Provincial pipeline conditions change the game

Time was, any project offering hundreds or thousands of jobs could count on the unwavering support of every politician in sight. Today that’s just not the case for major oil pipeline proposals, four of which are confronted by challenges from government and interest groups. Survey after survey shows Canadians have little interest in accepting assured jobs and tax revenue if they come with any potential for pipeline leaks. Rather, provinces, municipalities, First Nations and environmental groups are one-upping each other in the race to throw barriers in the way of multibillion-dollar projects.

The statement of joint principles issued in late 2014 by Ontario and Quebec setting conditions on TransCanada Corp.’s $12-billion Energy East project is just the latest hurdle erected with scant regard for the interprovincial jurisdiction of the National Energy Board (NEB). British Columbia has issued its own terms for coastal pipeline access, a dozen legal actions have been filed by project opponents, and various municipal resolutions also seek to block proposed rights of way. “The provinces have definitely become more vocal in wanting to ensure that their interests are considered,” TransCanada General Counsel Kristine Delkus says. “This,” she says, “is a reflection of the increased polarization of the debate about pipelines.”

Delkus says it’s “not yet known” whether Quebec and Ontario will set up separate adjudication of their seven principles, or simply seek to have them recognized by the NEB hearing panel. “We’re still working with stakeholders on an outcome that addresses their issues, while recognizing the role of the NEB,” Delkus says.

Provinces rely on the concept of “social licence” to claim authority over regulatory fields outside their mandate. The concept, Delkus says, is vague and problematic. “What level of social acceptability is required? Can it be measured? Who determines it? Shouldn’t the NEB’s finding that a project is, or is not, in the public interest … be the end of it?

“Companies today need to have a sophisticated and multi-faceted toolkit to make their case,” which is increasingly contested outside the regulatory process, Delkus observes. “We engage with our stakeholders early and often to provide project information but, most importantly, to listen.”

Borden Ladner Gervais LLP partner Alan Ross, who recently returned to Calgary from secondment as the Alberta government’s representative in Ottawa, agrees with Delkus that there’s no clear indication how provincial demands will be adjudicated. He says social licence is “an emerging term with emerging meaning” and no legal definition. But it clearly implies that regulatory approvals are not sufficient in themselves. Ross adds that many energy companies now see social licence as “a part of doing business” and have created board committees to oversee its management.

BLG partner Michael Massicotte, a Calgary regulatory expert, says social licence creates a “new world” where consultation should start as early as project definition allows. And there should be commitments to maintain stakeholder engagement even after construction is complete, Massicotte advises.

Ross says top-loaded provincial demands complicate the approvals process and “change the role of how you advise your clients,” placing much greater emphasis on the thoroughness of consultations with all communities. In an increasingly contentious regulatory arena, he says, lawyers must become masters of regulatory scheduling, presentation of expert evidence, increasingly exacting consultation requirements and the minutiae of regulatory rules, in order to “drive the process forward.”

Erik Richer La Flèche, a partner with Stikeman Elliott LLP in Montréal, says talk of challenging the constitutionality of provincial demands is confrontational and, as such, “unhelpful.” Like the BLG lawyers, he points out that provinces have longstanding status before the NEB, as well as their own environmental permitting powers, so the declaration of principles in large part merely underscores existing jurisdiction. Richer La Flèche adds that Quebec Premier Philippe Couillard has already ruled out consideration of Energy East greenhouse gas emissions outside provincial boundaries and, taken altogether, the Quebec/Ontario principles “are not that far from what the NEB might say.”

He suggests the two provinces are likely “quite in favour” of Energy East but want to ensure citizens who are not familiar with the oil and gas sector that it will be done in an environmentally sound manner. A dramatic declaration of principles, he suggests, accomplishes this without changing much.

A requirement for payments to affected communities, meanwhile, is new and aimed at gaining public support, “so that people can see the quid pro quo.” He advises pipeline companies to continue with the NEB process, communicate clearly with the public and meet concerns with effective action.