Canada: Over The First Hurdle And Into The Sharks: The NEB Recommends Approval Of The Trans Mountain Pipeline Expansion Project

1.The NEB's Findings

After reviewing tens of thousands of pages of evidence during a hearing process that had 1650 registered participants (400 of which had full intervenor status) and lasted 686 days (including two lengthy pauses in the legislatively mandated review timeframe),1 the NEB has handed Kinder Morgan its first victory on the long road toward the twinning of its existing Trans Mountain pipeline system between Edmonton, AB and Burnaby, BC (the Project). In OH-001-2014,2 the NEB recommended that the Cabinet approve the Project, which will nearly triple the system's capacity to ship oil from 300,000 bpd to 890,000 bpd, as being in the national public interest subject to 157 conditions. In this regard, the Board placed "significant weight" on the economic benefits of the Project. Particularly, the considerable benefits to national and regional economies associated with providing producers with increased flexibility and optionality in getting their product to market, as well as with the jobs created across Canada. The Board also noted the considerable benefits to regional and local economies associated with significant spending on pipeline materials.

Where the environment is concerned, the NEB completed a comprehensive environmental assessment of the Project in accordance with the Canadian Environmental Assessment Act, 2012 (CEAA 2012). Although marine shipping is not regulated by the Board, the Board did consider the potential environmental and socio-economic effects associated with Project-related marine shipping as part of its public interest mandate (the Project also includes the expansion of the Westridge Marine Terminal in Burnaby to increase the number of tankers to be loaded and to travel down the Burrard inlet from 5 to 34 per month). The NEB held that with the implementation of Trans Mountain's environmental protection procedures and mitigation, as well as the Board's 157 recommended conditions, the Project is not likely to cause significant adverse environmental effects. The Board did note, however, that effects from the operation of marine vessels would contribute to the total cumulative effects on the Southern resident killer whales, and would further impede the recovery of this endangered species that lives in the Salish Sea. Accordingly, though not technically within its jurisdiction, the Board found that Project-related marine vessels would likely result in significant adverse effects to the Southern resident killer whale and on Aboriginal cultural uses associated with these marine mammals.

On the ever-controversial topic of greenhouse gas (GHG) emissions, though a more robust review was conducted as compared to the assessment of the Northern Gateway project, the NEB restricted its review to emissions from the Project and from Project-related marine vessel traffic (i.e. it did not consider upstream or downstream emissions beyond marine vessel emissions). Significantly, the Board imposed a condition requiring Trans Mountain to develop an offset plan for the Project's construction-related GHG emissions; the intent being to confirm that there are no net GHG emissions from the construction of the Project. As discussed further below, this will not be the final word on GHG emissions.

The remaining conditions are heavily weighted to engineering and safety requirements as well as emergency preparedness and response. Of particular note, condition 121 requires that Trans Mountain maintain at least $1.1 billion dollars of financial assurances to address the costs of a spill coming within the NEB's jurisdiction over the lifetime of the Project. At least $100 million must be in the form of ready cash to cover costs and for the remaining $1 billion, Trans Mountain must submit a portfolio of multiple financial instruments, to be approved by the Board. This $1.1 billion dollars is separate from the $1.3 billion in funding available to address the costs of emergency response, cleanup and compensation in the event of an oil spill from a tanker pursuant to the Marine Liability Act, which establishes the framework for marine liability and compensation in Canada.

Unlike in the NEB's report in respect of Northern Gateway, notably absent from this report was any criticism of Trans Mountain's public consultation program with impacted stakeholders along its proposed routes or in proximity to the Westridge Marine Terminal, including its engagement and consultation with Aboriginal groups. The Board was satisfied that Trans Mountain developed and implemented a broadly based public consultation program, offering numerous venues and opportunities for stakeholders to learn about the Project, and to provide their views and concerns to the company. The Board was also satisfied that Trans Mountain considered the information that was provided by Aboriginal groups about their use of the lands, waters, and resources, and made a number of changes to the design and planned operation of the Project as a result of this information. The Board was clearly less impressed by the City of Burnaby's conduct, observing "with regret" that not all municipalities accepted the opportunity to engage with the Trans Mountain effectively, stating:

In particular, the City of Burnaby declined a number of opportunities to engage with Trans Mountain. The Board is of the view that when municipalities decline opportunities to engage, this diminishes the quality of information available to both the company and the Board, and creates the potential that less than satisfactory solutions to municipal concerns may be the result.3

One hopes that this comment may resonate with the numerous municipalities in Québec, including Montréal, that have been vocal in their opposition to Energy East.

2. The Road Ahead

Though we can almost smell the salty tidewater from Calgary, the road ahead of Kinder Morgan remains long and uncertain.

The Cabinet's review period has been extended by four months as part of the "interim measures" announced by the Government of Canada at the end of January 2016 (pending its review of the current environmental assessment process under CEAA 2012 and the modernization of the NEB), meaning that we will not have word on the Federal blessing until December 19, 2016. And how will Cabinet reach its final determination on whether the Certificate of Public Convenience and Necessity (CPCN) should issue? It is all a little murky. That the interim measures were announced while Trans Mountain was in the throes of final argument to the NEB under the process understood to govern its fate could not have been an easy blow.

As part of the interim measures, the Government of Canada announced that a Ministerial Panel would be appointed to conduct additional consultation with communities, and that an assessment of upstream GHG emissions associated with the Project would be conducted. The Ministerial Panel was announced on May 17, 2016, and is apparently tasked with engaging communities and local Indigenous groups4 and reviewing feedback that will be provided online regarding the Project and Project-related issues.5 Its work will apparently start in June and conclude in November with a report to the Minister of Natural Resources, which will be made public. Environment and Climate Change Canada's Draft Review of Related Upstream Greenhouse Gas Emissions Estimates (the Draft Assessment) was released for public comment concurrently with the NEB's Report on May 19, 2016. The Draft Assessment follows the two-step methodology proposed by Environment and Climate Change Canada in March of 2016:6 (1) a quantitative estimate of emissions released from "upstream"7 production; and (2) a "discussion" of the project's potential impact on Canadian and global GHG emissions.8

So it seems that, in addition to the NEB's recommendation report, in determining whether the CPCN should issue, the Government will also be considering "consultations with Indigenous peoples, public input from the Ministerial Panel, and the comments received on the [Draft Assessment]."9 Then, of course, there is also the matter of another environmental assessment to be undertaken by BC's Environmental Assessment Office (EAO) in light of the BC Supreme Court decision in Coastal First Nations v. British Columbia (Environment), 2016 BCSC 34, concluding that although the EAO may rely on the environmental assessment carried out by the NEB, the Equivalency Agreement between the NEB and the EAO cannot dispense with the requirement for an environmental assessment certificate under BC's Environmental Assessment Act, S.B.C. 2002, c.43. The timing and scope of this additional process is not yet clear, though it is anticipated that the EAO will require additional information from Trans Mountain, particularly with respect to the EAO's further consultation with Aboriginal groups.

Finally, there will invariably be the uncertainty and delay associated with legal challenges every step of the way. As with Northern Gateway, Trans Mountain can expect multitudes of judicial reviews and appeals of the NEB's report and the Governor in Council's ultimate decision. Whatever report is ultimately issued by the Ministerial Panel, and what reliance is ultimately placed upon it and the Draft Assessment by the Government of Canada, will likewise give rise to opportunities to challenge. So too will the EAO's environmental assessment certificate process, including whatever conditions it may subsequently impose.

In the end, Canada is still years away from meaningfully ameliorating its current market access predicament. As investment continues to find its way to oil-producing jurisdictions other than Canada, social licence may come too late – if it comes at all. Sadly, if that investment is finding its way to jurisdictions with less stringent environmental regulations, the planet will not be any better off for all our good intentions and hand-wringing.


1. The first, to allow for additional information to be gathered; the second, to  facilitate further process steps to address replacement evidence of Trans Mountain's expert witness Steven Kelly, whose evidence was struck by the NEB to ensure public confidence in the impartiality of the NEB when the Governor in Council decided to appoint Mr. Kelly as a full-time board member of the NEB while the proceeding was still unfolding.

2. National Energy Board Report, Trans Mountain Expansion Project (May 2016).

3. Ibid. at p. 28.

4. Though Natural Resources Canada will also be undertaking separate and additional Crown consultations with Indigenous peoples.

5. See the Ministerial Panel's Terms of Reference.

6. See Canada Gazette, Vol. 150, No. 12 (March 19, 2016).

7. Upstream, being defined as all industrial activities from the point of resource extraction to the project under review (i.e. extraction, field processing, handling and transportation).

8. Under Step 1, the Draft Assessment concludes that considering only the additional 590,000 bpd of capacity added by the expansion, the upstream GHG emissions could range from 14 to 17 megatonnes of C02e per year, which emissions are not necessarily incremental depending on the expected price of oil, the costs of transportation alternatives, and whether other pipelines are built. If, for example, the Project is the only additional pipeline capacity added from Alberta, the Draft Assessment concludes that oil sands production already expected to be completed by 2019 as well as volumes currently being transported by rail would make full use of the Project with the result that no incremental emissions can be attributed to the Project. More significantly, however, the Draft Assessment also properly notes that given the trade-exposed nature of oil production, if oil sands production does not occur in Canada, investments would be made in other jurisdictions and global oil consumption would be materially unchanged such that the impact of the upstream emissions is really dependent only on the mix of oil displaced by the oil sands.

9. Natural Resources Canada, News Release, Government of Canada Receives National Energy Board Report on the Trans Mountain Expansion Project, (May 19, 2016).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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