Friday, January 24, 2014

First Nations and the Development of our Energy Resources: Some Principles

1% Resource Revenue Royalty Uses
This post touches on the duty to consult, the impact of recent court decisions on the cumulative effect of energy resource development on claims of First Nations, the linkage of First Nations claims under our Constitution to the harm that might happen to their rights under global warming, developments in the Supreme Court that hold out fresh hope for a new way of looking at the problem, and two suggested principles that could radically change the way the issues are handled: the use by the Supreme Court of the Precautionary Principle now used by the European Union, and the creation of a new Impact Envelope to help define who gets what share of a proposed total revenue royalty of 1% on energy resources.

Duty to Consult:

The Supreme Court of Canada has held that the honour of the Crown is at stake in discussions with First Nations, and that requires that the Crown act with good faith to provide meaningful consultation appropriate for the circumstances.

Consultation is different from accommodation. If there is a strong prima facie case for the existence of a First Nations claim, and the proposed decision by the government will adversely affect that claim in a significant way, and if steps must be taken to minimize irreparable harm, then accomodation of the interests of First Nations is called for.

Pending final proof of the claim of a First Nation, there is no veto over what can be done with land. The consultation process does not provide such a veto. However, the Crown has to balance the interest of the First Nations with the public interest that is served by the government’s proposal, so that the First Nations’ interest is not prejudiced.

Cumulative Effects of Government Action:

In 2012, in the West Moberley decision, the Supreme Court also agreed that future, cumulative effects of government actions were valid considerations in court actions:

The West Moberly decision set an important precedent confirming the need to address cumulative effects of a number of projects on treaty and Aboriginal rights. In the West Moberly case, the issue was the cumulative impact of various development projects in the region on the shrinking caribou population.

The Court also found that nothing in the Carrier Sekani decision says that future impacts should be disregarded. In the West Moberly decision, the impact of full blown mining (which was the next step after the sampling process being contested) was within the scope of the duty to consult about impacts on treaty rights.

Here is another take on the cumulative effects issue in West Moberley:

As noted in the May 2011 update, the Court of Appeal's divided decision leaves some uncertainty with respect to the scope of the duty to consult and accommodate as it relates to past wrongs, cumulative effects and future development. However, based on the approach favoured by the B.C. Court of Appeal in West Moberly, the law provides that consultation must include a consideration of cumulative effects extending beyond the consequences of the permits at issue, but that accommodation should relate solely to the potential impacts flowing from the project or application at issue. While past effects may be relevant, there must be a causative link between the proposed conduct and the alleged impacts in question.

The Beaver Lake Cree Nation decision in 2013 is important regarding the cumulative effect of governmental actions:

A small First Nations band in Alberta has racked up a big win against the energy industry, clearing the way for a trial over whether its treaty rights are being infringed upon as industrial development such as the oil sands expands.

The Beaver Lake Cree Nation argues the so-called cumulative effects of oil sands and other industries such as mining and forestry violated their treaty rights. The provincial and federal governments grant permits which allow for development. Beaver Lake Cree Nation launched a legal battle five years ago and now Edmonton and Ottawa have lost their attempt to have it tossed out.

The cumulative effects argument is a touchy topic in Alberta and if the Beaver Lake Cree Nation comes out on top, it could force the governments to revamp the way they review and approve industrial projects – namely the oil sands. In short, it could put a damper on a key driver of the Canadian economy.

“This case is about limiting the development of the tar sands,” lawyer Drew Mildon, who represents Beaver Lake Cree Nation, said in an interview.

Energy, mining and forestry projects are typically judged case-by-case, but Beaver Lake Cree Nation argues the overall effect of numerous projects hinders their traditional way of life. The Beaver Lake Cree Nation believes its ability to hunt, fish, and trap have been dented because of roughly 300 projects in which about 19,000 permits have been granted, according to a judgement from the Court of Appeal of Alberta delivered April 30...

The judgement means the case can go to trial, which Mr. Mildon expects to begin winding its way through the legal system this fall. He believes the appeal judgement demonstrates the Beaver Lake Cree Nation has a viable case...

A good discussion of the Beaver Lake cast is found in desmog’s posting.

Consultation must address the cumulative effects of projects:

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?...

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...

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.

The extent of the cumulative effects issue on First Nations consultations and on their compensation claims is as of now still uncertain:

The SCC denied leave to appeal in the West Moberly case, so issues of past projects and cumulative effects remain unresolved. But the notion that cumulative effects warrant some consideration is becoming generally accepted.

Who must consult on cumulative effects?

The duty to consult on cumulative effects clearly resides with the government:

The Court’s comment suggests a recognition that project-specific consultations between proponents and First Nations are not the appropriate forum for consultations on cumulative effects, and that governments must be directly involved in the latter consultations.

Linkage between First Nations claims and Environmental Issues:

How do these decisions affect possible adverse impacts of expansion of the Alberta oil sands (and pipelines to transport the tar sands)?

Some critics see the rights of First Nations and environmental concerns as linked:

Critics of the Line 9 project say the pipeline should not be approved to ship bitumen because of the likelihood of a rupture and the adverse impacts further expansion of the tar sands will have on climate change and the people and environment of northern Alberta.

However, it is not at all clear from court decisions to date whether the two issues of the rights of First Nations and environmental degradation (including the impact of global warming over the medium- to long-term) will be joined.

The Supreme Court has recently brought down a decision that lower courts have a duty to consider issues even if earlier Supreme Court decisions appear to fly in the face of such investigations – the striking down of the prostitution laws clearly lays out the new Supreme Court approach of planned obsolescence in Canadian law:

If new legal issues are raised, or if there is a change in the circumstances or evidence that “fundamentally shifts the parameters of the debate,” trial judges may revisit constitutional precedents, Chief Justice Beverley McLachlin wrote. And the trial judge’s findings of changes in social norms will carry great weight with higher courts.

In that case, the Supreme Court viewed with favour the lower court looking at developments in other countries in assessing whether there were changes in social norms that would warrant a change in law.

And that brings us to the European Union’s embrace of the precautionary principle, and its possible application to the First Nations consultation and compensation issue.

The Application in Canada by the Supreme Court of the Precautionary Principle:

Jeremy Rifkin, in The European Dream – How Europe’s Vision of the Future is Quietly Eclipsing the American Dream, describes the development in the European Union of a major change in the way in which legislative bodies there deal with findings of science. The treatment now used differs from that used in Canada and the USA.

There is a strong case to be made that the precautionary principle should be incorporated in the approach of the federal government of Canada to the cumulative effects of global warming and environmental degradation on the rights of First Nations.

Rifkin describes the new litmus test in the EU:

The European Union has already institutionalized a litmus test that cuts to the core of the differences that separate the new European view of shared risks and vulnerabilities from the older American view of unlimited personal opportunities and individual prowess.

It’s called “the precautionary principle,” and it has become the centerpiece of EU regulatory policy governing science and technology in a globalizing world. Most European political elites, and the public at large, favor it. Far fewer American politicians and citizens would likely countenance it...

The key term ... is “uncertainty.”

When there is sufficient evidence to suggest a potential deleterious impact but not enough evidence to know for sure, the precautionary principle kicks in, allowing regulatory authorities to err on the side of safety by either suspending the activity altogether, employing alternative scenarios,  monitoring the activity to assess causal impacts, or creating experimental protocols to better understand its effects...

In the Beaver Lake case, the court had to decide whether to revisit past actions in determining cumulative effects on the rights of First Nations. Must courts look back at earlier decisions, and in effect retry past ones? It does not seem so:

Significantly, over 19,000 tenures and approvals (authorizations) alleged to have contributed to the cumulative effects are, as a result of the decision, no longer subject to possible revocation.

The result of such a decision is devastating. It is impractical to revisit past actions each and every time a court action is heard, but to ignore the cumulative effect on our environment of past actions is equally impractical. It is a bit like trying to prevent a camel’s back from being broken when individual straws are loaded on to it, by measuring the weight of every straw, but not adding the totals together.

How can you consider the cumulative impact on a camel’s back of straws if you only consider one straw at a time?

Part of the problem is our current practice in north America of applying science to nebulous sets of facts. We look for precision; we seek to give weight to each single factor; and we need certainty.

The European Union citizens have taken a major stride away from the need for scientific certainty where the seriousness of the consequences warrants it. They have adopted a social norm that our courts could look to in assessing the weight of individual facts in the debate about cumulative effects and First Nations rights.

This is from Rifkin:

The precautionary principle is designed to allow government authorities to respond pre-emptively, as well as after damage is inflicted, with a lower threshold of scientific certainty than has normally been the rule of thumb in the past. “Scientific certainty” has been tempered by the notion of “reasonable grounds for concern.”

The consideration of the cumulative impacts of our tar sands development, pipeline development, rail transport of oil and gas and other energy issues on the environment, on global warming (which will impact our environment) and especially on the current and future rights of First Nations as enshrined in our Constitution and fleshed out in our court decisions, surely calls for the adoption of the precautionary principle in order for our governments to respond pre-emptively to the threats posed, rather than retroactively.

First Nations Compensation: The Impact Envelope Proposal

The second major problem facing the development of Canada’s energy resources, is the problem of equity: who gets what share of the extraction, transportation and sale of the oil and gas reserves that belong to the citizens of Canada, and are leased to businesses to develop?

This reduces to two questions: What is to be shared, and Who is to get it?

Recently the CEO of Transcanada made the startling statement that his company was not going to talk about any share in the proceeds of extracting and transporting gas eastwards, because it was too difficult to ascertain just which First Nations bands are or might be affected. So he was going to offer jobs and other economic inducements because of this administrative burden:

The dozens of First Nations along the route of TransCanada Corp.’s Energy East pipeline should not expect offers for equity stakes in the $12-billion project as the company seeks approval, although a host of other economic benefits would accrue to the communities, TransCanada’s chief executive officer said.

The sheer size of the Energy East pipeline, 4,500 kilometres to New Brunswick from Alberta, and differences in degree of impact among the native communities along the route make that option too complicated for the project, which is aimed at moving oil-sands-derived crude to Eastern Canadian and export markets, TransCanada’s Russ Girling said in a year-end interview.

In contrast, Enbridge offered a 10% equity stake in its Northern Gateway pipeline for First Nations.

Leaving aside the impact on any duty to consult that such a pre-decision regarding equity participation will have on TransCanada’s regulatory hearings, we have another view on what kind of benefits should be shared with First Nations.

Chief Sharlene Gay has called for a sharing of the rewards from gas transportation over her band’s land:

The band wants a portion of shale gas royalties – echoing a condition Ms. Clark set for allowing new pipelines to take Alberta oil to the coast. The Premier has insisted that B.C. should get a greater share of the benefits because it carries most of the environmental risk.

And in the UK, PM Cameron has proposed a royalty of 1% on all fracking gas revenues to go to local communities as their share of the benefits of developing this citizens’s resource:

The message from Downing Street could not be clearer: David Cameron announced on Sunday the government would be going "all out" for fracking, in an effort to bring to the UK the shale gas revolution that has sent gas prices plummeting in the US, and transformed huge swathes of its landscape.

Cameron's plans involve a giveaway of millions to communities that allow fracking, through a scheme whereby councils will retain all of the business rates liable on the sites, and payments to local communities from fracking companies of £100,000 upfront and 1% of revenues thereafter.

We have seen a welcome move towards sharing the profits of pipelines with First Nations in return for their approval of and support for transportation over lands they claim rights in.

However, if one considers the problem of the cumulative effect of global warming (caused by the use of fossil fuels), and adverse environmental impacts of tar sands and pipeline and rail car developments, it is difficult to answer exactly who should get what.

Why should a tar sands company develop the tar sands under licence from the people of Canada (through their government) and transport it through a pipeline developed in a similar way, without sharing some of the upside benefits for doing so? And what if a tanker carrying oil, or a rail car carrying frack gas or oil, or a pipeline, comes to grief and results in damage to environment, that impacts not only the First Nations right to hunt etc., but also others living along the routes?

If the insurance policies governing such events are not enough to compensate for the damages caused to all current and future  persons in the impact areas (and such policies are limited in the dollars they will pay out), then who bears the cost?

A far better proposal would be to do two things (apart from the usual provision of jobs and community development funds):

First, define the Impact Envelope – that is, the areas that might be affected by such damage from all energy projects.

Second, require participation in all revenues from both the extraction and transportation of energy resources to be paid as an overriding royalty of (say) 1% to those in the Impact Envelope.

The Impact Envelope will be the geographic area that is or might be impacted by adverse events in the extraction and transportation of energy resources. It will be a large area, and would increase as new areas are developed for energy extraction and transportation.

Those living in the Impact Envelope who would be entitled to compensation for the development of the energy resources would be split into two groups: the Primary Impact group and the Secondary Impact group. 

The Primary Impact group would be those directly and clearly impacted by the granting of approvals and afterwards by any damages directly sustained through an incident. This would be the stakeholders that our laws currently consider as entitled to some compensation.

The Secondary Impact group would be others who might be impacted in the future by such developments (those owning businesses on the coast, for example, now in existence or to be built in future, who would be harmed if a tanker sank and oil spilled on the beach; and those who might be impacted in future by cumulative effects of this project and all other projects to be developed in the Impact Envelope.

So the revenue royalty of 1% imposed by the federal government on the extraction, processing and transportation of oil and gas would be shared 50/50 between the Primary and Secondary Impact groups.

The 50% payable to the Primary Impact group would be paid to them from day one due to the need to obtain a social licence from them because the energy project directly impacted or traversed their land claims.  This would be the group that the NEB defines as those who have to be consulted under the duty to consult that the federal government has.

The other 50% of royalties payable to the Secondary Impact groups would be used to fund the ability of all those in the Impact Envelope to be trained and educated so as to obtain jobs that provide living wages, and also those who might in future suffer harm due to future cumulative adverse effects.  Those entitled to such payments would include all those in the first group (if they suffer further losses through cumulative adverse effects), as well as other First Nations bands living in or with claims to rights in the large Impact Envelope.  So, a band living in southern B.C. would be entitled to some portion of these royalties even if the Alberta tar sands project being extracted was not on their land, nor any pipeline transporting it to the border.

A portion of the royalties to be paid to the Secondary Impact group should be invested in a Future Fund (similar to the fund built up by Norway from its oil revenues), to be used in future years should the stakeholders in the Primary and Secondary Impact groups face additional harm resulting from the future effects of global warming.

This diagram shows the various uses of the 1% resources revenue royalty, half of which goes to Primary Impact stakeholders, and half to Secondary Impact stakeholders.

Food for thought.

1 comment :

  1. As you mention 'global warming' I think it's OK to link to this post from Bookworm Room. But will anyone here read it?


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