Canadian Energy Law : Lawyers & Attorneys for Environmental Energy Law

Javier Gonzalez -

In a highly anticipated vote, a European Union committee of technical experts failed to reach a decision on whether to approve a European Commission proposal to classify oilsands crude oil as more harmful to the environment than other forms of fuel. The proposal will now go to a council of EU ministers, with a final decision expected by June.

The proposal by the European Commission, the EU’s executive arm, would constitute a revision of the EU’s Fuel Quality Directive, which aims to reduce carbon emissions by 6% from 2010 levels by 2020. The proposal would not ban oilsands crude oil, but it would assign it a greater carbon footprint than conventional crude oil. Under the proposal, oilsands crude oil would be deemed to emit 22% more greenhouse gas by weight than average crude oil.

A “qualified majority” – 255 votes from a total of 345 – was needed to accept or reject the proposal. The committee voted as follows: 89 points in favour of the proposal, 128 against, and 128 abstained.

Key to the result was the abstention of France, Britain, and the Netherlands, home to oil companies with significant oilsands interests.

Europe does not directly buy crude oil from the oilsands, but Canada’s concern is presumably that it any adverse conclusion by the EU may damage the image of the oilsands, set a precedent for possible similar actions in other jurisdictions, and affect potential future sales.

Canada has lobbied against the proposal for months, arguing that it is discriminatory and could hinder trade relationships. It has even threatened to take the matter to the World Trade Organization if the committee approved the plan.

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On Monday, TransCanada Corp. announced that it reached an agreement with the Nebraska state government to amend the route of the proposed Keystone XL pipeline to bypass the Sandhills region, an environmentally sensitive area that sits atop the heavily-utilized Ogallala Aquifer. As part of the agreement, the state will fund studies to evaluate alternative routes.

Today, the Nebraska state legislature will consider the proposed law that will direct the Nebraska Department of Environmental Quality to prepare a supplemental environmental impact statement for the Nebraska Governor.

This development follows last week’s U.S. State Department ruling that required TransCanada to examine new routes, as well as an earlier announcement by President Obama indicating that the decision whether to approve Keystone XL would be delayed until after the 2012 Presidential elections. A U.S. State Department spokesman indicated that any agreement between the state of Nebraska and TransCanada will not alter the review process undertaken by the federal agency.

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 U.S. and Canada-based environmental groups have filed a petition with the U.S. Secretary of the Interior under the Pelly Amendment, a statute that allows the U.S. President to impose trade restrictions against countries that engage in trade which diminishes the effectiveness of an international program to protect threatened or endangered species.

The petition claims that Canada has not put in place mechanisms in its oilsands regulatory regime that would prevent or mitigate harm to woodland caribou, whooping cranes and other species of migratory birds. The petition further claims that such omissions have diminished the effectiveness of international efforts to protect those species such as the Migratory Bird Convention of 1916 and the Western Hemisphere Convention of 1942.

Under the Pelly Amendment, the Secretary of Interior must now determine whether Canada’s actions have diminished the effectiveness of these international conservation efforts. If the Pelly Amendment application is certified by the Secretary of Interior, the President may direct the Secretary of the Treasury to prohibit any imports to the extent such prohibition is sanctioned by NAFTA or the World Trade Organization, and shall notify the U.S. Congress of any such actions.

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On July 21, 2011, the federal government announced a new plan to monitor air quality, biodiversity and water quality in the Canadian oilsands region in an effort to provide “hard science’ to reinforce the fact that the oilsands are being developed in a responsible manner. Water quality and quantity will be monitored in the lower Athabasca river. Air quality will be measured at 14 sites for a range of contaminants and those results will be combined with satelitte data. The plan will also examine the effects of contaminants and habitat disturbances on different species.  The plan will integrate many monitoring components already in place, but will boost the number of monitoring sites over a greater geographic area with a specific focus on downstream and downwind impacts. Environment Minister Peter Kent indicated that the government will start to work with the province of Alberta and industry to implement the monitoring plan quickly.

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The Government of Alberta has announced the release of the draft Lower Athabasca Regional Plan. According to the draft plan, approximately 16% of the Lower Athabasca region will be designated as a conservation area. This is in addition to the existing six per cent of the region already protected as wildland provincial parks. As a result of the plan, the Lower Athabasca region will contain more than two million hectares of legislatively protected lands – a 20,000 square kilometre area, three times the size of Banff National Park.

The plan states that the development of oil sands, minerals and commercial forestry will not be compatible with the management intent of these conservation areas. Therefore, certain existing leases, including leases where projects are already in development, will be revoked if the plan is implemented. Leases subject to cancellation will be compensated, including refunds for payments made to the Crown for the leases, development and reclamation costs and interest.

This plan is part of the Government of Alberta’s Land-use Framework, which consists of seven strategies to improve land-use decision making in Alberta. Thus far, only the Lower Athabasca and South Saskatchewan regions have released regional plans. The Lower Athabasca Regional Plan will now be subject to a public consultation process. For a schedule of the public consultation process, please see the Government of Alberta’s website.
 

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In response to the Federal Oil Sands Advisory Panel’s report released in December, the federal Minister of the Environment, Peter Kent, announced a $20-million per year comprehensive water quality monitoring system for the Athabasca River.

In its research findings, the Oil Sands Advisory Panel concluded that the environmental monitoring programs already in place are unable to definitively distinguish, with reasonable statistical confidence or power, oil sands industrial impacts from natural sources.

The new proposed monitoring system will include more frequent and widespread sampling of the Athabasca River, and will eventually encompass the monitoring of air quality and biodiversity. The program will be administered by Environment Canada and is expected to be funded by oil sands producers.
 

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The Alberta government announced that it will be directing a portion of the province's oil sands production to a proposed $5 billion upgrader that is scheduled to be completed by 2014. The upgrader is a joint venture between North West Upgrading Inc. and Canadian Natural Resources Ltd. The government will supply 37,500 barrels of bitumen per day to the proposed upgrader, which bitumen will be obtained by the government from production royalties it will collect from oil sands companies. In addition, Canadian Natural Resources Ltd. will supply 12,500 barrels of bitumen per day to the facility.

Alberta presently has a handful of upgraders that refine bitumen into crude, but the proposed upgrader will be the first to refine bitumen into a producing diesel fuel. The upgrader will also capture about 3,000 tonnes of carbon dioxide per day, which will be used for enhanced oil recovery in conventional oil fields.

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On January 27, 2011, a three-member Joint Review Panel established by the federal Minister of Environment and the Alberta Energy Resources Conservation Board ("ERCB") released its Report on a review of TOTAL E&P Joslyn Ltd. ("TOTAL")'s Joslyn North Mine Project, a proposed oil sands surface mine that would begin production in 2017.

The Joint Review Panel expressed an intention to approve TOTAL's application subject to twenty conditions that pertain to environmental benchmarks, monitoring and planning, among other requirements.  The conditions include submissions of a detailed tailings management plan two years prior to commencing operations to demonstrate TOTAL's ability to meet all of the requirements of ERCB Directive 074.

Starting 2012 onward, Directive 074 states that mining operators must capture 50 per cent of their annual production of "fines" suspended in tailings.  It is interesting that recent tailings management plans submitted by current oil sands mining operators have been approved despite not meeting the criteria established by Directive 074.

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Federal Environment Minister, Jim Prentice, has announced the formation of an independent Oilsands Advisory Panel, whose mandate is to provide recommendations on the scientific research and monitoring of environmental effects associated with oilsands development. 

Specifically, the Advisory Panel will:

• Document, review and assess the current body of scientific research and monitoring; and
• Identify the strengths and weaknesses in the scientific monitoring, and the reasons for them.

The Advisory Panel will report to Minister Prentice with their findings at the end of November.  It is expected the focus of the Advisory Panel will be on theRegional Aquatics Monitoring Program (“RAMP”), a monitoring organization led by industry and Alberta regulatory bodies, as well as the research methodologies of RAMP’s Technical Program Committee. 

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Mike Styczen

TransCanada announced on July 30 that it had completed line fill on the first phase of the Keystone Pipeline and that deliveries from Hardisty, Alberta to Wood River and Patoka, Illinois had commenced.

The construction of the first phase of Keystone, which will have a capacity of 435,000 barrels per day, involved the conversion of 864 kilometers of existing gas pipeline to oil service, the construction of 2177 kilometers of new 30” pipeline, and the construction of 39 new pump stations. 

Construction of the second phase of Keystone, a 480 kilometer expansion to Cushing, Oklahoma, will increase the capacity of the pipeline to 591,000 barrels per day and is expected to be in service in 2011. 

TransCanada has  already announced plans for the final phase of Keystone expansion (Keystone XL), which will take an additional 500,000 barrels per day to the U.S. Gulf Coast.  

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Mike Styczen

Syncrude was convicted in Alberta Provincial Court on June 25 on charges of failing to prevent a toxic substance from harming wildlife (a provincial charge under the Environmental Protection and Enhancement Act) and depositing a substance harmful to migratory birds (a federal charge under the Migratory Birds Convention Act).

Syncrude’s defence had been primarily based on due diligence - arguing that it had taken reasonable care to prevent the unlawful act.

The court found that, while a defence of due diligence was available on these charges, the court found that Syncrude had not acted with due diligence:

Syncrude could not "ensure" that waterfowl did not land on the Aurora Settling Basin on April 28, 2008 but it had a reasonable legal alternative. I am convinced beyond reasonable doubt that Syncrude could have acted lawfully by using due diligence to deter birds from the Basin, whether or not it was successful in its attempts at deterrence, and it did not do so.

With respect to the deployment of deterrence systems available to prevent ducks from landing on Syncrude’s pond, the Court found that:

The evidence convinces me beyond reasonable doubt that Syncrude placed itself in a position where it was unable to take reasonable steps to deter birds from the Aurora Settling Basin on April 28, 2008. It could have set up its system to place deterrents sooner and more quickly, regardless of the weather that arrived in April of 2008. It was reasonable to take those precautions and Syncrude did not.  It could have set up its system to place deterrents sooner and more quickly, regardless of the weather that arrived in April of 2008. It was reasonable to take those precautions and Syncrude did not.

Other defences raised by Syncrude (including that it would have been impossible for it to ensure that ducks would not land in the ponds, act of God, abuse of process and officially induced error were all rejected by the Court. .

The matter will resume on August 20th with arguments as to whether convictions should be entered on one or both charges, and for sentencing arguments.

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