Major Project Appraisal: Evaluation of Impact Assessment Methodologies in the Regulatory Review ...

410 Pages·2015·3.12 MB·English

by  Joanie Wolfe

Major Project Appraisal: Evaluation of Impact
Assessment Methodologies in the Regulatory
Review Process for the Northern Gateway
Project
by
Sean Christopher Broadbent
M.B.A. (Business Economics), Oakland University, 2008
B.Sc., Oakland University, 2005
Thesis Submitted in Partial Fulfillment
of the Requirements for the Degree of
Doctor of Philosophy
in the
School of Resource and Environmental Management
Faculty of Environment
 Sean Christopher Broadbent 2014
SIMON FRASER UNIVERSITY
Summer 2014
All rights reserved.
However, in accordance with the Copyright Act of Canada, this work may
be reproduced, without authorization, under the conditions for
“Fair Dealing.” Therefore, limited reproduction of this work for the
purposes of private study, research, criticism, review and news reporting
is likely to be in accordance with the law, particularly if cited appropriately.
Approval
Name: Sean Christopher Broadbent
Degree: Doctor of Philosophy
Title of Thesis: Major Project Appraisal: Evaluation of Impact
Assessment Methodologies in the Regulatory Review
Process for the Northern Gateway Project
Examining Committee:
Chair: Sean Markey, Associate Professor
Thomas I. Gunton
Senior Supervisor
Professor
Murray Rutherford
Supervisor
Associate Professor
J. Chad Day
Supervisor
Emeritus Professor
Robin Gregory
Internal Examiner
Adjunct Professor
Institute for Resources, Environment, and Sustainability
University of British Columbia
Kevin Hanna
External Examiner
Associate Professor
Department of Geography
University of British Columbia

Date Defended: July 25, 2014
ii
Partial Copyright Licence

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Abstract
In Canada, there are six major oil pipeline projects either proposed or approved with an
in-service date before 2020. The federal government has a regulatory process to
evaluate the environmental, economic, and social impacts of proposed pipeline projects.
This dissertation examines existing methods that project applicants use to evaluate
pipeline impacts in the review process and recommends how current methodologies
could be improved. The study uses the Northern Gateway Project as a case study.
Decision-makers reviewing proposed pipeline projects must determine whether projects
satisfy legislative criteria under the National Energy Board Act and the Canadian
Environmental Assessment Act in order to approve the application. Therefore an
evaluative framework is necessary to assess the degree to which information in a
regulatory application satisfies legislative criteria. A framework consisting of three
criteria, namely significant effects, project need, and public interest, is developed. The
evaluation determines that there are many major weaknesses in the regulatory
application for the Northern Gateway Project concerning the quality of information, which
suggests that decision-makers do not have the best available information to adequately
assess the project as required under the National Energy Board Act and the Canadian
Environmental Assessment Act.
A multiple account benefit-cost analysis of the Northern Gateway Project is undertaken
to evaluate the capability of the method to provide decision-makers with requisite
information to address legislative criteria. The analysis concludes that the Northern
Gateway Project represents a net cost to society. The evaluation of multiple account
benefit-cost analysis with legislative criteria for project approval under the National
Energy Board Act and the Canadian Environmental Assessment Act suggests that the
method is suitable for evaluating major pipeline projects and is certainly an improvement
relative to existing methods in the federal review process.
There are six recommendations to improve the current approach to evaluating project
impacts in the federal review process. Recommendations include requiring multiple
account benefit-cost analysis in the regulatory application, developing explicit
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methodological guidelines for applicants, appointing independent experts to prepare
impact assessments, developing specific decision-making criteria, evaluating alternative
pipeline projects jointly, and improving stakeholder participation in the decision-making
process.
Keywords: environmental assessment; impact assessment; multiple account benefit-
cost analysis; cost-benefit analysis; pipelines; Northern Gateway Project
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Acknowledgements
This dissertation would not have been possible without the support of many people.
First, I would like to thank my senior supervisor Dr. Tom Gunton for his guidance and
mentorship during my graduate school experience. Tom’s intelligence, energy, and
devotion throughout this process were constant sources of inspiration. I would also like
to thank Dr. Murray Rutherford and Dr. Chad Day whose advice and insights made a
significant contribution to this dissertation; Murray and Chad, I enjoyed our
conversations and learned a lot from both of you. Dr. Robin Gregory and Dr. Kevin
Hanna, I am grateful for your participation in this process. I feel honoured to have
worked with the brilliant gentlemen that comprise my supervisory committee.
I would also like to give thanks to several individuals and groups for their assistance and
ideas. Dr. Andrew Cooper and Dr. Randall Peterman in REM, I am grateful for your
valuable feedback on this material. Mr. Robert LaBelle, Science Advisor with the Bureau
of Ocean Energy Management in the United States Department of the Interior, I
appreciate your review of parts of this dissertation. A big thanks to Dr. Marvin Shaffer,
Dr. Chris Joseph, as well as Professor Chris Tollefson and his team at the
Environmental Law Centre at the University of Victoria for their insights. Thanks to REM
staff (Iris, Elissa, Devan, May, and Laurence) for their support and REM professors,
particularly Dr. Wolfgang Haider and Dr. Ken Lertzman, for the invaluable learning
experience. I would also like to thank Coastal First Nations and Mitacs-Accelerate for
providing funding for research projects that informed material in this dissertation, as well
as Simon Fraser University for providing me with graduate scholarships and support.
Finally, I would like to thank friends and family for their support throughout this journey.
Thanks to my parents, brother, and sister for their love and encouragement over the last
five years. Gina and Lilian, your love and support played a huge role in the completion
of this dissertation - thank you. Last, but far from least, heartfelt thanks to Patrick, Reed,
Joe, Tommy, Dale, Aroldo, Eric, Doug, and Marty for your encouragement and
inspiration.

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Table of Contents
Approval .......................................................................................................................... ii
Partial Copyright Licence ............................................................................................... iii
Abstract .......................................................................................................................... iv
Acknowledgements ........................................................................................................ vi
Table of Contents .......................................................................................................... vii
List of Tables .................................................................................................................. xi
List of Figures............................................................................................................... xvii
List of Acronyms .......................................................................................................... xviii

1. Introduction .......................................................................................................... 1
1.1. Overview of the Pipeline System in Canada ........................................................... 1
1. 2. Growth in Pipeline Development............................................................................. 3
1.3. Costs and Benefits of Pipeline Projects .................................................................. 4
1.4. Regulatory Review of Pipeline Applications ............................................................ 6
1.5. Research Scope and Objectives............................................................................. 8
1.6. Structure of Dissertation ....................................................................................... 10

2. Regulatory Framework for Evaluating Major Pipeline Projects ....................... 13
2.1. Introduction .......................................................................................................... 13
2. 2. Joint Review Process ........................................................................................... 14
2.2.1. Project Approval Criteria ........................................................................... 19
2.2.1.1. National Energy Board Act.......................................................... 19
2.2.1.2. Canadian Environmental Assessment Act .................................. 21
2.2.2. Provinci al Role in Joint Review Process .................................................... 24
2.3. Joint Review Pr ocess for the Northern Gateway Project ....................................... 25
2.4. Trans port Canada TERMPOL Review Process .................................................... 28
2.5. Regulatory Guidance Documents for Proponents Preparing an Application ......... 32
2.5.1. National Energy Board .............................................................................. 32
2.5.2. Canadian Environmental Assessment Agency .......................................... 35
2.5.3. Transport Canada (TERMPOL) ................................................................. 37
2.5.4. Northern Gateway Project Joint Review Process ...................................... 39
2.6. Histor ical Project Approval Decisions ................................................................... 41
2.7. Discus sion ............................................................................................................ 44
2.8. Summary of the Regulatory Framework for Evaluating Major Pipeline
Projects ................................................................................................................ 49

3. Overview of the Northern Gateway Project and Regulatory Application ........ 50
3.1. Introduction .......................................................................................................... 50
3. 2. Key Project Components ...................................................................................... 50
3.2.1. Pipelines ................................................................................................... 50
3.2.2. Marine Terminal ........................................................................................ 52
3.2.3. Tanker Operations .................................................................................... 52
3.3. Projec t Costs ........................................................................................................ 56
3.4. Emplo yment ......................................................................................................... 57
3.5. Project Effects Assessed by Proponent ................................................................ 58

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3.6. Methods of Impact Assessment ............................................................................ 61
3.7. Structure of Regulatory Application ...................................................................... 64

4. Evidence Addressing Decision Criteria in the National Energy Board
Act ....................................................................................................................... 68
4. 1. Introduction .......................................................................................................... 68
4.2. Market Demand for Canadian Crude Oil in Asia ................................................... 68
4.3. Economic Benefits of the NGP ............................................................................. 71
4.3.1. Benefit Analysis of Exporting Crude to Asia .............................................. 71
4.3.2. Direct, Indirect, and Induced Economic Impacts ........................................ 79
4.3.3. Public Interest and Net Social Benefit ....................................................... 87
4.4. Summ ary of Evidence .......................................................................................... 94

5. Evaluation of NGP Regulatory Application Under the National Energy
Board Act ............................................................................................................ 96
5. 1. Introduction .......................................................................................................... 96
5.2. Methods and Data ................................................................................................ 96
5.3. Evaluation of NGP Need and Public Interest ........................................................ 99
5.3.1. Project Need ............................................................................................. 99
5.3.2. Public Interest ......................................................................................... 108
5.4. Discus sion .......................................................................................................... 127
5.5. Limita tions .......................................................................................................... 128

6. Evidence Addressing Decision Criteria in the Canadian Environmental
Assessment Act ............................................................................................... 130
6. 1. Introduction ........................................................................................................ 130
6.2. Tanker Spills....................................................................................................... 131
6.2.1. Likelihood of Spill Event .......................................................................... 131
6.2.2. Magnitude of Effects ............................................................................... 139
6.3. Termi nal Spills .................................................................................................... 149
6.3.1. Likelihood of Spill Event .......................................................................... 149
6.3.2. Magnitude of Effects ............................................................................... 153
6.4. Pipelin e Spills ..................................................................................................... 156
6.4.1. Likelihood of Spill Event .......................................................................... 156
6.4.2. Magnitude of Effects ............................................................................... 162
6.5. Summ ary of Evidence ........................................................................................ 165

7. Evaluation of the NGP Application Under the Canadian Environmental
Assessment Act ............................................................................................... 168
7. 1. Introduction ........................................................................................................ 168
7.2. Methods and Data .............................................................................................. 168
7.3. Overview of Risk Assessment ............................................................................ 171
7.4. Good Practices for Risk Assessment .................................................................. 175
7.5. Evaluation of NGP Risk Assessments ................................................................ 187
7.5.1. Transparency .......................................................................................... 188
7.5.2. Reproducibility ........................................................................................ 194
7.5.3. Clarity ..................................................................................................... 195
7.5.4. Reasonableness ..................................................................................... 201

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7.5.5. Reliability ................................................................................................ 209
7.5.6. Validity .................................................................................................... 212
7.5.7. Stakeholder Participation ........................................................................ 216
7.6. Discus sion .......................................................................................................... 221
7.7. Limita tions .......................................................................................................... 225

8. Application of Oil Spill Risk Analysis Model to the Northern Gateway
Project ............................................................................................................... 227
8. 1. Introduction ........................................................................................................ 227
8.2. Methods and Data .............................................................................................. 228
8.3. Overview of the Oil Spill Risk Analysis Model ..................................................... 228
8.4. Spill Risk Estimates for NGP Tanker Operations ................................................ 230
8.4.1. Annual Spill Risk ..................................................................................... 233
8.4.2. Spill Risk Over a 30-Year Period ............................................................. 234
8.4.3. Spill Risk Over a 50-Year Period ............................................................. 236
8.5. Spill R isk Estimates for NGP Pipeline Operations .............................................. 239
8.5.1. Spill Risk Over a 30- and 50-Year Period ................................................ 239
8.6. Summary ............................................................................................................ 242
8.7. Evalua tion of OSRA Model with Good Practice Criteria for Risk Assessment ..... 243
8.7.1. Transparency .......................................................................................... 244
8.7.2. Reproducibility ........................................................................................ 244
8.7.3. Clarity ..................................................................................................... 245
8.7.4. Reasonableness ..................................................................................... 246
8.7.5. Reliability ................................................................................................ 248
8.7.6. Validity .................................................................................................... 249
8.7.7. Stakeholder Participation ........................................................................ 250
8.8. Discus sion .......................................................................................................... 250
8.8.1. Comparison with Spill Risk Estimates in the NGP Regulatory
Application .............................................................................................. 251

9. Multiple Account Benefit-Cost Analysis of the Northern Gateway
Project ............................................................................................................... 258
9. 1. Introduction ........................................................................................................ 258
9.2. Overview of Multiple Account Benefit-Cost Analysis ........................................... 259
9.3. Base Case Analysis ............................................................................................ 262
9.3.1. Financial Account .................................................................................... 264
9.3.1.1. Project Development ................................................................ 265
9.3.1.2. Surplus Capacity ...................................................................... 268
9.3.1.3. Oil Price Uplift ........................................................................... 276
9.3.2. Econom ic Activity Account ...................................................................... 280
9.3.2.1. Employment Benefits ................................................................ 281
9.3.2.2. Government Revenue ............................................................... 282
9.3.3. Environ mental Account ........................................................................... 284
9.3.3.1. Air Pollution .............................................................................. 285
9.3.3.2. Greenhouse Gas Emissions ..................................................... 291
9.3.3.3. Ecosystem Goods and Services ............................................... 296
9.3.3.4. Operational Spills ..................................................................... 301
9.3.3.4.1. Tanker Spills ........................................................... 301

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9.3.3.4.2. Pipeline Spills .......................................................... 304
9.3.3.5. Passive Use Damages ............................................................. 307
9.3.4. Sociocultural Accou nt .............................................................................. 313
9.3.4.1. Conflict and Opposition ............................................................. 313
9.3.4.2. Reduction in Subsistence Activities .......................................... 315
9.3.4.3. Psychological Impacts to Spill-Affected Communities ............... 317
9.3.5. Summa ry ................................................................................................ 318
9.4. Distributional Im pact Analysis ............................................................................. 320
9.4.1. Oil Transportation Sector ........................................................................ 323
9.4.2. Federal, Provincial, and Local Governments ........................................... 325
9.4.3. Aboriginal Groups ................................................................................... 329
9.4.4. Households ............................................................................................. 332
9.4.5. Outside Canada ...................................................................................... 334
9.4.6. Summary ................................................................................................ 335
9.5. Evalua tion of Multiple Account Benefit-Cost Analysis Methodology .................... 335
9.5.1. Significant Effects ................................................................................... 336
9.5.2. Project Need ........................................................................................... 339
9.5.3. Public Interest ......................................................................................... 340
9.6. Discus sion .......................................................................................................... 345

10. Conclusion ........................................................................................................ 349
10.1.Recommendations.............................................................................................. 352
10.1.1.Require MABCA in the Regulatory Application ........................................ 352
10.1.2.Develop Explicit Guidelines for Proponents Preparing an Application ..... 353
10.1.3. Appoint Independent Experts to Prepare Impact Assessments ............... 355
10.1.4. Develop and Employ Specific Decision-making Criteria .......................... 356
10.1.5. Evaluate Alternative Projects Jointly ....................................................... 357
10.1.6. Improve Stakeholder Involvement in the Decision-making Process ......... 357
10.2.Future Research ................................................................................................. 359

References ................................................................................................................. 362

Appendices ................................................................................................................ 386
Appendix A. Statement of Co-authorship................................................................ 387
Appendix B. Comparison of Multiple Account Benefit-Cost Analysis with
Wright Mansell Cost-Benefit Analysis ................................................ 388

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