Court ruling demonstrates oilsands review process brokenJudge rules ERCB not required to review Shell’s failure to follow through on pollution limits

Aug. 28, 2009

Calgary, Alberta - An Alberta court decision that permits the Energy Resource Conservation Board (ERCB) to ignore Royal Dutch Shell's breach of written agreements made to obtain regulatory approval signals a likely end to collaborative approaches in the oilsands.  Yesterday afternoon, Ecojustice, on behalf of the Pembina Institute and the Toxics Watch Society of Alberta, was denied Leave to Appeal the ERCB's decision to uphold the approvals for two of Shell oilsands projects, even though the ERCB acknowledged Shell had broken written agreements to reduce greenhouse gas pollution.

"The court's decision not to hear this case means that stakeholders and regulators should be reluctant to accept voluntary environmental commitments made by oilsands companies and instead call for clear legal standards and enforceable environmental laws. The ERCB needs to ensure companies are making commitments that will clean up their environmental record, not just their image," said Karin Buss, counsel to Ecojustice.

Shell, through its environmental promises involving the Jackpine and Muskeg River oilsands mining projects, had positioned itself as an environmental leader. Prior to the approval of both projects, Shell had committed to setting greenhouse gas pollution reduction targets to bring its pollution in line with alternatives available in North America. The reductions would have trimmed 900,000 tonnes of carbon dioxide per year - the equivalent of taking 200,000 cars off the road in Canada. As a result of the written agreements, which were submitted to government regulators, the Pembina Institute and the Toxics Watch Society of Alberta withdrew their opposition to the projects.

"We participated in the ERCB review process in good faith and had assumed the same from Shell," said Dan Woynillowicz, a spokesperson for the Pembina Institute. "The decision by the court to not hear this appeal is another blow to the credibility of Canada and Alberta's management of oilsands development. As it stands Shell broke its word to stakeholders, and the ERCB let it happen instead of standing up to protect the interests of Albertans."

"This is a critical case to any stakeholder who has participated in any alternative mediation process," said Myles Kitagawa, Associate Director of the Toxics Watch Society of Alberta.  "By stating that Shell is not accountable for its agreements, the ERCB is sending a chilling signal that companies can simply say anything to satisfy their stakeholders, then ignore them once they have their approvals in hand."

In approving Shell's projects, the Joint Review Panel struck by the ERCB and the Government of Canada explicitly noted that they would review Shell's approval in the event that the company failed to fulfill commitments that had been presented as evidence. However, the ERCB recently denied a request for a follow-up hearing.

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For more information see attached backgrounder or contact:

Karin Buss
Counsel to Ecojustice
(780) 412-2704

Dan Woynillowicz
Director of Strategy
The Pembina Institute
(403) 888-6272

Myles Kitagawa
Associate Director
Toxics Watch Society of Alberta
(780) 439-1912 / (780) 907-1231

High resolution photographs of oilsands impacts are available at
www.pembina.org/oil-sands

BACKGROUNDER

Backgrounder: Questions & Answers

1. In light of Shell's decision to break these commitments, what have the Pembina Institute and Toxics Watch Society of Alberta done?

OSEC has gone to significant lengths to resolve this matter bilaterally with Shell through written correspondence and face-to-face meetings between November 2007 and January 2009. Despite these efforts, Shell has made it clear that it does not intend to fulfill the commitments.

"The Joint Panel believes that when a company makes commitments of this nature, it has satisfied itself that these activities will benefit the Project, the stakeholders, and the public, and the Joint Panel takes these commitments into account when arriving at its decision." — EUB Decision 2006-128, p. 90

In the decision reports for both the Jackpine Mine and the Muskeg River Mine Expansion, the respective Joint Review Panels clearly stated that they expect Shell to adhere to all commitments made during the consultation process, in the application and at the public hearing. In addition, the Joint Review Panels noted that Shell should advise the EUB (now the ERCB) if, for whatever reason, it could not fulfill a commitment. In the event that Shell failed to fulfill a commitment, the Joint Review Panels indicated that the affected parties have the right to request a review of the original approval.

The Pembina Institute and Toxics Watch exercised this right, with counsel from Ecojustice, by requesting that the ERCB and the Government of Canada reconvene Joint Panel public hearings to re-evaluate the approvals it granted Shell for these projects. Both the ERCB and Government of Canada denied this request.

As a result, on behalf of the Pembina Institute and Toxics Watch, Ecojustice sought leave to appeal the ERCB's decision not to reconvene public hearings in the Alberta Court of Appeal. On August 27, 2009 this leave to appeal was denied.

There is no further, formal recourse that the Pembina Institute and Toxics Watch can pursue.

2. What were Shell's climate change commitments to OSEC for the Jackpine Mine and Muskeg River Mine Expansion?

The Oilsands Environmental Coalition (OSEC), of which the Pembina Institute and Toxics Watch are members, and Shell reached bilateral agreements in 2003 and 2006, respectively, that included commitments to reduce greenhouse gas (GHG) pollution from the Jackpine Mine and Muskeg River Mine Expansion oilsands projects. Shell now refers to these projects collectively as "Expansion 1."

For the Jackpine Mine project Shell committed that, at a minimum, it would reduce emissions to better than the most likely commercial alternative (to producing oil from oilsands) on a full cycle basis. A process for establishing the specific target is set out in the agreement with an expected completion date of the second quarter of 2006.

For the Muskeg River Mine Expansion, Shell similarly committed to setting an emission reduction target or goal for new facilities (on a full cycle basis) that is better than the most likely commercial supply alternative at start-up, with a GHG commitment and management plan to be established by 2007.

In written correspondence and face-to-face meetings, Shell has indicated that it does not intend to quantify a reduction target; rather it intends to comply with future federal GHG regulatory requirements as outlined in the Turning the Corner climate change plan. Shell believes that compliance with these regulations will result in sufficient GHG reductions to meet the "spirit" of the commitments to OSEC.

However, not only do these regulations not yet exist, but also their future is uncertain because the Government of Canada is reviewing its approach in light of developments on climate change and GHG regulations in the United States. Furthermore, based on our analysis, even if Shell were to comply with the reduction requirements envisioned in Turning the Corner, the GHG intensity of these projects would remain higher than the "most likely commercial alternative" and therefore Shell would fail to fulfill its commitments to OSEC.

3. How environmentally significant were these climate change commitments?

By reducing greenhouse gas emissions associated with Expansion 1 to a level consistent with the most likely commercial alternative, as per the commitments, OSEC estimates that Shell would avoid emitting approximately 900,000 tonnes of CO2 each year. This is equivalent to the annual greenhouse gas pollution from 200,000 cars.

4. Why did OSEC and Shell negotiate commitments for improved environmental performance?

OSEC has taken a proactive and cooperative approach to minimizing and mitigating project-specific environmental impacts by engaging in negotiations with proponents of oilsands projects to improve environmental performance. These negotiations occur after a proponent has filed its application and environmental impact assessment, but prior to ERCB or Joint Review Panel public hearings.

When successful, these negotiations lead to bilateral agreements that include specific commitments for improved environmental performance. These written agreements are submitted as evidence at public hearings to inform the ERCB and/or Joint Review Panel's public interest decision.

For those issues that are not successfully addressed through a bilateral agreement, OSEC presents evidence at ERCB or Joint Review Panel hearings and makes recommendations for approval conditions and/or recommends that the project be denied approval.

Government decision-makers have advocated this approach in order to minimize the scope, duration and conflict associated with public hearings. It is also commonly used by First Nations and Métis stakeholders in the oilsands region.

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