmental and socio-economic impacts of increased marine shipping activities. This included a consideration of possible accidents or malfunctions.
  • Should the Project proceed, Trans Mountain will be required to continue its consultation with potentially affected Indigenous groups throughout the life of the Project. As part of the NEB's conditions, Trans Mountain is required to report on its consultation with Indigenous groups during construction and through the first five years of operations. Consultation will include the development of a number of plans related to, among other things, environmental protection and emergency response programs.
  • Should the GIC ultimately approve the Project, the Board will attach 157 conditions largely in respect of emergency preparedness and response, protection of the environment, consultation with those affected by the Project, including Indigenous communities, socio-economic matters, safety, and integrity of the pipeline.
  • For the first time, the NEB required a cross-border pipeline project to detail plans to reduce and offset carbon emissions generated from the construction of the pipeline. However, the regulator did not specify how to offset those emissions.

Next Steps

The NEB decision is not the last word on Trans Mountain. As required by the NEB Act, the NEB submitted its recommendation to the Minister of Natural Resources Canada. The GIC may now reject, approve or approve the Project with conditions, and indicated it will make its determination by December 2016.

On January 27, 2016, the Government of Canada announced new interim rules, which will guide federal decision-making on natural resource projects. These rules will apply until the government's formal review of the federal environmental assessment legislation and NEB process. Borden Ladner Gervais LLP ("BLG") discussed these proposed reforms in In Process? New Federal Rules for Pipeline Approvals.

In addition to whether the GIC ultimately approves Trans Mountain – and how heavily conditioned that approval might be – there are two key areas of federal government oversight to watch. First, Natural Resources Minister Jim Carr appointed a three-person panel to carry on six months of consultations with First Nations and other communities along the proposed route. That panel reports back to the GIC before its determination. Second, the extent to which the GIC conditions its approval, if any, to address upstream greenhouse gas ("GHGs").

Regarding First Nations, as BLG addressed in Federal Government Signals Support For Indigenous Rights Declaration, the federal government recently adopted the United Nations Declaration on the Rights of Indigenous Peoples ("UNDRIP"), which may result in significant consultation-related GIC conditions for Trans Mountain approaching a greater degree of consent than previously anticipated. Turning to upstream GHGs, the federal government's January 2016, statements on interim rules indicate that they would consider the upstream implications of GHGs on major pipeline projects. If so, this may in turn raise federal-provincial jurisdictional disputes. This is because project approvals for upstream oil and gas facilities within a province, including their environmental impacts, are generally within the scope of provincial regulators.

Two additional areas to watch will be whether the B.C. government – which had previously raised concerns respecting the Project – or parties opposing the Project including municipalities, environmental and certain First Nation groups will seek leave to appeal the NEB's recommendation. BLG will be closely monitoring developments surrounding the upcoming GIC decision and any potential appeals of the NEB's Trans Mountain determination.

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