The Two Elephants in the Room at the Pipeline Summit

George Hoberg
April 14, 2018

March 10, 2018 protest in Burnaby, BC

As Prime Minister Justin Trudeau, Alberta Premier Rachel Notley and British Columbia Premier John Horgan prepare for the emergency pipeline summit, the dominant discourse in mainstream and social media has been about Alberta’s economic needs and whether or not the BC government is overstepping its constitutional jurisdiction with its proposed diluted bitumen regulation. Those two issues are unquestionably critical, but there are two larger issues looming at the summit: Alberta’s climate challenge and indigenous reconciliation. No one at the summit will be representing these latter two issues but they are undeniably elephants in the room.

Alberta’s Climate Challenge

One of the more remarkable things about the Trans Mountain conversation has been Trudeau and Notley’s claim that the pipeline project is a climate solution. It is true that in the short term, politically, getting Alberta’s participation in the Pan-Canadian Framework on Clean Growth and Climate Change was not possible without Trudeau committing to push forward a new pipeline. But the longer-term problem is that it’s hard to square the oil sands expansion planned by Alberta and enabled by the Trans Mountain project with Canada’s UN commitment to the international community to reduce emission by 30% (below 2005 levels) by 2030.

The current policies that make up the Pan-Canadian Framework are not sufficient for Canada to meet its 2030 goals. It’s hard to see how Canada can meet that target without reductions from Alberta, whose much-celebrated Climate Leadership Plan does not reduce emissions through 2030 (report, p. 10). Even more important when discussing long-lived investments like pipelines, for Canada to be a responsible global citizen in contributing the long-term climate goals, post-2030 reductions in emissions will have to be much steeper.

The challenge all along is that the Alberta oil sands fueled model of economic development is simply not sustainable as we shift to a low-carbon, clean energy future. Sooner or later the Governments of Alberta and Canada need to reckon with this reality. Trudeau’s Pan-Canadian Framework, by buying Alberta’s participation with an emissions-expanding pipeline, simply postpones the necessary task of dealing with this reality.

By approving the pipeline, Trudeau chose to imposes the costs and risks on British Columbia, for which there will be an electoral backlash form the west coast. But if Trudeau is serious about climate leadership, or even simply compliance with Canada’s 2030 targets, he’ll need to reckon with the Alberta problem. There’s really no other alternative than beginning the transition away from the oil sands as the core driver of the province’s economy. That will be costly — socially, economic and politically.

Notley certainly doesn’t want to deal with this issue. Trudeau doesn’t either. Horgan has undermined his ability to represent the climate case when he changed the province’s policy framework in an effort to attract a major LNG project, and by advocating increased domestic refining as an alternative to a pipeline to export raw bitumen. Nonetheless, Canada and Alberta’s climate challenge loom large over the emergency meeting.

The Indigenous Reconciliation Challenge

The other elephant in the room is Canada’s challenge in reconciling settler governments with its indigenous peoples. One of the cornerstones of Trudeau’s election campaign has been building a government to government relationship with aboriginal people. Yet while three settler government leaders sit down to discuss the fate of a project of great to concern to many of Canada’s First Nations, no First Nations leadership will be present at the summit. The Governments of Alberta and Canada are rushing to help Kinder Morgan ramp up summer construction even before courts have ruled on multiple lawsuits against the project by First Nations.

All three settler governments attending the summit have committed to fully implementing the UN Declaration on the Rights of Indigenous Peoples (UNDRIP). Yet there is a still a huge gulf in understanding of what role First Nations should play in project decision-making. Existing Canadian law, and the expectations of all three settler governments, is that Crown governments have an obligation to consult with and accommodate First Nations, but the consent of First Nations is not required for projects to go forward. In contrast, First Nations believe that UNDRIP’s provision of “free, prior, and informed consent” from indigenous groups means what it says: First Nations consent is required for a project to go forward in their traditional territories.

The Elephants Aren’t Going Away

Each of Canada’s oil sands pipeline proposals has ran into the same process pathology: individual projects have been transformed into proxy battles over broader issues about Canadian climate policy and indigenous rights. The fact that both issues are being ignored in the emergency pipeline summit does not mean that they are any less important or that they are going to go away. Canada is long overdue for serious conversations about reconciling settler and aboriginal title and Alberta’s economic model with a low-carbon future. Let’s hope the gathering of political leadership at the pipeline summit advances those two conversations.

Posted in Climate Action Policy, Energy Pipelines | Leave a comment

Status of significant litigation against the Site C dam

George Hoberg
Updated June 29, 2017

This morning the Supreme Court dismissed the leave the appeal for the Prophet River case, bringing the legal proceedings over this phase of the Site C proceedings to a close.

Claire Allen and George Hoberg
May 19, 2017

This table provides a resource to help understand the complex litigation against the Site C dam. Thus far, lawsuits challenging the approval decisions by the Government of British Columbia and the Government of Canada have all been dismissed. Plaintiffs in two of these cases, on First Nations treaty rights and consultation, have applied for leave to appeal to the Supreme Court of Canada – a decision on whether to hear the appeal is pending. The only case decided for the plaintiff was when BC Hydro applied to have an injunction enforced to remove protesters from disrupting construction.

Case Court and citation Subject Most recent action
Prophet River First Nation & West Moberly First Nation v. BC Hydro BC Court of Appeal (on appeal from BC Supreme Court)

2017 BCCA 58

Lack of an unjustified infringement determination and adequacy of consultation Dismissed Feb 2, 2017, plaintiffs have applied for leave to appeal to the Supreme Court of Canada
West Moberly First Nation & Prophet River First Nation v. BC FLNRO BC Supreme Court

2016 BCSC 2007

Adequacy of consultation Dismissed Oct 13, 2016
Prophet River First Nation v. Canada Federal Court of Appeal (on appeal of Federal Court decision) 2017 FCA 15 Whether the federal cabinet was required to consider whether environment effects constitute infringement Dismissed Jan 23, 2017, plaintiffs have applied for leave to appeal to the Supreme Court of Canada
BC Hydro v Ken Boon et al BC Supreme Court

2016 BCSC 355

Injunction against protesters blocking construction Injunction granted Feb 29, 2016
Peace Valley Landowner Association v. BC Min. of Environment BC Court of Appeal

2016 BCCA 377 (on appeal from the BC Supreme Court)

Whether the Government of BC could choose not to consider JRP recommendations for future government regulation of BC Hydro Dismissed Sep 15, 2016
Peace Valley Landowner Association v. Canada (Attorney General) Federal Court

2015 FC 1027

Whether the federal cabinet sufficient justified the significant adverse effects Dismissed Aug 28, 2015
Posted in British Columbia Electricity | Leave a comment

British Columbia Abandons Climate Leadership

George Hoberg
August 19, 2016

Clean Energy Canada corrects BC gov p. 12 graph

After repeated delays, Premier Christy Clark announced British Columbia’s new climate policy today. Friday August 19, at 1 PM. As the announcement has been dragged out, any expectations for meaningful progress were very low. But even by that low bar, this plan is disappointing. The province seems to have abandoned all pretense of being a climate leader.

Climate policy experts from around the world have examined BC carbon tax a model progressive carbon policy initiative. I doubt they will be anymore.

Effective climate policies have at least 2 core ingredients: legally-enforceable carbon pollution reduction targets, and a suite of policies that can be demonstrated to meet those pollution reduction targets. Today’s plan fails both of those tests.

Targets Abandoned

The province has, shamefully, failed to comply with its 2020 pollution reduction target. In fact, the 2020 target is completely ignored in today’s plan. But the province of BC is currently required by law to reduce its GHG emissions by 33% by 2020; it’s right there in the Greenhouse Gas Reduction Targets Act (Section 2.1). While the government never commented on it, the government-appointed Climate Leadership Team acknowledged that the 2020 target couldn’t be met.

But the Climate Leadership Team proposed a sensible alternative: an ambitious 2030 target of 40% reduction below 2007 levels. But the government ignored that call. The only remaining target is for 2050, which is too far in the future to guide near term decisions. So we no longer have meaningful emission reduction targets.

Plainly Inadequate Policies

The policies proposed in the plan can’t credibly put us on a path to meet that 2050 target.

BC uses 2007 as its baseline year. In that year, emissions were 66.3 million tonnes. In 2012, it was able to achieve it 6% interim reduction target, but since then emissions have started to come back up and in 2014 (in the inventory figures just released) BC’s emissions were 62.7 million tonnes, 5.5% below the 2007 baseline.

The plan claims to reduce emissions by 25 million tonnes by 2050 below projected 2050 emissions (It doesn’t provide a 2050 business as usual projection but look like it’s 77 MT). So even if they achieve the projected reductions (see below), 2050 emissions are projected to be 52 million tonnes (this according to Clean Energy Canada – the province did not include the projection in its bizarre graph on p. 12). BC’s legislated emission target for 2050 is 13 MT tonnes – so there’s a 39 MT gap in the plan. In other words, the government’s plan, even if implemented, would not even get the province half way to where it needs to be.

Using forests for reductions

Even the limited policies offered by the plan are poorly supported and not credible in their current form. The plan claims to get half of the reductions by 2050 (12 MT) by “enhancing the carbon storage potential of BC’s forests.” There is no rationale provided in the document for that 12 MT figure, and there are no accompanying commitments to regulation or funding to achieve that level of reduction.

There are real and cost-effective ways to use forests to reduce the province’s greenhouse gas emissions. The challenge is the complexity of designing and measuring forest sector reductions. That complexity makes it harder to ensure that emission reductions are real and verifiable. If the province is intending to rely increasingly on forest emission reductions, it will need a much more vigilant regulatory program, and substantially more investment, than we’ve had in the past.

Forestry can play a role in emissions reductions but, if we want to make the sort of reductions required to meet that 2050 target, it can’t substitute for reducing emissions from fossil fuel use and industrial processes.

Maybe now’s the time for federal leadership

Canada has committed to reducing its emissions by 30% (from 2005 levels) by 2030. BC, once an ambitious climate leader, now proposes virtually no reductions by 2030 (if all their policies are implemented successfully emissions would be only 3% lower (not a typo)). Provincial initiatives are failing to put Canada on a path to meet our international commitments.

I’ve long been skeptical of the Canadian approach of letting provinces lead on climate policy. Today’s disappointing actions by the BC government strengthen the argument that it is time for the federal government to step in and show real leadership on climate policy.

Note: I’m part of the Pacific Institute for Climate Solutions Forest Carbon Mitigation Project, but the views expressed here are solely my own.

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Time for the Hard Work on Meaningful Climate Policy

This blog was reproduced in IRPP’s Policy Options.

George Hoberg
July 21, 2016

Trudeau with the premiers at a November 2015 meeting

The premiers are meeting in Whitehorse this week, and climate and energy are on the agenda again. For long-frustrated Canadian climate hawks, it’s remarkably refreshing to have a federal government verbally committed to climate action, and a provincial government in Alberta finally taking action to cap the increase in oil sands emissions. But it is also important to keep in mind how far we from having a meaningful climate policy in Canada.

A meaningful climate plan needs to have, at minimum, two core ingredients. First, a jurisdiction needs a measurable, enforceable climate target in terms of a level of reductions in greenhouses gases over a specified time period. Second, there must be real, enforceable policies in place that can reasonably be expected to achieve that climate target. Canada is doing reasonably well on the first ingredient, but is a long way from having the second in place.

Canada does have a real climate target. The Harper government committed, in the run up to the Paris Accord last December, to reducing emissions by 30% below 2005 levels by 2030, and the Trudeau government seems intent to stay with this target for the time being. According to Simon Donner, this target might be consistent with Canada’s fair share of international reductions to meet a 2°C, although nowhere near sufficient to meet Paris’ bolder 1.5°C target (that would require more than a 90% reduction). Our 30% by 2030 target would be a much stronger target if it was embodied in domestic law, but at least it provides a measurable objective to guide policy.

Canada is not currently on a path to meet this target. The latest inventory report from Environment Canada shows just how far off we are.

A more optimistic scenario comes from the work of Dave Sawyer and Chris Bataille, who modelled the expected impact of current policies and also recently introduced policies like the Alberta climate plan and Ontario’s cap and trade plan. Even if those policies and plans are faithfully implemented, Canada only gets one half of the way there to its 30% by 2030 target (110 million tonnes short of its 2030 goal of 524 million tonnes, from a 2005 base of 749 million tonnes).

Current and recently announced policies only get us half way to target

Where will Canada get the remaining 110 million tonnes of required reductions? There are many potentially effective options – pricing through a carbon tax or cap and trade, regulations, or some combination. Over the past week we have heard fresh commitments from the Trudeau government to introduce a nationwide carbon price even if some provinces are opposed. But there’s no signal, publicly at least, what the level of the price floor will be. Nor is there any indication of how the national price would be coordinated with existing provincial climate policies. The highest carbon tax in Canada is currently BC’s $30 a tonne (a level, we’ve known for some time, that won’t enable BC to meet its own provincial climate target). Alberta will be moving part of its economy to $30 per tonne in 2018, but the Quebec (and soon Ontario price) is only around $16 per tonne. Pledging to establish a carbon price is virtually meaningless unless you specify the price and design, and demonstrate how it will achieve Canada’s target.

Canada clearly needs new, bold policies to close the gap and meet its 2030 target. Until now we’ve relied almost exclusively on uncoordinated provincial initiatives: a carbon tax in BC, a ban on coal in Ontario, cap and trade in Quebec, and mixture of pricing and regulatory instruments in Alberta. One important consequence of that is that we have yet to have any kind of national discussion about appropriate burden sharing among the provinces. At present there are widely varying costs of carbon across the provinces. Alberta’s bold new plan, as significant a step as it is, doesn’t actually reduce Alberta’s emissions (p. 26). If Canada is to reduce its emission by 30% by 2030, what should each province’s share of that national reduction be? It seems hard to imagine a political agreement where other provinces reduce their emissions by even more than 30% to allow Alberta to continue its current level of emissions.

I hope the premiers can make some major strides towards addressing these issues this week. But that seems unlikely. It’s long past time for the Government of Canada to do what federal governments should do: show real leadership on vitally important national policies. Canada doesn’t just need carbon pricing – we need carbon pricing and climate policies that are actually strong enough to meet our commitments to the international community and future generations. We have a long way to go.

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Over to You, Mr. Trudeau: The Political Perils of Kinder Morgan’s Trans Mountain Expansion

George Hoberg
May 20, 2016

The National Energy Board has recommended the approval of Kinder Morgan’s Trans Mountain Expansion Project with 157 conditions. Yesterday’s decision brings the regulatory process created by Stephen Harper to an end. The decision is now squarely in the lap of the Trudeau government, although the government of British Columbia also needs to take a stance.

Trudeau has created two supplementary processes: a climate test, which is underway for Trans Mountain, and 3-person consultation panel. The climate test will look at the impact of the pipeline on upstream GHG emissions, and a draft of that analysis was also released yesterday. The 3-person panel will be consulting further with First Nations, affected communities, and the public, and is charged with reporting by November 1. These supplementary processes can provide the basis for a rationale for Trudeau departing from the NEB recommendations, but there’s no guarantee they will be used that way.

The BC government also needs to decide whether the project is in BC’s interest. Premier Clark was originally hoping for some political cover from that difficult political choice through the Equivalency Agreement, which handed full responsibility for project review and assessment to the federal government. In January, the BC Supreme Court invalidated that agreement. The BC government has initiated a process for its review, which will include First Nations consultation, but has yet to provide a timeline for completion. The court’s ruling clarified that BC can impose it’s own conditions on the pipeline in BC, but not in a way that has the effect of denying approval to a federally-approved pipeline.

Pledging to multiple incompatible objectives

These additional processes don’t change the fact the decision ultimately comes down to an exceptionally challenging political choice by Prime Minister Trudeau. Trudeau has repeatedly promoted the importance of supporting the Alberta oil sector by diversifying the market for oil sands. But he also ran on the slogan that “governments grant permits, but communities grant permission.” More than a dozen lower mainland municipalities are opposed to the project, including Burnaby, Surrey, and Vancouver. Vancouver Mayor Gregor Robertson, a close political ally of Trudeau, just launched a major campaign against the pipeline. Public opinion in BC is opposed to the pipeline by a margin of 45% to 36%, and opposition appears to be more intense in the vote-rich Lower Mainland.

Trudeau has also pledged reconciliation with First Nations and the full implementation of the UN Declaration on the Rights of Indigenous People. The declaration calls for “free, prior, and informed consent,” a departure from current Canadian law emphasizing consultation and accommodation. A number of First Nations, including the Coast Salish groups Tsleil-Waututh, Squamish, and Musqueam in the Burrard Inlet and surrounding areas, are vehemently opposed to the project. The Tsleil-Waututh have crafted an elaborate legal strategy to defend their rights and resist the construction of a new pipeline, including forging an alliance with indigenous groups on the Salish Sea from across the 49th parallel.

Trudeau has also sought to establish Canada as a leader in combatting climate change, and pledged to meet the national target of reducing emissions by 30% by 2030. It’s hard to see how enabling significant expansion of the oil sands, the fastest growing source of Canadian emissions, will put Canada on a path to compliance.

Trudeau can’t keep pledging to do multiple incompatible things. To govern is to choose, and it’s close to time for him to make the difficult political choice on Kinder Morgan’s proposal.

Posted in Energy Pipelines | 1 Comment

Recommendation to reject divestment at UBC deeply flawed

George Hoberg
February 10, 2016

Last week, the Finance Committee of the UBC Board of Governors voted to endorse the recommendation of its Responsible Investment Policy Committee and reject fossil fuel divestment. The principal rationale for rejecting divestment is that “it would not be consistent with the board’s fiduciary obligation to endowment donors.” This conclusion relies on a faulty definition of the Board’s fiduciary obligations with respect to the endowment, and rests on assumptions about financial returns under divestment that are unsupported by any evidence presented by the committee (and, in fact, are directly contradicted by the publicly-available literature). Furthermore, the Finance Committee’s interpretation of fiduciary duty appears to contradict research from the UBC Allard School of Law and an external legal opinion sought by the University of Toronto President’s Advisory Committee on Divestment.

The Board’s narrow definition of fiduciary duty is not supported by law

My expertise is in environmental policy, and not the law of trusts. But the literature review that I’ve done about fiduciary responsibility reveals that the Finance Committee’s statement that the Board’s fiduciary duty is the donors is unsupportable. The Association of Governing Board’s defines fiduciary duty like this: “Fiduciary responsibility entails three particular duties to the institution, commonly known as the fiduciary duties of care, loyalty, and obedience. Taken together, they require board members to make careful, good-faith decisions in the best interest of the institution consistent with its public or charitable mission, independent of undue influence from any party or from financial interests.”

Fiduciary duty has its origins in common law, and in some jurisdictions is codified in statutes. British Columbia has a Trustees Act that codifies as the law on fiduciary duty as embodying a standard of care whereby “a trustee must exercise the care, skill, diligence and judgment that a prudent investor would exercise in making investments.”

The Board’s duty is not to donors per se, but for the purposes for which the endowment was established. That purpose is guided by the University Act, s. 19.1, which states that “The members of the board of a university must act in the best interests of the university.” Board policies also clarify the endowment’s purpose. The Board’s Endowment Management policy states that “The University is committed to ensuring that the endowment funds maintained in the endowment pool are used in such a way as to maximize their benefits for the advancement of education at the University, including educational and research activities carried on by the University which benefit society generally.” The Board’s Endowment Responsible Investment Policy defines its “primary fiduciary responsibility” as “acting in the best interest of the University and its stakeholders.” It continues, “When  considering divestment, the University must consider the interest of its multiple stakeholders, which include students, faculty, staff, alumni, donors, the government and taxpayers.” [i]

Traditionally, fiduciary duty has been understood to emphasize financial criteria, particularly pursuing the best possible return over the long run with due consideration to risk. Investment criteria, however, are not limited to financial gain. UBC, for example, has broadened its criteria to include Environmental, Social, and Governance (ESG) principles. The normal expectation is that such screening will either increase or at least not jeopardize financial returns. In principle, screening investments for non-financial criteria, even if it did sacrifice financial return, could be consistent with fiduciary duty as long as the beneficiaries of the trust made this value choice explicit (see the Richardson memo cited below). But that’s not the issue for fossil fuel divestment as there is no evidence divestment will materially decrease returns, and indeed growing body evidence that maintaining fossil fuel investments may decrease returns (see next section).

As a side note: The legal opinion solicited by the Board states ”Divestment is compatible with the fiduciary standard if alternative investments are available with a higher rate of return having regard to the relevant risk.” This statement must be an error, as it is inconsistent with the understanding of fiduciary duty in the literature, which states that such screening should be permissible so long as it does not jeopardize financial returns.

The Board’s assumption that divestment creates a financial risks is not supported by evidence

The Finance Committee appears to assume, without citing any evidence, that divesting the endowment of fossil fuels would create financial risk. Our Responsible Investment Proposal, and our September 15 research update, both cite a substantial body of research showing that fossil free funds would have experienced either similar or higher returns.  Given the weight of this evidence, the burden of proof should be on the Board to demonstrate that there would be a financial risk. Yet no such analysis has been provided.

Moreover, concern has been increasing in the investment community about the long term financial risks of exposure to fossil fuel stocks, given that most of the reserves on the books for fossil fuel companies will become stranded assets as the world moves to address the climate crisis.  Arguably, fiduciary duty requires that the Board examine the long-term financial risks from holding fossil fuel stocks (See the Kosky-Minsky report, especially p. 25).

The Finance Committee rejects divestment on the grounds that it is inconsistent with their fiduciary duty. Yet their legal standard for fiduciary duty is flawed, and they do not support their concern of the financial risk of divestment with evidence. Fiduciary duty requires the the Board “exercise the care, skill, diligence and judgment that a prudent investor would exercise in making investments.” The Board does not seem to have done the due diligence necessary to fairly consider the divestment proposal.

Further Reading

An external legal opinion (pg. 18) obtained by University of Toronto contradicts UBC, instead finding fiduciary duty does allow for divestment.
“After considering all the evidence and given the long-term nature of the University’s obligations with respect to the Funds, the Committee concludes that divesting from the University’s direct holdings in fossil fuels companies whose actions blatantly disregard the 1.5-degree threshold (or any evolution of this standard, upwards or downwards, as the best scientific and policy evidence produces a new consensus) would be consistent with the University’s fiduciary duties and the long-term financial best interests of the beneficiaries of the trusts. “

Professor Benjamin Richardson, “Legality of Socially-Responsible Investing (SRI) by University Endowment Funds,” Memorandum to UBC Board of Governors Finance Committee, August 3, 2013. This Memorandum states “because SRI emphasizes a long-term approach to investing financial capital in a manner that addresses ongoing and emerging concerns such as climate change and respect for basic human rights, SRI is arguably quite compatible with the purpose of an endowment fund. To manage and preserve the endowment in perpetuity for the benefit of current and future generations of students, staff and other stakeholders in the university requires being attentive to ESG issues of long-term financial salience.” The Memorandum concludes, “there is no insurmountable fiduciary or trusts law barrier to UBC’s endowment funds practising SRI. Rather, the legal imperative is increasingly that these funds must be managed for SRI purposes – SRI should be viewed as a way to legally fulfill the purpose of endowment funds and to nurture the wider best interests of the university and its members.”

[i] At an earlier point in the document, the policy does say “Fiduciary responsibility dictates that UBC invest and act solely in accordance with the requirements of its donors in accordance with the common law investment standards for trustees.” However, this statement is inconsistent with the more accurate characterization of fiduciary duty found later in the document, and the common law and statutory law on it. The sentence would correctly characterize the concept if it had said “Fiduciary responsibility dictates that UBC invest and act solely in accordance with the requirements of its donors AND in accordance with the common law investment standards for trustees.” Donors can dictate specific investment practices in their deeds, and when they do they must be honoured by trustees. But there’s no evidence that much of the Board’s endowment is constrained in that way.

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Major New Legal Obstacle for Northern Gateway Pipeline

January 13, 2016
George Hoberg

A BC Supreme Court judge today invalidated the agreement between the BC and federal governments on the environmental assessment process used to support the approval of Enbridge’s Northern Gateway Pipeline. While the decision does not directly overturn the federal government’s conditional approval decision, it does have major implications for the legality of the project.

Isn’t Northern Gateway already dead?

Most Canadian energy observers believe the Northern Gateway Pipeline, despite its conditional approval by the Harper government in June 2014, is essentially dead. Nonetheless, Enbridge did restate its confidence in the project earlier this week. The project is subject to a number of legal challenges.  Most of the challenges are in federal courts and about alleged flaws in the federal government’s decision-making process. Today’s decision by a BC court judge was not considered one of the most significant challenges, but it does target a critical ingredient in the regulatory approval process.

BC abdicated its regulatory authority under the Environmental Assessment Act

At issue in this case was the BC government’s “equivalency agreement” with the federal government on the environmental assessment and regulatory review process for the pipeline projects. Environmental assessments have several stages, from project proposal, to scoping, to hearings and the actual assessment and report. The final stage is a decision by the appropriate regulatory authority. BC’s Environmental Assessment Act Section 17 clearly calls for a final decision on whether to issue an environmental assessment certificate. When BC entered the equivalency agreement, it not only agreed to defer to the assessment procedures used by the federal government, but also gave up its authority to issue an EA certificate. The most important part of the ruling is judge’s decision that BC had no grounds to give up final decision-making authority. As a result, the equivalency agreement is invalidated, and the province needs to make a decision on whether or not to approve the project.

BC failed in its duty to consult appropriately with First Nations

The parts of the decision about First Nations consultation, which have received all the attention in the instant press on the decsion, are an intriguing combination of limited and expansive. On the one hand, the judge ruled that the province did not have to consult about entering the equivalency agreement (consistent with previous judicial rulings on similar issues. But there was an obligation to consult First Nations about whether or not to terminate the equivalency agreement once BC made its formal opposition to the pipeline known. The province argued that the equivalency agreement transferred the obligation to consult to the Federal government, but the BC Supreme Court judge in this case disagreed. Note this case is not about the adequacy of federal government consultation with First Nations – those decisions are pending in federal court. In this case, since the BC government did not engage in direct consultations with First Nations during the process, the judge ruled it did not uphold its duty. Prior to exercising its final authority under the Environmental Assessment Act, the province must consult First Nations.

Provinces can impose conditions on interprovincial pipelines

In a new twist on regulatory federalism in Canada, the judge in this case ruled that despite federal paramountcy over interprovincial pipeline approvals, it would be permissible for the provincial government to impose certain conditions on interprovincial pipeline approvals. The province could not use its regulatory authority to deny an approval to a pipeline that the federal government approved, but it could add conditions to the federal government’s conditions.

Implications for pipeline proposals

If this decision sticks, the Northern Gateway Project can’t proceed without several additional steps by the BC government. Last we heard, the BC government was strongly opposed to the project. And this judge ruled that the province can’t block an interprovincial pipeline project approved by the federal government.

As a result, the decision shifts the intergovernmental politics of pipelines. For an equivalency agreement to pass muster, BC would be able to defer the assessment process to the federal government, but it would need to issue its own final decision. The current process, where BC submits strenuous objections to the pipeline but then defers the final decision to the federal regulator, would no longer workable.

This decision also has direct implication for the Kinder Morgan Trans Mountain Expansion project, because that regulatory review process is being conducted according to the same equivalency agreement. There are fewer direct implications for Energy East because BC’s Environmental Assessment Act and the particular equivalency agreement are not in play. If the other provinces’ EA acts and equivalency agreements are similar, then there could be important implications.

Of course, this decision could be overturned or altered on appeal. I don’t know what counts as finality of regulatory decisions anymore. Stay tuned.

Posted in Energy Pipelines | 1 Comment

Bending the Curve: Alberta’s Tectonic Shift in Climate Policy

George Hoberg
November 22, 2015

Rachel Notley’s Government of Alberta made history today by transforming her province from a renegade to a leader on climate policy. The province announced today that it will introduce a $30 per tonne economy wide carbon pricing (starting at $20 per tonne in 2017 and increasing to $30 in 2018). It will also cap carbon emissions from oil sands facilities at 100 million tonnes, compared to about 70 million today. That is designed to allow for growth from the facilities currently under construction. The province will also phase out coal use for electricity by 2030, and require 30% of its electricity to be generated by renewables by 2030.

These changes are monumental. While the details of the carbon price will need to be analyzed, its $30 level matches BC’s current carbon price, the highest in Canada. The cap and trade regime being operated by Quebec and California currently has a price of about $16 per tonne (although that price is likely to increase somewhat by 2018).

The overall emissions cap is also important, signalling a limit on the growth the oil sands impact on our climate. It does not cap oil sands production, but increased production beyond the level of those facilities under construction will only be able to occur if innovation drives down carbon intensity of oil sands significantly.

These changes fundamentally alter the politics of Canada. It will make it much easier for Canada to become a constructive player in global climate policy. The meeting tomorrow between Trudeau and the premiers can be much more productive with this bold move by Alberta in advance. If other provinces want to claim the mantle of climate leadership, they are going to have to step up their game, creating the potential for a “race to the top” in Canadian environmental policy. It will contribute, as Notley stated, to “a significant de-escalation worldwide of Alberta’s oil sands.”

These changes are testimony to two fundamental political changes. The first is a concerted resistance movement to new oil sands transportation infrastructure in both Canada and the United States.  While there are many sources of this resistance, to many anti-pipeline activists, resistance has always been first and foremost about forcing climate policy change. Notley referred to this indirectly when she described Obama’s denial of the Keystone XL pipeline application as a “kick in the teeth”. The second dramatic political shift is Notley herself, beaming from the podium. Her May 2015 election brought decades of Conservative rule to an end, allowing this tectonic shift, a reminder that elections matter more than anything else.

There’s a lot more work to be done. Remember that we need to completely decarbonize the energy system by mid-century. But today is a day for celebration. Alberta has bent its carbon emissions curve, and provided a lever to Canada to show real climate leadership.

Here’s the Panel’s Climate Leadership report.

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Game over for Keystone KXL: How environmentalists created Obama’s new climate test

George Hoberg
November 6, 2015

Environmentalists protesting Keystone XL at White House

Obama’s decision today to reject the Keystone XL pipeline brings a seven year saga to a close (well, except for the lawsuits). It is an extraordinary victory for the climate movement, but in this post I wanted to focus on the narrower issue of the rationale for today’s decision. It is extraordinary in how it vindicates the symbolic power of the pipeline.

US environmentalists transformed the Keystone XL decision into a test of climate leadership.’s Bill McKibben, echoing climate scientist James Hansen, repeatedly used the frame of the pipeline being a fuse to one of “the largest carbon bombs on the planet,” the exploitation of which would mean “game over for the climate.”

Obama sent a powerful signal about his climate views and this particular pipeline in his famous Georgetown speech in June 2013, where he spelled out the “climate test”:

“Allowing the Keystone pipeline to be built requires a finding that doing so would be in our nation’s interest. And our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution. The net effects of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward.”

I was struck that today’s was not based on a decision that Keystone XL “would significant exacerbate” GHG emissions. Instead, today’s decision states “the proposed project by itself is unlikely to significant impact the level of GHG-intensive extraction of oil sands” (p. 29). Despite finding little measurable impact on GHG emissions, the Record of Decision continued, “it is critical for the United States to prioritize actions that are not perceived as enabling further GHG emissions globally.”

The decision cites the broader standard of the “net effects of the pipeline’s impact on our climate,” but makes that about global political reaction, not modelling estimates. In effect, the decision transforms Obama’s climate test into a broader consideration of the impact of the decision of global climate politics:

“A key consideration at this time is that granting a Presidential Permit for this proposed Project would undermine U.S. climate leadership and thereby have an adverse impact on encouraging other States to combat climate change and work to achieve and implement a robust and meaningful global climate agreement. Strong climate targets and an effective global climate agreement would lead to a reduction in global GHG emissions that would have a direct and beneficial impact on the national security and other interests of the United States.”

In his public remarks, Obama stressed the role model justification for the decision: “Today, we’re continuing to lead by example, because ultimately, if we’re gonna prevent large parts of this Earth from becoming not only inhospitable but uninhabitable in our lifetimes, we’re gonna have to keep some fossil fuels in the ground rather than burn them and release more dangerous pollution into the sky.”

The climate movement, remarkably, transformed Keystone XL into a line in the sand on climate. Today, the very symbolic magnification of importance they manufactured was used as the core rationale for the rejection decision.

What an extraordinary victory!

Addendum: A lot of great journalism and commentary has emerged around this decision by Obama in the broader context.

From the architect of the campaign, Bill McKibben, in The New Yorker
Ben Adler on the activist campaign on Vox
David Roberts on the misguided critique of activism on Vox
Brad Blumer on Obama’s rationale on Vox
Elena Shor with a thorough 7+ year timeline on Politico

Posted in Energy Pipelines | Leave a comment

The Softwood Lumber Dispute – a Hoberg Course Brief

George Hoberg and Gabrielle Schittecatte
October 10, 2015

Since before Confederation, trade in lumber between Canada and the United States has been politically contentious.  The modern conflict began in 1982, when the US softwood industry asked the US government to impose countervailing duties on imports from Canada. As Canada’s largest lumber producer, British Columbia has been strongly affected by US trade actions.

US lumber interests argue that Canadian policies have the effect of subsidizing lumber exports to the US, giving Canadian lumber an unfair advantage and making them inconsistent with the US Trade Act and free trade agreements. The biggest source of concern has been how stumpage (the price paid by a forest company for what is a publically owned tree) is set in the country. In most of the US, where private forest land dominates, trees are priced by markets. Because of the public land model north of the border, stumpage in Canada, including BC, is set administratively. The US has long argued that the way stumpage is calculated amounts to an unfair subsidy. The US has also complained about direct subsidies to the forest sector, limitations on log exports, and cut control policies.

In the early 1980s the US lumber industry petitioned the US Department of Commerce (DoC) to implement its countervailing duties, a tax the US would then charge Canada on its softwood exports. The DoC declined to do so. In 1986 the US lumber industry again petitioned the DoC to establish countervailing duties, which it agreed to at a level of 15%. However, before this could take place Canada agreed to a Memorandum of Understanding (MOU) which established a phased export tariff. In essence, Canada, in order to decrease tensions on the matter, agreed to tax itself so at least revenues would remain within the country.

In 1991 Canada withdrew from the MOU and the US industry petitioned the DoC again to implement countervailing duties, which it did at a level of 6.5%. This decision was reviewed under the Canadian-US Free Trade Agreement (a predecessor of NAFTA). The review panel ruled in Canada’s favour, finding that the DoC had not made a convincing case under the US Trade Act. Consequently, Congress amended the Trade Act to make it easier to demonstrate the existence of an illegal subsidy. In response, Canada agreed to the 1996 Softwood Lumber Agreement, which was planned to last five years. This agreement determined that a certain amount of softwood exports would be allowed tax free, but that above this level there would be substantial export fees.

In 2001 the Softwood Lumber Agreement expired, and the US forest industry again applied for countervailing duties. This time, the DoC agreed to impose even higher duties, at 27.2%. Canada again challenged the decision under the dispute settlement mechanisms of both NAFTA and the World Trade Organization (WTO), virtually all of which ruled in Canada’s favour.

At the same time, the BC government embarked on an extensive policy reform designed in part to address US criticisms by substantially increasing the role of market forces in determining stumpage and other aspects of BC forest policy. The 2003 Forest Revitalization Plan included a 20% take back of harvesting rights, half of which were allocated to auctions to create a system of market-based pricing. Appurtenancy was eliminated, along with other reforms to “bring the market back in.” One key part of the justification for these changes was to address the concerns raised by the US in the softwood lumber dispute.

Despite BC’s significant policy reforms, and the victories in dispute settlement mechanisms, Canada agreed again, in 2006, to enter into an agreement where export taxes were collected if the price of lumber fell below a particular threshold. The US refused to return the $5 billion in duties inappropriately collected from the industry over the past 4 years, and Canada felt the need to agree to trade restraints to get access to the funds.  The 2006 Softwood Lumber Agreement, which would last for 7 years and be renewed for 2 more, places an export charge on lumber based on the current market price measured in price per thousand board feet. The charges on lumber increase when the market price of lumber decreases – the maximum rate is 15% if the price falls below $315, and goes to zero if the price exceeds $355. In September 2015, Canadian exporters paid a tax of $5 US because the price of lumber was in the range of $336 US and $355 US.

The agreement expires on October 12, 2015, and there are no apparent signs of active negotiations. The agreement stipulates that the US is prohibited from launching new trade actions for a year after expiration. Premier Clark is committed to renegotiating a new deal, and recently stated she would bring the matter up with the prime minister “as soon as the federal election is over.”

The longstanding softwood lumber dispute between Canada and the US has had a significant impact on the BC forest industry’s policies and profitability. The dispute prompted one of the biggest changes in the forest industry through the Forest Revitalization Act and ensuing tenure take-back. It also continues to have impacts on the price of exports to the US, and thus the vitality of the BC forest industry. These US trade pressures have pushed costs up, induced policy reforms, and been a major challenge to Canadian sovereignty.

Additional sources:

Government of Canada DFAIT site Softwood Lumber

Government of BC Softwood Lumber

Random Lengths overview of softwood lumber dispute

Coalition for Fair Lumber Imports

Posted in BC Forest Policy | Leave a comment