Battle over a Canadian Oil Sands Pipeline Nears End
Canada's Enbridge Inc. proposes building a new pipeline from Alberta to the Pacific. For Dentons' Richard Neufeld, trying to win government approval for the project has been the fight of his career.
On June 25, under the fluorescent lights of a Best Western ballroom in Terrace, British Columbia, Dentons' Richard Neufeld made a last pitch for his client. More than a decade had passed since the Calgary-based pipeline company Enbridge Inc. had first floated the idea of piping half a million barrels a day of diluted bitumen from Alberta's oil sands to the Pacific Coast. Now, 18 months into a contentious hearing process over the pipeline, Neufeld told a government-appointed review panel that his client's $6.3 billion, 727-mile long project, Northern Gateway, was more vital to Canada than ever. The country's 178 billion barrels of proven oil reserves are second only to Saudi Arabia's—and burgeoning Asian markets are eager to buy them.
And there aren't a lot of other options for moving bitumen out of Alberta. Prospects for TransCanada Corporation's Keystone XL pipeline to the Gulf of Mexico have dimmed. Meanwhile, each year without a new pipeline, oil companies are losing more than $20 billion—and the province of Alberta is missing out on substantial royalties. If Enbridge's pipeline is not approved, Neufeld told the panel, "Canadians would be facing, we submit, an economic catastrophe of unprecedented proportions."
The panel, which has until next month to decide whether to recommend the project, is assessing its potential economic and environmental impact at a politically charged time. There is intense disagreement among Canadians over Alberta's oil sands and their country's future. The Northern Gateway project, like Keystone XL in the United States, has exposed the seemingly unbridgeable divide between environmental coalitions on the one side, and the pipeline company and its oil industry backers on the other. The province of British Columbia—politically left of and considerably greener than neighboring Alberta—opposes the project, while Alberta and the Conservative national government of Prime Minister Stephen Harper both strongly support it. Ultimately, the final decision belongs to Harper—but in the meantime, almost everyone has had their say.
As an example of grassroots engagement in a quasi-judicial process, the hearings were a wild success, with roughly 275 groups and individuals registering as "intervenors" and dozens of interest groups offering evidence and cross-examining witnesses.
But for the oil industry, and for the Harper government, the sprawling, tumultuous hearings were the poster child for a regulatory system run amok. Beyond the cost of delays, Enbridge will have spent more than half a billion dollars on the regulatory process, including legal, marketing, and engineering costs, before the pipeline even breaks ground. Citing the excesses associated with Northern Gateway's hearing process, the Harper government last year overhauled Canadian environmental laws to restrict intervenors in Canada's National Energy Board public review process to "interested parties" only.
Neufeld, a Calgary native, has spent much of the past 15 years advising on some of the largest pipeline projects in Western Canada. This work includes guiding Alliance Pipeline in the late 1990s through a review of its 2,311-mile gas line from Northeast British Columbia to Chicago, and advising prospective shippers in the now-tabled 785-mile Mackenzie Valley gas line from the Northwest Territories to Alberta. But little about the Northern Gateway review followed past playbooks. Neufeld's previous efforts occurred generally out of the national spotlight; this one unfolded on the front pages of Canadian dailies. Dozens of opponents challenged Enbridge's experts and evidence at every turn, and at times, close to 30 witnesses appeared en masse to answer questions at the hearing. In addition to the eight-volume application itself, the panel is considering voluminous evidence offered by intervenors, as well as 22,000 pages of oral evidence and hearing transcripts.
Neufeld's job was further complicated by Enbridge's own PR problems during the hearings. In July 2010 an Enbridge pipeline carrying Albertan oil ruptured in Michigan in the largest on-land U.S. spill ever recorded. In July 2012, just as Northern Gateway evidentiary hearings got rolling, the U.S. National Transportation Safety Board issued a report damning the company's spill response in Michigan as grossly inadequate. And in March 2013, during heated cross-examinations of experts on both sides evaluating Enbridge's spill response plans, the Environmental Protection Agency ordered Enbridge to dredge the Kalamazoo River because some 180,000 gallons of oil remained mired on the river bottom. Enbridge also could not banish from the proceedings the ghost of the 1989 Exxon Valdez spill, which had devastated a marine inlet in neighboring Alaska.
The intense emotions surrounded the hearings "brought a different dimension that counsel had to pay attention to," acknowledges the unflappably courteous Neufeld. "We had to try to depersonalize things so we were dealing with issues, rather than personalities. That's difficult when people have pretty strong views."
Enbridge first floated the idea of a pipeline to the Pacific in the late 1990s. At the time, two coastal B.C. communities, Prince Rupert and Kitimat, both expressed interest in hosting the project's terminus. In 2005 Enbridge signed a memorandum of understanding with PetroChina International to partner on a then $3 billion project to pump the oil across the Rockies to the Pacific. Tapping Neufeld, Enbridge filed a preliminary project description with the Canadian Environmental Assessment Agency and the National Energy Board. Enbridge executives began a campaign to win over native Canadians, known in Canada as aboriginals or First Nations, promising jobs and other benefits. (Under Canada's constitution, the government has a duty to consult First Nations on proposed development affecting lands over which they have traditional claims; in practice, companies try to strike deals up front with the individual aboriginal groups, also known as bands.) But in 2006, it put plans on the back burner, and abruptly pulled out of talks with First Nations, leaving behind ill will among some groups. In 2008, with the Albertan oil patch undergoing a frenzied development, Enbridge obtained $100 million in commitments from Asian refiners and Alberta oil producers to finance the regulatory process and dusted off pipeline plans, but this time, nearly a dozen British Columbia First Nations quickly began agitating against the project.
By the time Neufeld filed Enbridge's formal application in May 2010, environmental activists had jumped into the pipeline fray. Ad campaigns in the U.S. and Canada targeted Canada's "dirty oil"; increasingly, the mission was to stop all oil sands pipelines to slow production. The extraction and processing of bitumen, a viscous hydrocarbon, releases more climate-changing gases than production of lighter grades of crude, and generates large quantities of toxic wastewater.