April 9, 2012 / 6:01 AM / in 8 years

Analysis - Enbridge's Gateway pipeline still in legal swamp

CALGARY, Alberta (Reuters) - A Canadian government attempt to speed up construction of Enbridge Inc’s (ENB.TO) Northern Gateway oil pipeline to the West Coast is unlikely to prevent a flood of court challenges that could still delay the multibillion-dollar project.

In its budget last month the Conservative government said it will force time limits on regulators reviewing the pipeline plan. But aboriginal law experts say that won’t stop legal actions against the C$5.5 billion ($5.5 billion) project, which is designed to open a lucrative new export route to the Pacific for surging production from the Alberta oil sands.

They say court precedents relating to rights and title to native lands in British Columbia open the government and Enbridge, a major Canadian pipeline and energy company, to untold actions even if the regulatory body reviewing the proposal approves the controversial project.

Legal action has already begun and sources say this is likely just the first of a raft of actions as the oil industry and government face opposition from several aboriginal groups.

“You’ve got aboriginal people in British Columbia who will bear all the risks of this, who don’t want to see so-called economic benefits on the back of their culture,” said Louise Mandell, a Vancouver-based lawyer who has argued numerous cases on behalf of native groups, including a landmark one in 1997 known as Delgamuukw that will have implications for the project.

“They won’t allow it, so there will be challenges in whichever direction the legal arguments take it, including legislated solutions.”

Many native groups say said they fear that construction and operation of the pipeline will threaten traditional ways of life and leave their territories and coastal waters at risk of oil spills. Enbridge has said risks of spills are low as it will use state-of-the-art technology and materials to build the line.

Much of the risk for Enbridge stems from the lack of treaties in British Columbia between most native bands, known as first nations, and the government, despite years of talks.

In the absence of such agreements, there is uncertainty over how aboriginal rights and title apply, raising thorny questions over whether the pipeline requires actual consent from dozens of first nations affected by the project.

“There will be huge litigation. Absolutely,” said Art Sterritt, executive director of Coastal First Nations, an alliance of 10 native groups on British Columbia’s northern and central coasts that has been vocal in opposing the project.

“There have been many court cases that have defined the landscape in British Columbia. Aboriginal title exists here. It’s not just some vague concept.”


Seeking to prevent lengthy delays as the oil industry seeks new buyers for its oil sands-derived crude, the government said in its March budget it will streamline rules for environmental approvals and put time limits on reviews.

The project took on a sense of urgency when U.S. President Barack Obama rejected TransCanada Corp’s (TRP.TO) $7 billion Keystone XL pipeline to Texas from Alberta earlier this year, cutting off a bigger market for oil sands crude.

Ottawa has yet to release the details of its changes, and it is not known it will try to limit the ability to challenge regulatory decisions for major projects in court.

The review for the 1,177 km (731-mile) Northern Gateway pipeline, which would carry 525,000 barrels a day to Kitimat, British Columbia is scheduled to wrap up by the end of 2013.

New time limits appear to aim to keep the regulatory panel to that schedule, which was stretched by about a year to accommodate more than 4,000 people who signed up to participate.

Some hearings have already been contentious. Last week, regulators suspended proceedings for 1-1/2 days after noisy protests in the community of Bella Bella, British Columbia.

Enbridge expects legal issues, especially given the size of the project, but declined to comment on any preparations.

“We recognize the potential is there, but we’re focused right now on the regulatory hearings, which are likely to go on for another 12 to 18 months,” spokesman Paul Stanway said.

The company has sought native support by offering a total of 10 percent interest in the project to first nations and up to C$1 billion in community development money.


Hearings began three months ago, but one legal challenge has already been launched - Gitxaala First Nation is challenging its exclusion from Transport Canada’s review of the tanker traffic that would accompany the pipeline.

The Gitxaala, through whose coastal territory the oil and condensate tankers would sail, claim the ministry is breaching its constitutional duty to consult.

What is expected of the government and project proponents as they consult with native communities for the approval process is likely to be a major factor if actions are launched, and some lawyers see it as a gray area.

Shawn Atleo, National Chief of the Assembly of First Nations, said earlier this year he believes Enbridge requires the consent of aboriginal people. Canadian Natural Resources Minister Joe Oliver has said only that the government has “a moral and constitutional obligation to consult”.

“If they abruptly cut the process short so it no longer has the full information exchange aspect to it - that includes squeezing information out of the company as well - then they are going to have a problem saying that this process was good enough to meet the duty to consult,” said Robert Janes, a lawyer who represents the Gitxaala.

According to the British Columbia Treaty Commission, the landmark Delgamuukw case at the Supreme Court of Canada confirmed that aboriginal title exists in the province, that the rights extend to the land and not just fishing, hunting and gathering on it, and that the government must consult with first nations and may have to compensate them.

That likely leaves aboriginal groups with numerous legal options if they want to oppose construction of the project, regardless of the government’s frequent assertions that Northern Gateway is in the national interest, Mandell said.

“There’s just been simply no proper attention paid in any of this to the framework for consultation and accommodation and so I think that the first nations alone or together will be able to mount multiple challenges,” Mandell said.

The legal uncertainty is one reason FirstEnergy Capital Corp analyst Steven Paget has not factored financial contributions or costs associated with Northern Gateway into his projections for Enbridge, despite the government’s efforts to speed approvals and the fact that it has committed shippers.

“I know things can change, and it’s not as if Enbridge is out of the game at all. But the pipeline just has a host of challenges,” Paget said

Editing by Peter Galloway

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