Here we go again: NEB redo of Trans Mountain review leaves climate impacts out

George Hoberg
October 6, 2018

September 26, 2018, the NEB released its draft list of issues and factors for consideration in its reconsideration of the Trans Mountain pipeline. The reconsideration commits the same indefensible error of not including climate impacts associated with the project in the proposed factors to consider in the analysis. Below is the text of my submitted comment to the NEB about this concern.

October 03, 2018

Ms. Sheri Young
Secretary of the Board
National Energy Board
Suite 210, 517 Tenth Avenue SW
Calgary, AB T2R 0A8

Dear Ms. Young,

I am writing to provide comments on the draft List of Issues and the draft Amended Factors and Scope of the Factors for the Environmental Assessment under the Canadian Environmental Assessment Act, 2012 (CEAA 2012) for the NEB reconsideration of the Trans Mountain Expansion Project. The proposal would clearly rectify the primary flaw in the original NEB review identified by the Federal Court of Appeal by incorporating project-related marine shipping in the definition of the designated project.

However, the draft commits another serious, and easily rectifiable, error by excluding the consideration of the environmental and socio-economic implications of greenhouse gas emissions associated with the project. This deficiency was acknowledged by the current federal government as a significant shortcoming that it addressed in part by repeatedly committing to consider at least upstream emissions in environmental assessments. If the current government already has an established process to do so for this reconsideration of TMX outside the NEB process, then this is a less serious defect (although still an unnecessarily fragmented way to conduct a review of a project). But I have not seen a statement committing the government to do this.

Best practice in environmental assessment considers all significant environmental impacts of the project being assessed. Given the severity of the global climate challenge, and Canada’s commitment to the international community to play its part in reducing global emissions, it is imperative that this be included in NEB’s reconsideration. I would note that the US, in its reviews of major pipeline projects like the Keystone XL pipeline, assesses both upstream and downstream greenhouse gas implications. Environment and Climate Change Canada’s assessment of upstream greenhouse gas emissions found the following: “Considering only the capacity added by the Project, emissions could range from 13 to 15 Mt of CO2 eq per year.” Those magnitudes clearly classify GHGs as an environmental impact of significant concern deserving consideration. That ECCC assessment is now two and one-half years old, and market conditions affecting the modelled impact might have changed significantly.


George Hoberg

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The Trans Mountain Expansion Project – A Policy Case Study – REVISED

Sarah Frose and George Hoberg
August 30, 2018

In a stunning development in Canadian politics today, the Federal Court of Appeal quashed the Canadian government’s approval of the Trans Mountain Expansion Project. The court found two major flaws. First, it ruled the NEB erred by not including tankers when it established the scope of its project. Second, it ruled the federal government did not demonstrate it engaged in a “genuine and sustained effort to pursue meaningful, two-way dialogue” with First Nations.

Now construction on the pipeline cannot proceed unless and until the government corrects these serious deficiencies.

We’ve updated our policy case to account for this major new development. Link to PDF is below. A website is coming shortly

Trans Mountain Expansion Project – Policy Case V2

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The Trans Mountain Expansion Project – A Policy Case Study

Trudeau's speech approving the Trans Mountain Expansion Project

Sarah Froese and George Hoberg
August 22, 2018

We have completed a case study on the Trans Mountain Expansion Project, updated through August 19, 2018. We’ll be putting online on a case study website shortly. But we wanted to make it available now in the event any instructors are interested in using it in classes in the fall. It’s designed for use in Hoberg’s public policy classes at UBC, but we are hoping that it can serve as a useful resource beyond those classes for students, instructors, the media, and members of the public who are interested in this fascinating case of Canadian policy. More developments will be playing out in the near future, and we will update the case to reflect major new developments.

Trans Mountain Expansion Project – Policy Case

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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.

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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
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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.

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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.

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