Introduction
The National Energy Board (NEB or Board) recently approved an application by Enbridge Pipelines Inc. (Enbridge) for reversal of its Line 9B (from Westover Station in Ontario to Montreal) and its proposed Capacity Expansion Project for the entire Line 9 (from Sarnia to Montreal).1 With the reversal of Line 9B, Line 9 would be returned to its original purpose when the line entered service in 1976 of shipping oil from western sources to eastern refineries.
As a proposal to return an existing line to the service for which it was originally approved and built, it might have been expected that approving the application would have been relatively straightforward. In fact, the controversy around the project escalated to the point that, the NEB cancelled the final portion of its oral hearing, “due to concerns with respect to the security of attendees.”2 The Board hearing was concluded in writing. The Line 9 reversal proceeding provides a further illustration that, in today’s environment, virtually every pipeline proposal attracts public controversy and presents regulatory challenges. The NEB’s Reasons for Decision on the matter reflect this new environment.
The Board’s decision is also significant for affirming the Board’s general approach of accepting market responses to the fundamental shifts in the dynamics of energy supply and demand in North America, as they continue to evolve. The decision also continues the Board’s consistent refusal to consider concerns such as oil sands development, energy policy, upstream greenhouse gases (GHGs) and GHGs related to the end use of crude oil.
Background
Line 9 was built, at the request and with the contractual support of the Government of Canada, in the wake of the 1973 oil embargo by the Organization of Petroleum Exporting Countries.3 Known as the Montreal Extension, its purpose was to address security of supply and price issues by enabling the delivery of crude oil from western Canada to eastern refineries, both in the Montreal area and, potentially, by ongoing marine shipment from Montreal to refineries in Quebec City and Atlantic Canada. The contractual arrangement between Enbridge and the Government of Canada underpinning the original construction of Line 9 was terminated by agreement in 1996.
In 1997, in response to significant changes in the international oil market, Enbridge applied for, and the NEB granted, approval to reverse the direction of Line 9 to allow imported crude oil to flow from Montreal to major refining centres in Ontario.
Further developments in the supply of oil from the west resulted in Enbridge applying to the NEB in 2011 to reverse the westerly flow of the segment of Line 9 between the Sarnia Terminal and the North Westover Station, to accommodate a request from Imperial Oil’s Nanticoke Refinery. The Board approved the application and easterly flow on what was then identified as Line 9A began in August 2013.
By the time of Enbridge’s application in the current proceeding, Line 9 comprised Line 9A, operating in an easterly direction between the Sarnia Terminal and the North Westover Station, and Line 9B flowing in a westerly direction from the Montreal Terminal to North Westover, with deliveries from both lines to Imperial Oil’s Nanticoke Refinery. The application before the NEB in the current proceeding requested approvals to reverse the flow of Line 9B (to flow in an easterly direction from Westover Station to Montreal), to expand the capacity of Line 9 to approximately 300,000 barrels per day and to amend the tariff to allow for the transportation of heavy crude.
Safety and Environmental Issues
Controversy over Enbridge’s application was driven primarily by public concerns about the potential safety and environmental implications of the project.4 As suggested above, this might have been surprising, given that Line 9 had been operating without major incident for more than 35 years. It immediately became apparent, however, that there has been a recent dramatic shift in public apprehensions about pipeline safety and the potential environmental consequences of ruptures. It also appeared that many landowners along the route of Line 9 had been only generally aware of the proximity of the line. In addition to individual landowners, several local governments, the City of Montreal and the Ontario Ministry of Energy also expressed concerns to the Board, particularly with respect to consultation and their needs for further information, both on the project as proposed and on an ongoing basis.
The Board explicitly acknowledged the new environment:
The Board is aware that throughout this proceeding, Participant submissions were informed by the current social context in which this Project is being considered. The Board is mindful of an increased awareness and concern regarding projects under its jurisdiction, including this Project which involves the modification and continued operation of a pipeline that passes through large population centers, rural communities and areas of environmental sensitivity… [T]his overall social context provides insight into the concerns expressed by Participants.
Despite the longstanding presence of Line 9 in Ontario and Quebec, this proceeding raised local awareness of this currently-operating NEB-regulated pipeline… Adding to this awareness were major incidents such as the train derailment at Lac-Mégantic, Quebec in July 2013 and the Enbridge Energy, Limited Partnership Line 6B spill at Marshall, Michigan in July 2010…to which frequent reference was made. Concern arising from these events formed the basis of some submissions regarding not only the Project, but about pipeline safety in general.
* * *
Since Line 9B passes through some of the most densely populated areas of Canada, the concerns that were brought to light or reinforced by these two incidents were understandably heightened in many of the submissions the Board received from Participants.5
Expressions of public concern about the project in fact went further than merely shaping some of the submissions to the Board to the point of disrupting the proceedings in Montreal and Toronto. In its Procedural Update for final argument, the Board sought to avert further disruptions:
The Board has a long tradition of conducting its hearings and associated processes in a courteous, safe, respectful and civil manner. The hearing will proceed in a more efficient manner if all Parties and members of the public uphold this tradition. While the Board recognizes that there are strong opinions about the issues in this proceeding, the Board expects all Parties and members of the public to act with professional courtesy and respect in their dealings with each other, Board staff, and the Board members. Disrespect and discourtesy will not be tolerated at the hearing.
Participants have a right to a fair and efficient proceeding before the Board. The Board may take steps to ensure that the oral hearing proceeds in an orderly, respectful and efficient manner for all Participants. The Board will not tolerate disruptions that impact the ability of all Parties (Enbridge and Intervenors) to present their oral final argument.
If any Party or member of the public disrupts the Board’s proceeding they will be asked to stop the disruption immediately, and the Board may take additional steps if necessary in response. The Board also notes that the content of any disruptions to the Board’s process, whether oral or written, will not form part of the record of this proceeding and will not be considered by the Board in its deliberations. Furthermore, Participants and members of the public in attendance during the presentation of oral final argument are advised that foreign objects such as signs, placards, or other props are not appropriate and will not be permitted in the hearing room.6
In spite of this forewarning, further disruptive conduct resulted in the final day of oral argument being cancelled, as noted, “due to concerns with respect to the security of attendees.”7 Enbridge’s reply argument was submitted subsequently, in writing.
The Board was satisfied that, subject to conditions, the project should be approved. The conditions8 include measures intended to ensure the availability of information about the project. Enbridge is required, for example, to post a Commitments Tracking Table on its website and to continue to update the table until all commitments have been fulfilled, as well as to continue stakeholder consultations throughout the project.
The Board denied Enbridge’s request for exemption from having to obtain leave to open the expanded facilities.9 Prior to applying for leave to open, Enbridge is required to make several filings, including an Updated Pipeline Engineering Assessment, its hydrostatic pressure testing program, the leak detection system manual, an Environmental Protection and Emergency Response Coordination Framework, and a plan to update and implement Enbridge’s continuing education program (including emergency management exercises), liaison program and consultation activities on emergency preparedness and response.10 While conditions similar to these might be found in most Board approvals of this nature, their specifics seem to have been influenced in this case by a desire on the part of the Board to provide broader assurance the project would be constructed and operated safely and would be environmentally responsible. The Board also went to some length in its Reasons for Decision to describe its mandate and, in some detail, its role concerning pipeline safety and environmental assessment, again apparently for the purpose of providing reassurance to concerned parties and the general public.11
Aboriginal Matters
Eleven Aboriginal groups or individuals participated in the proceeding, eight of which filed evidence and submitted final argument. The concerns expressed by these participants included the potential impact of a spill from Line 9 on traditional land use activities and on archaeological and heritage resources. Some concerns were also expressed regarding the original approval of Line 9 and ongoing maintenance activities on the existing line.12
The Board emphasized that the current proceeding was not assessing the operation of the existing Line 9 or its related ongoing maintenance activities.13 It noted that no new permanent land rights were required for the current project and that no Crown land was involved in the project, while acknowledging that the project was on lands used by Aboriginal groups for traditional purposes. All potentially affected Aboriginal groups had been provided with sufficient information.
The Board concluded that, given the nature and scope of the project, and subject to the Board’s conditions, any potential impacts on the rights and interests of Aboriginal groups “are likely to be minimal and will be appropriately mitigated.”14 The conditions included a requirement that Enbridge file an environmental protection plan containing a project-specific archaeological resource contingency plan 30 days prior to commencing construction.15
The Chippewas of the Thames First Nation, an intervener in the Line 9 proceeding, has applied to the Federal Court of Appeal for leave to appeal the Board’s decision.16 The application alleges that the Board failed to apply the correct test in determining whether the Crown’s duty to consult and accommodate had been properly discharged.17
Commercial Issues
As well as reflecting how current public, landowner and Aboriginal expectations are shaping the regulatory process for pipeline projects, the Line 9 application and the Board’s Reasons for Decision also testify to the continuing response of oil markets to shifting patterns of supply. In particular, the project reflected the increasing supply of crude oil from western Canada (including, potentially, production from the oil sands) and the U.S. Bakken region area, the price differential between domestic and offshore supplies and competitive pressures on refineries in eastern Canada. Enbridge noted that the Line 9B was currently underused and that, unless reversed, it would be idled.18
Suncor had entered into a 10-year transportation service agreement, which, Suncor stated, would provide it “with the ability to economically replace largely foreign supplies of crude oil…for its Montreal refinery.”19 As owner of the last of six refineries in Montreal, Suncor stated that competition is “fierce since it includes refineries in the U.S. Eastern seaboard, Gulf of Mexico and Europe.” Refiners in eastern Canada must be allowed to access alternative crude supplies “in order to remain viable and competitive…”
Valero (formerly Ultramar), as owner of the refinery at Lévis, near Quebec City, stated that, without the project, its refinery “would have difficulty remaining competitive…”20 Valero had entered into a 10-year transportation service agreement and had committed to invest up to $200 million to upgrade the capacity of its Montreal East terminal and its Lévis refinery to facilitate the onward movement of crude oil delivered to Montreal on Line 9 to Lévis.
Some participants challenged the supply and price forecasts underlying these positions, but the Board accepted them as “reasonable.”21 The Board stated, however, that firm shipper commitments were “of considerably greater importance [than] the expectation of favourable market conditions…” The Board concluded that the project “would likely improve the competitive position and long term survival of the Montreal and Lévis refineries, as well as their associated industries.”
Enbridge’s had also applied for approval to amend its tariff for Line 9 to allow for the transportation of heavy crude oil. The Board rejected arguments in favour of limiting the types of crude oil that could be transported, stating that this would be “counter to the free market principle of allowing parties to freely choose what commodities best suit their needs.”22
Under subsection 71(1) of the NEB Act,23 NEB-regulated oil pipelines must, subject to such exemptions, conditions or regulations as the Board may prescribe, operate as common carriers. Enbridge proposed that 25,000 bpd, or 8.3 per cent of the annual capacity of Line 9 of 300,000 bpd be set aside as uncommitted capacity.
The Board accepted the allocation as proposed by Enbridge, noting that oil pipelines “are increasingly relying on long-term contracts to support the construction of new facilities.”24 It referred to its past determination that “the determination of an appropriate level of capacity to be set aside for uncommitted volumes is a matter of judgment and should be based on the circumstances of any specific case.”
Changes in NEB Role and Procedures
The NEB’s Line 9 process and decision are also noteworthy for helping to elucidate the scope of the significant change in the Board’s role that was introduced in 2012 and to illustrate the Board’s application of the restrictions introduced at the same time on participation rights in NEB proceedings.
Amendments to section 52 of the NEB Act introduced by the Jobs, Growth and Long-term Prosperity Act25 removed the NEB’s previous decision-making authority to issue a certificate of public convenience and necessity for proposed pipeline projects and replaced that authority with a requirement that the Board instead make a recommendation to the Governor in Council.26 Decision-making authority with respect to applications for certificates of public convenience and necessity is now vested directly in the Governor in Council, which is free to accept or reject a recommendation by the Board.27 The Line 9 decision demonstrates that the Board’s direct decision-making authority with respect to pipeline facilities is, however, still significant.
Under subsection 58(1) of the NEB Act, the NEB continues to have authority to exempt certain pipelines and related facilities from specified sections of the Act. The line reversal and capacity expansion components of Enbridge’s application were made under this subsection and thus did not trigger the process under section 52 requiring the Board to make a recommendation rather than decide the matter directly. The Board’s Line 9 decision on what is clearly a significant matter in the evolution of Canadian oil markets and on the regulatory response to public expectations of the process is, therefore, final.28
At the same time, it is to be noted that the mandatory time lines imposed by the 2012 amendments to the NEB Act for processing certificate applications under section 52 were also applied to exemption applications where the Board retains direct authority under section 58.29 The applicable limit for processing the Line 9 application was 15 months, which the Board complied with.30
The 2012 amendments to the NEB Act also restricted participation in NEB facilities hearings. Section 55.2 requires the Board to hear any person “who, in the Board’s opinion, is directly affected by the granting or refusing of the application” and provides that the Board “may consider the representations of any person who, in its opinion, has relevant information or expertise.”
The Board issued guidance for applying the section,31 stating that the Board will decide who may be directly affected on a case-by-case basis and that it may consider whether a person’s interest is “specific and detailed…rather than a general public interest.” The guidance gives examples of who may be considered to be directly affected and of persons who the Board may determine have relevant information or expertise. In determining whether a person has relevant information or expertise, the Board will consider “how much value the information will add to the NEB’s decision or recommendation.”
The Enbridge Line 9 proceeding was the first occasion on which section 55.2 and the Board’s guidance were applied. In its Reasons for Decision, the Board noted:
The Board received [Application to Participate (ATP)] forms from 178 interested persons. Of the 178 applications, 171 Participants were provided the opportunity to provide their views. Of these, 160 ATPs were granted as requested and 11 persons who requested Intervenor status were instead granted the opportunity to submit a Letter of Comment. Seven persons were not granted standing. As a result, there were 60 Intervenors and 111 Commentors for the OH-002-2013 proceeding.32
Three organizations concerned with economic benefits associated with the project were determined not to have demonstrated “a specific and detailed interest that would be directly affected by the proposed Project.”33 They were therefore denied intervener status, but granted the opportunity to provide a letter of comment.
The most significant of the Board’s rulings dealt with applications for intervener status by five “public interest” organizations: East End Against Line 9, Environmental Justice Toronto, Council of Canadians, Council of Canadians – Guelph Chapter and Sierra Club Canada. These associations were each denied intervener status on the ground that they had not demonstrated “a detailed and specific interest in the Project that would be directly affected, as opposed to a general public interest.” While they had demonstrated that they possessed some relevant information or expertise, the Board noted that, as an expert tribunal, it has expertise in the areas identified by the associations. However, each of these associations was granted the opportunity to provide a letter of comment.
Prior to the enactment of section 55.2, it is unlikely that any of this group of organizations would have been denied intervener status. It is clear, therefore, that the restriction of participation in certificate proceedings to those who are “directly affected” or who have “relevant information or expertise” will have a significant impact. It is also clear that the group of prospective participants that will likely be excluded as a result of this restriction is the group comprising various public interest organizations and concerned individuals. Far from meeting expectations for participation held by many such organizations and individuals, the new rules have engendered widespread criticism that they frustrate the reasonable expectations of many with legitimate concerns about matters before the Board.
It is not surprising that an application has been made to the Federal Court of Appeal challenging the enactment of section 55.2 and its implementation by the Board in the Enbridge Line 9 proceeding.34 The applicants are Forest Ethics Advocacy Association (Forest Ethics), a British Columbia organization founded “to conserve and protect the natural environments of Canada while allowing for their sustainable use,” and Donna Sinclair, who was denied the right to participate in the Line 9 proceeding.35
The application to the Federal Court of Appeal seeks a declaration that section 55.2 is unconstitutional under the freedom of expression element of paragraph 2(b) of the Canadian Charter of Rights and Freedoms that cannot be justified under section 1 of the Charter. The application also requests an order quashing the Board’s decision to issue the Application to Participate Form and its decision to condition participation in its proceedings on completion of the Form. Finally, the application asks for an order that the Board “accept all letters of comment from groups and individuals who seek to participate in the Line 9B proceedings.”36
After describing pipelines like Line 9 as “the primary enabler of oil sands growth” and alleging various detrimental consequences of that growth, the Forest Ethics application states:
Oil sands expansion is an issue of national importance. Its impact on the future of our economy and the environment cannot be overstated. Over the next decade, Canadians will have to choose between rescuing our planet or exploiting Northern Alberta’s vast, but dirty, oil sands wealth. Canadians ought to have a voice in this decision. Unfortunately, however, new NEB rules cut off public participation.37
The application asserts that “[p]articipation in an NEB proceeding is a right that is guaranteed by s. 2(b)” and that the restriction of participation to those who are directly affected is “arbitrary.” Further, the requirement to complete the Application to Participate form “creates a chilling effect on would-be applicants’ speech.”38
Whatever the merits of any of these assertions, they seem to be based largely on political and policy objections to section 55.2 and the Board’s process for applying it. No legal authority is cited for any of the claims. However, they may well be representative of a widely-held view among public interest groups and others about the negative effects of section 55.2 in significantly reversing the Board’s previous openness to – indeed, encouragement of – participation in its proceedings.
Conclusion
Enbridge’s Line 9 reversal and expansion project and the NEB’s reasons for approving the project are noteworthy for several reasons that reflect the dynamics of rapidly changing oil markets against the background of dramatic changes in public concerns about the safety of pipelines and the potential environmental consequences of ruptures. Only a few years ago, an application to return an existing pipeline to its originally intended service and expand its capacity, without the need for any additional right-of-way, would probably have been considered routine and might even have been approved by the NEB without convening an oral hearing.39 Instead, the Board’s proceeding for Enbridge’s current proposal was the focus of intense controversy, including disruptive behavior in the hearing room, leading the Board to cancel part of the scheduled oral hearing due to security concerns.
The Board’s response to the “current social context”40 is reassuring. The Board noted, for example, that participants in the proceeding had spoken of “the need for Enbridge’s consultation and communication with affected communities to be transparent, genuine, ongoing, structured, collaborative and consistent.”41 Municipalities were particularly concerned in this regard with respect to emergency response plans. In an apparent move to allay these and other public concerns (including concerns expressed by public institutions, such as local governments and emergency organizations), the Board explained in some detail its role in overseeing the construction and ongoing operations of pipelines, with particular regard for safety, emergency preparedness and environmental protection. In doing so, the Board emphasized its requirements and expectations of companies. At the end of the day, however, the Board was clearly focused on its own assessment of the safety and environmental aspects of Enbridge’s proposal.
The Enbridge Line 9 decision is also noteworthy for its reaffirmation of the Board’s approach of allowing market forces to work, in a rapidly changing oil and gas supply and demand environment. Many projects will inevitably be controversial in today’s social environment and will continue to attract intense scrutiny of safety and environmental aspects in particular. Industry should find in the Board’s decision some assurance that, provided projects pass muster when scrutinized on safety and environmental grounds, the Board will continue to allow market forces to operate.
Finally, it is worth noting that there is a link between the dynamics of today’s emerging oil and gas market in North America and public concerns about pipelines. The Board noted in its Reasons for Decision that local awareness of Line 9 had been increased by recent major incidents at Lac-Mégantic and Marshall, Michigan. This increased local awareness should, however, be seen in the context of the broader public awareness of oil and gas pipelines generally, resulting from controversies surrounding projects such as Keystone XL and Northern Gateway, which are of course responses to the emerging North American oil supply situation. The reality is that, in today’s environment, oil and gas pipelines are inherently controversial, described by one commentator as a “lightning rod on the political agenda.”42 The NEB’s decision on the Enbridge Line 9 project demonstrates that sound projects, and the regulatory process itself, can survive the storm.
* Rowland J. Harrison, Q.C. is the TransCanada Chair in Administrative and Regulatory Law at the University of Alberta, Edmonton and Co-Managing Editor of Energy Regulation Quarterly. He is also an arbitrator in energy related matters. From 1997 to 2011, he served two successive terms as a permanent member of the National Energy Board in Calgary.
Introduction
The National Energy Board (NEB or Board) recently approved an application by Enbridge Pipelines Inc. (Enbridge) for reversal of its Line 9B (from Westover Station in Ontario to Montreal) and its proposed Capacity Expansion Project for the entire Line 9 (from Sarnia to Montreal).1 With the reversal of Line 9B, Line 9 would be returned to its original purpose when the line entered service in 1976 of shipping oil from western sources to eastern refineries.
As a proposal to return an existing line to the service for which it was originally approved and built, it might have been expected that approving the application would have been relatively straightforward. In fact, the controversy around the project escalated to the point that, the NEB cancelled the final portion of its oral hearing, “due to concerns with respect to the security of attendees.”2 The Board hearing was concluded in writing. The Line 9 reversal proceeding provides a further illustration that, in today’s environment, virtually every pipeline proposal attracts public controversy and presents regulatory challenges. The NEB’s Reasons for Decision on the matter reflect this new environment.
The Board’s decision is also significant for affirming the Board’s general approach of accepting market responses to the fundamental shifts in the dynamics of energy supply and demand in North America, as they continue to evolve. The decision also continues the Board’s consistent refusal to consider concerns such as oil sands development, energy policy, upstream greenhouse gases (GHGs) and GHGs related to the end use of crude oil.
Background
Line 9 was built, at the request and with the contractual support of the Government of Canada, in the wake of the 1973 oil embargo by the Organization of Petroleum Exporting Countries.3 Known as the Montreal Extension, its purpose was to address security of supply and price issues by enabling the delivery of crude oil from western Canada to eastern refineries, both in the Montreal area and, potentially, by ongoing marine shipment from Montreal to refineries in Quebec City and Atlantic Canada. The contractual arrangement between Enbridge and the Government of Canada underpinning the original construction of Line 9 was terminated by agreement in 1996.
In 1997, in response to significant changes in the international oil market, Enbridge applied for, and the NEB granted, approval to reverse the direction of Line 9 to allow imported crude oil to flow from Montreal to major refining centres in Ontario.
Further developments in the supply of oil from the west resulted in Enbridge applying to the NEB in 2011 to reverse the westerly flow of the segment of Line 9 between the Sarnia Terminal and the North Westover Station, to accommodate a request from Imperial Oil’s Nanticoke Refinery. The Board approved the application and easterly flow on what was then identified as Line 9A began in August 2013.
By the time of Enbridge’s application in the current proceeding, Line 9 comprised Line 9A, operating in an easterly direction between the Sarnia Terminal and the North Westover Station, and Line 9B flowing in a westerly direction from the Montreal Terminal to North Westover, with deliveries from both lines to Imperial Oil’s Nanticoke Refinery. The application before the NEB in the current proceeding requested approvals to reverse the flow of Line 9B (to flow in an easterly direction from Westover Station to Montreal), to expand the capacity of Line 9 to approximately 300,000 barrels per day and to amend the tariff to allow for the transportation of heavy crude.
Safety and Environmental Issues
Controversy over Enbridge’s application was driven primarily by public concerns about the potential safety and environmental implications of the project.4 As suggested above, this might have been surprising, given that Line 9 had been operating without major incident for more than 35 years. It immediately became apparent, however, that there has been a recent dramatic shift in public apprehensions about pipeline safety and the potential environmental consequences of ruptures. It also appeared that many landowners along the route of Line 9 had been only generally aware of the proximity of the line. In addition to individual landowners, several local governments, the City of Montreal and the Ontario Ministry of Energy also expressed concerns to the Board, particularly with respect to consultation and their needs for further information, both on the project as proposed and on an ongoing basis.
The Board explicitly acknowledged the new environment:
The Board is aware that throughout this proceeding, Participant submissions were informed by the current social context in which this Project is being considered. The Board is mindful of an increased awareness and concern regarding projects under its jurisdiction, including this Project which involves the modification and continued operation of a pipeline that passes through large population centers, rural communities and areas of environmental sensitivity… [T]his overall social context provides insight into the concerns expressed by Participants.
Despite the longstanding presence of Line 9 in Ontario and Quebec, this proceeding raised local awareness of this currently-operating NEB-regulated pipeline… Adding to this awareness were major incidents such as the train derailment at Lac-Mégantic, Quebec in July 2013 and the Enbridge Energy, Limited Partnership Line 6B spill at Marshall, Michigan in July 2010…to which frequent reference was made. Concern arising from these events formed the basis of some submissions regarding not only the Project, but about pipeline safety in general.
* * *
Since Line 9B passes through some of the most densely populated areas of Canada, the concerns that were brought to light or reinforced by these two incidents were understandably heightened in many of the submissions the Board received from Participants.5
Expressions of public concern about the project in fact went further than merely shaping some of the submissions to the Board to the point of disrupting the proceedings in Montreal and Toronto. In its Procedural Update for final argument, the Board sought to avert further disruptions:
The Board has a long tradition of conducting its hearings and associated processes in a courteous, safe, respectful and civil manner. The hearing will proceed in a more efficient manner if all Parties and members of the public uphold this tradition. While the Board recognizes that there are strong opinions about the issues in this proceeding, the Board expects all Parties and members of the public to act with professional courtesy and respect in their dealings with each other, Board staff, and the Board members. Disrespect and discourtesy will not be tolerated at the hearing.
Participants have a right to a fair and efficient proceeding before the Board. The Board may take steps to ensure that the oral hearing proceeds in an orderly, respectful and efficient manner for all Participants. The Board will not tolerate disruptions that impact the ability of all Parties (Enbridge and Intervenors) to present their oral final argument.
If any Party or member of the public disrupts the Board’s proceeding they will be asked to stop the disruption immediately, and the Board may take additional steps if necessary in response. The Board also notes that the content of any disruptions to the Board’s process, whether oral or written, will not form part of the record of this proceeding and will not be considered by the Board in its deliberations. Furthermore, Participants and members of the public in attendance during the presentation of oral final argument are advised that foreign objects such as signs, placards, or other props are not appropriate and will not be permitted in the hearing room.6
In spite of this forewarning, further disruptive conduct resulted in the final day of oral argument being cancelled, as noted, “due to concerns with respect to the security of attendees.”7 Enbridge’s reply argument was submitted subsequently, in writing.
The Board was satisfied that, subject to conditions, the project should be approved. The conditions8 include measures intended to ensure the availability of information about the project. Enbridge is required, for example, to post a Commitments Tracking Table on its website and to continue to update the table until all commitments have been fulfilled, as well as to continue stakeholder consultations throughout the project.
The Board denied Enbridge’s request for exemption from having to obtain leave to open the expanded facilities.9 Prior to applying for leave to open, Enbridge is required to make several filings, including an Updated Pipeline Engineering Assessment, its hydrostatic pressure testing program, the leak detection system manual, an Environmental Protection and Emergency Response Coordination Framework, and a plan to update and implement Enbridge’s continuing education program (including emergency management exercises), liaison program and consultation activities on emergency preparedness and response.10 While conditions similar to these might be found in most Board approvals of this nature, their specifics seem to have been influenced in this case by a desire on the part of the Board to provide broader assurance the project would be constructed and operated safely and would be environmentally responsible. The Board also went to some length in its Reasons for Decision to describe its mandate and, in some detail, its role concerning pipeline safety and environmental assessment, again apparently for the purpose of providing reassurance to concerned parties and the general public.11
Aboriginal Matters
Eleven Aboriginal groups or individuals participated in the proceeding, eight of which filed evidence and submitted final argument. The concerns expressed by these participants included the potential impact of a spill from Line 9 on traditional land use activities and on archaeological and heritage resources. Some concerns were also expressed regarding the original approval of Line 9 and ongoing maintenance activities on the existing line.12
The Board emphasized that the current proceeding was not assessing the operation of the existing Line 9 or its related ongoing maintenance activities.13 It noted that no new permanent land rights were required for the current project and that no Crown land was involved in the project, while acknowledging that the project was on lands used by Aboriginal groups for traditional purposes. All potentially affected Aboriginal groups had been provided with sufficient information.
The Board concluded that, given the nature and scope of the project, and subject to the Board’s conditions, any potential impacts on the rights and interests of Aboriginal groups “are likely to be minimal and will be appropriately mitigated.”14 The conditions included a requirement that Enbridge file an environmental protection plan containing a project-specific archaeological resource contingency plan 30 days prior to commencing construction.15
The Chippewas of the Thames First Nation, an intervener in the Line 9 proceeding, has applied to the Federal Court of Appeal for leave to appeal the Board’s decision.16 The application alleges that the Board failed to apply the correct test in determining whether the Crown’s duty to consult and accommodate had been properly discharged.17
Commercial Issues
As well as reflecting how current public, landowner and Aboriginal expectations are shaping the regulatory process for pipeline projects, the Line 9 application and the Board’s Reasons for Decision also testify to the continuing response of oil markets to shifting patterns of supply. In particular, the project reflected the increasing supply of crude oil from western Canada (including, potentially, production from the oil sands) and the U.S. Bakken region area, the price differential between domestic and offshore supplies and competitive pressures on refineries in eastern Canada. Enbridge noted that the Line 9B was currently underused and that, unless reversed, it would be idled.18
Suncor had entered into a 10-year transportation service agreement, which, Suncor stated, would provide it “with the ability to economically replace largely foreign supplies of crude oil…for its Montreal refinery.”19 As owner of the last of six refineries in Montreal, Suncor stated that competition is “fierce since it includes refineries in the U.S. Eastern seaboard, Gulf of Mexico and Europe.” Refiners in eastern Canada must be allowed to access alternative crude supplies “in order to remain viable and competitive…”
Valero (formerly Ultramar), as owner of the refinery at Lévis, near Quebec City, stated that, without the project, its refinery “would have difficulty remaining competitive…”20 Valero had entered into a 10-year transportation service agreement and had committed to invest up to $200 million to upgrade the capacity of its Montreal East terminal and its Lévis refinery to facilitate the onward movement of crude oil delivered to Montreal on Line 9 to Lévis.
Some participants challenged the supply and price forecasts underlying these positions, but the Board accepted them as “reasonable.”21 The Board stated, however, that firm shipper commitments were “of considerably greater importance [than] the expectation of favourable market conditions…” The Board concluded that the project “would likely improve the competitive position and long term survival of the Montreal and Lévis refineries, as well as their associated industries.”
Enbridge’s had also applied for approval to amend its tariff for Line 9 to allow for the transportation of heavy crude oil. The Board rejected arguments in favour of limiting the types of crude oil that could be transported, stating that this would be “counter to the free market principle of allowing parties to freely choose what commodities best suit their needs.”22
Under subsection 71(1) of the NEB Act,23 NEB-regulated oil pipelines must, subject to such exemptions, conditions or regulations as the Board may prescribe, operate as common carriers. Enbridge proposed that 25,000 bpd, or 8.3 per cent of the annual capacity of Line 9 of 300,000 bpd be set aside as uncommitted capacity.
The Board accepted the allocation as proposed by Enbridge, noting that oil pipelines “are increasingly relying on long-term contracts to support the construction of new facilities.”24 It referred to its past determination that “the determination of an appropriate level of capacity to be set aside for uncommitted volumes is a matter of judgment and should be based on the circumstances of any specific case.”
Changes in NEB Role and Procedures
The NEB’s Line 9 process and decision are also noteworthy for helping to elucidate the scope of the significant change in the Board’s role that was introduced in 2012 and to illustrate the Board’s application of the restrictions introduced at the same time on participation rights in NEB proceedings.
Amendments to section 52 of the NEB Act introduced by the Jobs, Growth and Long-term Prosperity Act25 removed the NEB’s previous decision-making authority to issue a certificate of public convenience and necessity for proposed pipeline projects and replaced that authority with a requirement that the Board instead make a recommendation to the Governor in Council.26 Decision-making authority with respect to applications for certificates of public convenience and necessity is now vested directly in the Governor in Council, which is free to accept or reject a recommendation by the Board.27 The Line 9 decision demonstrates that the Board’s direct decision-making authority with respect to pipeline facilities is, however, still significant.
Under subsection 58(1) of the NEB Act, the NEB continues to have authority to exempt certain pipelines and related facilities from specified sections of the Act. The line reversal and capacity expansion components of Enbridge’s application were made under this subsection and thus did not trigger the process under section 52 requiring the Board to make a recommendation rather than decide the matter directly. The Board’s Line 9 decision on what is clearly a significant matter in the evolution of Canadian oil markets and on the regulatory response to public expectations of the process is, therefore, final.28
At the same time, it is to be noted that the mandatory time lines imposed by the 2012 amendments to the NEB Act for processing certificate applications under section 52 were also applied to exemption applications where the Board retains direct authority under section 58.29 The applicable limit for processing the Line 9 application was 15 months, which the Board complied with.30
The 2012 amendments to the NEB Act also restricted participation in NEB facilities hearings. Section 55.2 requires the Board to hear any person “who, in the Board’s opinion, is directly affected by the granting or refusing of the application” and provides that the Board “may consider the representations of any person who, in its opinion, has relevant information or expertise.”
The Board issued guidance for applying the section,31 stating that the Board will decide who may be directly affected on a case-by-case basis and that it may consider whether a person’s interest is “specific and detailed…rather than a general public interest.” The guidance gives examples of who may be considered to be directly affected and of persons who the Board may determine have relevant information or expertise. In determining whether a person has relevant information or expertise, the Board will consider “how much value the information will add to the NEB’s decision or recommendation.”
The Enbridge Line 9 proceeding was the first occasion on which section 55.2 and the Board’s guidance were applied. In its Reasons for Decision, the Board noted:
The Board received [Application to Participate (ATP)] forms from 178 interested persons. Of the 178 applications, 171 Participants were provided the opportunity to provide their views. Of these, 160 ATPs were granted as requested and 11 persons who requested Intervenor status were instead granted the opportunity to submit a Letter of Comment. Seven persons were not granted standing. As a result, there were 60 Intervenors and 111 Commentors for the OH-002-2013 proceeding.32
Three organizations concerned with economic benefits associated with the project were determined not to have demonstrated “a specific and detailed interest that would be directly affected by the proposed Project.”33 They were therefore denied intervener status, but granted the opportunity to provide a letter of comment.
The most significant of the Board’s rulings dealt with applications for intervener status by five “public interest” organizations: East End Against Line 9, Environmental Justice Toronto, Council of Canadians, Council of Canadians – Guelph Chapter and Sierra Club Canada. These associations were each denied intervener status on the ground that they had not demonstrated “a detailed and specific interest in the Project that would be directly affected, as opposed to a general public interest.” While they had demonstrated that they possessed some relevant information or expertise, the Board noted that, as an expert tribunal, it has expertise in the areas identified by the associations. However, each of these associations was granted the opportunity to provide a letter of comment.
Prior to the enactment of section 55.2, it is unlikely that any of this group of organizations would have been denied intervener status. It is clear, therefore, that the restriction of participation in certificate proceedings to those who are “directly affected” or who have “relevant information or expertise” will have a significant impact. It is also clear that the group of prospective participants that will likely be excluded as a result of this restriction is the group comprising various public interest organizations and concerned individuals. Far from meeting expectations for participation held by many such organizations and individuals, the new rules have engendered widespread criticism that they frustrate the reasonable expectations of many with legitimate concerns about matters before the Board.
It is not surprising that an application has been made to the Federal Court of Appeal challenging the enactment of section 55.2 and its implementation by the Board in the Enbridge Line 9 proceeding.34 The applicants are Forest Ethics Advocacy Association (Forest Ethics), a British Columbia organization founded “to conserve and protect the natural environments of Canada while allowing for their sustainable use,” and Donna Sinclair, who was denied the right to participate in the Line 9 proceeding.35
The application to the Federal Court of Appeal seeks a declaration that section 55.2 is unconstitutional under the freedom of expression element of paragraph 2(b) of the Canadian Charter of Rights and Freedoms that cannot be justified under section 1 of the Charter. The application also requests an order quashing the Board’s decision to issue the Application to Participate Form and its decision to condition participation in its proceedings on completion of the Form. Finally, the application asks for an order that the Board “accept all letters of comment from groups and individuals who seek to participate in the Line 9B proceedings.”36
After describing pipelines like Line 9 as “the primary enabler of oil sands growth” and alleging various detrimental consequences of that growth, the Forest Ethics application states:
Oil sands expansion is an issue of national importance. Its impact on the future of our economy and the environment cannot be overstated. Over the next decade, Canadians will have to choose between rescuing our planet or exploiting Northern Alberta’s vast, but dirty, oil sands wealth. Canadians ought to have a voice in this decision. Unfortunately, however, new NEB rules cut off public participation.37
The application asserts that “[p]articipation in an NEB proceeding is a right that is guaranteed by s. 2(b)” and that the restriction of participation to those who are directly affected is “arbitrary.” Further, the requirement to complete the Application to Participate form “creates a chilling effect on would-be applicants’ speech.”38
Whatever the merits of any of these assertions, they seem to be based largely on political and policy objections to section 55.2 and the Board’s process for applying it. No legal authority is cited for any of the claims. However, they may well be representative of a widely-held view among public interest groups and others about the negative effects of section 55.2 in significantly reversing the Board’s previous openness to – indeed, encouragement of – participation in its proceedings.
Conclusion
Enbridge’s Line 9 reversal and expansion project and the NEB’s reasons for approving the project are noteworthy for several reasons that reflect the dynamics of rapidly changing oil markets against the background of dramatic changes in public concerns about the safety of pipelines and the potential environmental consequences of ruptures. Only a few years ago, an application to return an existing pipeline to its originally intended service and expand its capacity, without the need for any additional right-of-way, would probably have been considered routine and might even have been approved by the NEB without convening an oral hearing.39 Instead, the Board’s proceeding for Enbridge’s current proposal was the focus of intense controversy, including disruptive behavior in the hearing room, leading the Board to cancel part of the scheduled oral hearing due to security concerns.
The Board’s response to the “current social context”40 is reassuring. The Board noted, for example, that participants in the proceeding had spoken of “the need for Enbridge’s consultation and communication with affected communities to be transparent, genuine, ongoing, structured, collaborative and consistent.”41 Municipalities were particularly concerned in this regard with respect to emergency response plans. In an apparent move to allay these and other public concerns (including concerns expressed by public institutions, such as local governments and emergency organizations), the Board explained in some detail its role in overseeing the construction and ongoing operations of pipelines, with particular regard for safety, emergency preparedness and environmental protection. In doing so, the Board emphasized its requirements and expectations of companies. At the end of the day, however, the Board was clearly focused on its own assessment of the safety and environmental aspects of Enbridge’s proposal.
The Enbridge Line 9 decision is also noteworthy for its reaffirmation of the Board’s approach of allowing market forces to work, in a rapidly changing oil and gas supply and demand environment. Many projects will inevitably be controversial in today’s social environment and will continue to attract intense scrutiny of safety and environmental aspects in particular. Industry should find in the Board’s decision some assurance that, provided projects pass muster when scrutinized on safety and environmental grounds, the Board will continue to allow market forces to operate.
Finally, it is worth noting that there is a link between the dynamics of today’s emerging oil and gas market in North America and public concerns about pipelines. The Board noted in its Reasons for Decision that local awareness of Line 9 had been increased by recent major incidents at Lac-Mégantic and Marshall, Michigan. This increased local awareness should, however, be seen in the context of the broader public awareness of oil and gas pipelines generally, resulting from controversies surrounding projects such as Keystone XL and Northern Gateway, which are of course responses to the emerging North American oil supply situation. The reality is that, in today’s environment, oil and gas pipelines are inherently controversial, described by one commentator as a “lightning rod on the political agenda.”42 The NEB’s decision on the Enbridge Line 9 project demonstrates that sound projects, and the regulatory process itself, can survive the storm.
* Rowland J. Harrison, Q.C. is the TransCanada Chair in Administrative and Regulatory Law at the University of Alberta, Edmonton and Co-Managing Editor of Energy Regulation Quarterly. He is also an arbitrator in energy related matters. From 1997 to 2011, he served two successive terms as a permanent member of the National Energy Board in Calgary.
1 National Energy Board, Enbridge Pipeline Inc. OH-002-2013 ( March 2014), Reasons for Decision, [RFD]online: NEB https://docs.neb-one.gc.ca/ll-eng/llisapi.dll/fetch/2000/90464/90552/92263/790736/890819/2431831/2428616/Reasons_for_Decision_OH-002-2013_-_A3V1E4.pdf?nodeid=2431830&vernum=-2
2 Ibid at 13.
3 The history of Line 9 is reviewed by the Board in its RFD supra note 1 at 8-9.
4 The Board had determined in its Procedural Update No 1, 4 April 2013 (https://docs.neb-one.gc.ca/ll-eng/llisapi.dll/fetch/2000/90464/90552/92263/790736/890819/918701/941089/A5-1_-_Procedural_Update_No._1_-_List_of_Issues_and_Application_to_Participate_Form_Hearing_Order_OH-002-2013_Line_9B_Reversal_and_Line_9_Capacity_Expansion_Project_Enbridge_Pipelines_Inc._-A3G6J4_.pdf?nodeid=941090&vernum=-2), that it would not consider the environmental and socio-economic effects associated with upstream activities, the development of oil sands, or the downstream use of the oil transported by the pipeline, as “[t]hese issues are not within the Board’s mandate to regulate, and are not part of the Project as proposed by the applicant.” See also RFD supra note 1 at 75.
5 RFD, supra note 1 at 2.
6 Procedural Update No 4, 30 September 2013 (https://docs.neb-one.gc.ca/ll-eng/llisapi.dll/fetch/2000/90464/90552/92263/790736/890819/918701/1043114/A47-3_-_Procedural_update_no._4__A3L5X8_.pdf?nodeid=1043303&vernum=-2).
7 RFD, supra note 1 at 13.
8 The conditions are set out in Appendix IV of the RFD supra note 1 at 131-141.
9 As is generally required by section paragraph 30(1)(b) of the National Energy Board Act, RSC 1985 [NEB Act].
10 RFD, supra note 1 Appendix IV.
11 Ibid at 5-8.
12 Ibid at 94.
13 Ibid at 97-98.
14 Ibid at 99.
15 Condition 6, RFD, supra note 1 Appendix IV. See also at 98.
16 Notice of Motion, Chippewas of the Thames First Nation v Enbridge Pipelines Inc., National Energy Board, 7 April, 2014.
17 Ibid at paras 14-20.
18 RFD, supra note 1 at 111.
19 Ibid at 104-105.
20 Ibid at105.
21 Ibid at 110-111.
22 Ibid at 111.
23 Supra note 9.
24 RFD, supra note 1 at 121-122.
25 Jobs, Growth and Long-term Prosperity Act, SC 2012, c 19.
26 NEB Act, supra note 9 s 52, as amended.
27 The amendments are reviewed in Harrison, Olthafer and Slipp, “Federal and Alberta Energy Project Regulation Reform – At What Cost Efficiency?” 51 Alta. L. Rev. 249 (2013).
28 Subject to any application for review or appeal. See NEB Enbridge Pipelines Inc. – Line 9B Reversal and Line 9 Capacity Expansion Project – Frequently Asked Questions, online: NEB http://www.neb-one.gc.ca/clf-nsi/rthnb/pplctnsbfrthnb/nbrdgln9brvrsl/nbrdgln9brvrsl-eng.html#s5
29 NEB Act, supra note 9 s 58(4),(5).
30 See Frequently Asked Questions supra note 28.
31 Applying to Participate in a Hearing, online: NEB http://www.neb-one.gc.ca/clf-nsi/rthnb/pblcprtcptn/pblchrng/pblchrng-eng.html
32 RFD, supra note 1 at 12.
33 The Board’s rulings on Applications to Participate are recorded in a letter dated 22 May 2013, online: NEB https://docs.neb-one.gc.ca/ll-eng/llisapi.dll/fetch/2000/90464/90552/92263/790736/890819/918701/956466/A11-1_-_Letter_to_Enbridge_Pipelines_Inc._OH-002-2013_-_A3H8J9_.pdf?nodeid=956610&vernum=-2
34 Forest Ethics Advocacy Association and Donna Sinclair v. The National Energy Board and the Attorney General of Canada, (13August 2013). Court File No: A-273-13 [Forest Ethics], online: forestethics.org http://www.forestethics.org/sites/forestethics.huang.radicaldesigns.org/files/ForestEthics-Advocacy-NoticeofApplication-Federal-Court-Appeal.pdf . As at the date of writing, no hearing had been set down.
35 See supra note 32.
36 See supra note 33.
37 Ibid.
38 Ibid.
39 Applications under section 58 of the NEB Act, supra note 9, are frequently processed without conducting a full oral hearing, as is the usual process for certificate applications under section 52. Enbridge’s application in 2011 to reverse Line 9 between Sarnia and Westover was processed in a combined written and oral proceeding (OH-005-2011), resulting in a letter decision by the Board dated 27 July 2012.
40 RFD, supra note 1 at 2.
41 Ibid.
42 The Globe and Mail, August 12, 2013.