An inside look at the bitter legal battle over cumulative impacts of oil sands activity

Unclear rules mean neither energy companies nor aboriginal groups understand where cumulative effects fit in the consultation process

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September 16, 2013

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In May 2008, the chief of a small First Nation near Lac La Biche filed a statement of claim against the governments of Alberta and Canada over what he termed the adverse cumulative effects of oil sands development in the area.

At the time, Chief Alphonse Lameman of the 700-person Beaver Lake Cree Nation likely didn’t understand how the case could change the way oil sands producers consult with aboriginals on development. Lameman’s statement of claim sought to have some 19,000 development permits in the area revoked and sought compensation from the provincial and federal governments for the loss of hunting, fishing and trapping land around the First Nation’s reserve, which the claim says should have been protected under Treaty 6, signed on September 9, 1876.

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The cumulative effects of oil sands development have strained relationships with First Nations

Counsel for the provincial and federal governments tried to have the case thrown out. But a decision from the Court of Appeal of Alberta this past May has permitted the Beaver Lake Cree Nation’s case to go to trial. The trial will not result in the 19,000 development permits in the area being revoked, but it will determine and define how companies should consult with aboriginal groups on the cumulative effects of oil sands development in the future (and whether or not the respective governments need to pay the First Nation for damages to its traditional lands).

Cumulative effects management is becoming an increasingly prominent issue in aboriginal consultation: the provincial government has drafted new legislation and new frameworks specifically to deal with the issue. Oil sands developers, too, are finding it popping up more frequently. Lawson Lundell LLP partner John Olynyk says, “In a lot of the proceedings that we’re involved in, we’re seeing cumulative effects and cumulative impacts on treaty and aboriginal rights being raised as a concern in part because communities feel there is no other good forum in which to raise those concerns.” But how are company executives, who normally consult with aboriginals on a project-by-project basis, supposed to manage consultations that take into account the projects of their competitors and peers?

Last June, the joint review panel for the federal Ministry of the Environment and the Energy, Resources and Conservation Board issued its environmental report on Shell Canada Ltd.’s application to expand its Jackpine oil sands mine, which sits 70 kilometers north of Fort McMurray. While the panel ultimately approved the company’s application to expand bitumen production at the mine by 130,000 barrels per day, it did so with some strict provisos on the effects of the project in the area.

“Under the new regulations, each of these companies will have to address cumulative effects in their [environmental impact assessments].”

The report stated that the Mikisew Cree First Nation had no issues with Shell’s consultation efforts with respect to the mine expansion, but it did express concern “that the governments of Alberta and Canada were failing to uphold the honor of the Crown in their approach to the assessment and management of cumulative effects in the Lower Athabasca Region.” The aboriginal group also said that neither government was “meaningfully consulting about cumulative effects” to the nation’s treaty and aboriginal rights.

But Shell’s approach to cumulative effects management didn’t escape the report unscathed, either. The panel found that the regional effects on aboriginal traditional land use in the area were not being fully addressed: “It is apparent to the panel that the mitigations that are proposed by individual project proponents to mitigate effects on [traditional land use] are not entirely effective.” The report went on to say that it’s unclear whether or not the reclaimed landscape would ever be suitable to traditional land use once all development ceases.

Altogether, the report makes clear that both the government and the individual company – in this case, Shell – have a duty to consult on and manage the development’s cumulative effects on the environment and traditional land use. Understanding to whom belong which responsibilities, however, is less clear.

Many oil sands producers, including Shell, have participated in cumulative effects consultation through the Fort McMurray-based Cumulative Effects Management Association, which studies environmental issues in northeastern Alberta and makes policy recommendations to the Alberta government. CEMA’s 50-plus members include major producers, like Canada Natural Resources Ltd. and Suncor Energy Inc., and small producers like BlackPearl Resources Inc. More importantly, the association includes First Nations, Métis and non-governmental organizations like Ducks Unlimited Canada. The organization is divided into four caucuses (one for companies, one for aboriginal groups, one for NGOs and one for government ministries), each of which has equal voting power on the policy recommendations CEMA makes to the province.

Until recently, oil sands producers have used involvement in CEMA and the Joint Oil Sands Monitoring initiatives as a forum to manage their cumulative effects consultations. Now, CEMA executive director Glen Semenchuk says, the provincial government is changing the rules. “Under the new regulations, each of these companies has to address cumulative effects in their [environmental impact assessments],” Semenchuk says. “Before now, they were able to say, ‘Our membership in CEMA is enough to cover that off.’ Now, they actually have to sit down and look at their project and say, ‘What is this going to add to what is out there right now?’ ” The net effect is that producers will now need to include some consideration of emissions at neighboring projects, including the projects of their competitors, in their applications for development.

To further complicate matters, the Alberta government unveiled a new management framework in 2012, called the Lower Athabasca Regional Plan (LARP), which was designed to address the issue of cumulative effects in the oil sands. Semenchuk says that much of the regional plan was compiled from CEMA recommendations and sets limits on total air, water and land disturbances. It also serves as a precedent for the six other regional plans currently being compiled by the Albertan ministry of Environment and Sustainable Resource Development. Jessica Potter of ESRD says under the plan, “Companies need to report on air emissions and water emissions – site specific emissions coming from one specific site,” which is nothing new, but “LARP is attempting to bring all of these effects together and set regional limits.”

“The governments of Alberta and Canada were failing to uphold the honor of the Crown in their approach to the assessment and management of cumulative effects in the Lower Athabasca Region.”

Potter also says those limits will force the government to make “hard decisions,” adding, “That could mean we’ll need to put additional restrictions on development.” Asked whether or not that meant some smaller projects would be approved and larger projects would be denied, the government’s answer was unclear. “I don’t necessarily see that happening,” Potter says. “We all have a responsibility and it’s up to all of us together to find a solution.”

Part of the frustration for oil sands operators right now is they are negotiating amid major changes to the provincial regulatory regime. Norton Rose Fulbright Canada LLP partner Ray Chartier says not only is the provincial government in the beginning stages of implementing LARP, it has also reorganized the province’s energy regulator and is making substantive changes to existing aboriginal consultation guidelines. The province, for example, is opening a new consultation office, designed to centralize all aboriginal consultation. It’s still not clear to Chartier how LARP and the new consultation guidelines will work together. It’s also uncertain to what extent the province will directly consult with aboriginal groups on cumulative effects or delegate, in certain cases, that duty to energy companies. “In the interim,” Chartier says, “there are various cases out there and active litigation that are raising issues of cumulative effects.”

That includes the Fort McKay First Nation’s formal objection to the Dover development, a joint venture project between Athabasca Oil Corp. and PetroChina Co. Ltd. The proponents were recently granted permisison to build a 250,000 bpd steam-assisted gravity drainage plant in five stages near the aboriginal group’s reserve, 100 kilometers north of Fort McMurray. The nation’s objection is partly project specific, that portions of the development would come within one kilometer of the reserve, and partly regional. Chief Jim Boucher has described the development in question as one of the last undeveloped areas remaining in the First Nation’s traditional territory. Official statements from the aboriginal group describe an aggregate loss of traditional land as a result of industrial development, and the group has said that the project as it’s currently proposed would interfere with its ability to hunt, trap and fish – in other words, the exercise of its treaty rights.

Both the Fort McKay and the Beaver Lake cases are expected to set the tone for First Nations consultation, and both put a heavy emphasis on the cumulative effects of oil sands development.

It’s still unclear whether or not either case will be successful in stopping proposed developments near the Fort McKay and Beaver Lake reserves (Fort McKay said it will appeal the Dover approvals). In the Beaver Lake case, Olynyk says, it has taken the First Nation five years to win the right to a trial. He expects the case to drag on for years, and thinks it will likely be appealed to higher and higher courts. In the meantime, development frameworks and guidelines for consulting on cumulative effects are being written and rewritten by the provincial government. “It remains to be seen how [these initiatives] will all work together,” Chartier says. “There’s a lot of uncertainty out there to start with, and once you start changing the policies, it makes it even more difficult.”

“There’s a lot of uncertainty out there to start with, and once you start changing the polices, it makes it even more difficult.”

At this point, the provincial government has indicated that frameworks like LARP will not dictate how individual companies should consult with First Nations groups on cumulative effects management. Potter says that ESRD will consult on cumulative effects itself. But, at the same time, case law and environmental impact assessments like that of Shell’s Jackpine mine are forcing oil sands producers to address the issue. The problem is that companies are still unclear on how that should be done. In the coming years, Chartier says, the picture will become clearer. But for the moment, “It’s difficult to see where the pieces will fall.”

 

September 16, 4:35 p.m. : An earlier version of this article incorrectly referred to Shell’s approved facility. The correct name is the Jackpine Mine. Alberta Oil regrets the error.

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Comments

  • Mike Rosen

    “…Shell Canada Ltd.’s application
    to expand its Jackfish oil sands mine….”

    Should be Jackpine oil sands mine, not Jackfish. Jackfish is a Devon SAGD operation.

    Otherwise a very good article.