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‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐Gregory,Failing&Joseph.InformedDecisions:ENGPImpactsReviewreport.12‐15,2011.
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MakingInformedDecisionsabouttheEnbridgeNorthern
GatewayProject:EvaluatingtheAnticipatedCosts,Benefits,
andRisksofMarineOilTransportationontheGitga’atNation
andCanada’sPublicInterest
Dr.RobinGregory,ValueScopeResearch
(leadauthor)
LeeFailing,&ChrisJoseph,CompassResourceManagement
December15,2011
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TableofContents
ExecutiveSummary 3
1. Introduction 4
1.1 DecisionMakingContext 4
1.2 ScopeandPerspectiveofthisReport 5
2.StandardsofPracticeforMajorProjectAssessments 7
2.1InternationalStandardsandPractices 7
2.2Identifyingandevaluatingallrelevantprojectimpacts 8
2.3ExplicitAnalysisofUncertainty 11
2.4ComparisonofProjectAlternatives 13
2.5ExplicitIdentificationofTrade‐offs 15
2.6DistributionofCostsandBenefits 16
3. CriticalEvaluationIssues 17
3.1EstimatingtheProbabilityofMarineOilSpills 17
3.2IncorporatingPerceptionsofRisks 24
3.3AssessingNetBenefitsoftheENGP 28
3.4MitigationandCompensationEffectiveness 30
4. Conclusion 36
5. References 38
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ExecutiveSummary
ThisreviewoftheEnbridgeNorthernGatewayProject(ENGP)applicationfocusesonwhethertheinformationprovidedbyENGPprovidesabasisformakinginformeddecisionsabouttheproject,particularlywithrespecttopotentialeffectsstemmingfromthemarinetransportationofoilbytankersontheGitga’atNationandonthepublicinterest.TheconclusionisthattheENGPapplicationandsummarysupportingdocumentsfailtoaddressNEBandCEAAcriteriaandfailtomeetminimumstandardsofacceptabilityforanevaluationofthenetimpactsofamajorenergyproject.Specifically:
− Keypotentialconsequencesoftheproposedproject,importanttotheGitga’atNationandothercitizensofCanada,areomittedfromtheanalyses;theseincludeimpactsonmanynaturalresourcesandecosystemservicesnottradedineconomicmarketsthatareofcriticalimportancetotheGitga’ateconomy,culture,andsocietyaswellastheimpactsofincreasedperceptionsofriskoneconomicvaluesandcommunitywell‐being(pages8‐11).
− Informationandmethodsusedtocharacterizetheeconomicbenefitsoftheprojectaredeficientandincomplete.Becausetheapplicationincorrectlyidentifiesgrosseconomicimpactsaseconomicbenefitsandexcludessignificantcostsandrisksfromthepublicinterestassessment,incompleteandmisleadinginformationisprovidedaboutthecosts,risks,andoverallnetbenefitsoftheENGP(pages28‐30).
− MethodsusedtodeterminewhethertheprojectisinthepublicinterestfailtoconformtoCEAAandNEBmandatesortoacceptedstandardsforevaluatingtheenvironmental,socialandeconomiceffectsoflargeenergyprojects(pages9‐16,28‐30).
− Summarymeasuresofimpactsignificanceareoftenpresentedwithoutexplanation;thisisparticularlytrueofmanyriskestimates,whichfailtoreflectthestandarddefinitionofriskastheproductofprobabilityandconsequence,furtherinformedbythevaluesandriskperceptionsofpotentiallyaffectedgroups(pages24‐28).
− Theuncertaintyassociatedwiththeanticipatedbenefits,costsandrisksoftheprojectislargelyignoredaspartofquantitativeanalyses;thisistrueforsuchkeyprojectelementsasoilprices,environmentalimpacts,andboththefrequencyandanticipatedconsequencesofoilspills(pages11‐13,17‐23).
− Noevidenceispresentedastowhytheproposedprojectispreferredtootheralternatives,andnoevidenceispresentedthattheeconomic,social,cultural,healthorenvironmentaltrade‐offsbetweenconsequencesoftheproposedprojectanditsleadingalternativeshavebeenaddressedexplicitlyasrequiredbytheNEBActandstandardprojectevaluationpractices(pages13‐14).
− Importanttrade‐offsrelatedtothedistributionofconsequencesamongthedifferentinterests–includingtheGitga’atNation,otherNorthwestCoastFirstNations,Enbridgeanditscontractors,andthecitizensofBritishColumbiaorCanada–arenotacknowledged(pages15‐16).
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− Conclusionsabouttheprobabilityofanaccidentaloilorcondensatespillarebasedonlimitedanalysesthatignorekeydataandfailtofollowestablishedbestpracticesforincorporatingthejudgementsofexpertsconcerningspillfrequenciesofdifferentvolumes.Inlightofthesignificanceofthepotentialconsequencesofanoilspill,thislackofrigorousanalysisintheENGPapplicationconstitutesacriticalomission(pages17‐23).
− PerceptionsoftherisksoftheENGPandtheireffectsonlocalandnationaleconomicvalues
(bothmarketandnon‐use)andonthepsychologicalandphysicalhealthofindividualsarelargelyignored.Thisexclusionofpotentiallysignificantlosseshighlightstheneedforafarmorecomprehensive“weighing”ofallthebenefits,costs,andrisksoftheENGPtoarriveatasoundestimateoftheoverallnetbenefitsoftheproposal.(pages24‐28).
− AnalysesoftheexpectedpotentialforeffectivemitigationandcompensationoftheadverseeffectsofanoilspillignoremanyinitiativesundertakeninotherjurisdictionsaspartofoilpipelinedevelopmentsandignorethekeypointthatneithertheleadresponsibilitynorthefinancialburdenforspillcleanupwillbebornebyEnbridge,whichgreatlyreducesincentivesforexploringinnovativemitigationoptions(pages16‐17,30‐32).
− AnaïveanalysisispresentedoftheextenttowhichcompensationcanoffsetthelossesthatmaybeincurredbytheGitga’atNationandotherNorthwestCoastcommunities.ThisreportconcludesthatmanyofthepotentialharmsfacingtheGitga’atwillnotbeamenabletomonetarycompensation,andtheavailableinformationonthesuccessofsimilarcompensationprogramsdoesnotsupportaconclusionthatcompensationwillredresstheinequitabledistributionalimpactsoftheproject(pages33‐36).
1. Introduction
Thisreport,researchedandwrittenundercontracttotheHartleyBayBandCouncil(HBBC),examinestheadequacyoftheinformationprovidedbytheproponentwithrespecttotheEnbridgeNorthernGatewayProject(ENGP)applicationinlightofNEBandCEAArequirementsaswellasstandardprofessionalpractices.TheapplicationseekspermissiontoconstructtwinnedpipelinesfromAlbertatoKitimat,BritishColumbiaandtoshipcrudeoil(bitumen)andcondensatebymarinetankerstoandfromoffshoremarkets.OurreviewoftheEnbridgeapplicationfocusesonpotentialeffectsrelatedtothemarinetransportationofoilbytankersontheGitga’atNationandonselectedaspectsoftheproject’spotentialeffectsonprovincialornationalinterests,withanemphasisontheaccuracyandcompletenessofkeyinformationrequiredtomakeinformeddecisionsaboutthebenefits,costs,andrisksoftheENGP.
1.1 DecisionMakingContext
Deliberationsand,ultimately,decisionswithrespecttotheproposedENGPbytheJointReviewPanel(JRP)andotherresponsiblefederalandprovincialauthoritiesare,forthemostpart,guidedbythemandatessetoutintheCanadianEnvironmentalAssessmentAct(CEAA)andtheNationalEnergyBoardAct(NEBAct).
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UndertheCEAA,environmentaleffectsinclude“anychangethattheprojectmaycauseintheenvironment,includinganyeffectofanysuchchangeonhealthandsocioeconomicconditions,onphysicalandculturalheritage,onthecurrentuseoflandsandresourcesfortraditionalpurposesbyaboriginalpersons,oronanystructure,siteorthingthatisofhistorical,archaeological,paleontologicalorarchitecturalsignificance….”Judgementsconcerningwhatisandisnot“significant”areafunctionoftheanticipatedeffects’magnitude,durationandfrequency,geographicalextent,reversibility,andthecontextwithinwhichtheeffectswouldoccur(FEARO,1994).ProjectreviewsunderSection4oftheCEAAalsoareguidedbytherequirementto“encourageresponsibleauthoritiestotakeactionsthatpromotesustainabledevelopmentandtherebyachieveormaintainahealthyenvironmentandahealthyeconomy,”aspartoftheAct’semphasisonidentifyinganylikelysignificantresidualadverseeffectsofaproposedinitiative.
TheNEBActspecifiesthecriteriabywhichidentifiedfederalauthoritiesdeterminewhetheraprojectisinthebestinterestsoftheCanadianpublic,furtherdefinedintheNEBStrategicPlan2008‐2011asmeeting“…abalanceofeconomic,environmental,andsocialintereststhatchangeassociety’svaluesandpreferencesevolveovertime.”Federaldecision‐makersarerequiredto“…estimatetheoverallpublicgoodaprojectmaycreateanditspotentialnegativeimpacts,weighitsvariousimpacts,andmakeadecision.”Thisstatementemphasizesthreeofthemaincomponentsofanyevaluationofamajorenergyproject:theexistenceofmultipleobjectivesordimensionsofconcern,anemphasisonsocietalvaluesaswellasprivateconsequences,andtheneedtoweighthevariousimpactsofaproposedinitiativeaspartofinformeddecisionmaking.
Inlightofthisguidingpolicydirection,inmakingadecisiontheJRPandotherrelevantfederalauthoritiesthereforehaveamandatetoconsider–andthustheproponenthasaresponsibilitytoaddress–twoprimaryquestionsinitsreviewoftheanticipatedbenefits,costs,andrisksoftheENGP:
− towhatextentdoestheproposedprojecthavethepotentialtoresultinsignificantadverseeffects,includingimpactsthatcannotadequatelybemitigated?
− afterweighingitspotentialenvironmental,social,andeconomiccostsandbenefits,towhatextentistheproposedprojectinthepublicinterest?
ThisreportreviewstheextenttowhichtheENGPapplicationcontainsinformationsufficienttoanswerthesetwooverarchingimpactassessmentquestions.
1.2 ScopeandPerspectiveofthisReport
TheanalysisandargumentsinthisreviewoftheENGPapplicationdrawontwoprimarysourcesofinformation:(1)internationallyrecognizedpracticesandstandardsrelatedtotheevaluationofmajorenergyprojects,and(2)informationcontainedinreportsofsubjectmatterexpertscommissionedbytheHartleyBayBandCounciltoexaminetheimpactsoftheENGPonthenaturalenvironment,communityeconomy,healthanddiet,communitywell‐being,andthecultureoftheGitga’atapeople.Ourexperienceisasanalystswhohaveworkedinboththepublicandprivatesectoronnumerousevaluationsofotherlargeprojectssubjecttocarefulgovernmentreview.Theseincludeprojectsevaluatingnuclearwastestorageoptions(Gregory),hydroelectricfacilitydevelopmentandrelicensing(Gregory&Failing),oilsandsdevelopmentin
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Alberta(Gregory&Joseph),marineplanningandtheimpactsofindustrialdevelopmentoncoastalcommunitiesandcoastalenvironments(Gregory,Failing&Joseph),thedevelopmentandpricingofenergysupplycorridors(Gregory),andtheevaluationofoffshoreoilandgassupplyopportunities(Gregory&Joseph).
Section2ofthisreportfirstidentifiesacceptedframeworksforevaluatingthecosts,risksandbenefitsofmajorenergyprojectsandidentifiescommonelementswidelyacknowledgedasstandardpracticeintheirevaluation.WethenaddresswhethertheENGPapplicationsatisfactorilyaddressestheseelements,concludingthatessentialinformationrequiredformakinginformeddecisionsabouttheENGPisnotincludedaspartoftheproponent’sapplication.
Section3providesinformationthataddressesseveralofthekeygapsintheENGPanalyseswhichwebelievearecriticaltoafullunderstandingofthecostsandbenefitsoftheproject–specifically,whethertherewillbesignificantadverseeffectsontheGitga’atNationandwhethertheprojectisinthepublicinterest.Thesecriticalinformationgapsinclude:
− identificationofthefullrangeofpotentiallysignificantenvironmental,social,cultural,health,andeconomiceffectsoftheENGP;
− estimationoftheexpectednetbenefitsoftheprojecttoCanada,includingcostsaswellasbenefits,inlightofpossiblealternativestocomponentsoftheproposedENGP;
− incorporationoftheuncertaintyassociatedwitheffectsoftheENGP;inparticularestimationoftheprobabilityofmarineoilorcondensatespillsinCanadianwaters;
− riskperceptionsthataffectindividuals’psychologicalandsocio‐economichealth,includingbothmembersoftheGitga’atcommunityandotherresidentsofB.C.orCanada;
− effectivenessofcompensationasamechanismtomitigateandaddresstheresidualadverseeffectsanddistributionalimpactsoftheENGP;and
− thedegreetowhichtheproposedENGPenhancesenvironmental,economic,andsocialsustainabilityobjectives.
Section4brieflysummarizesourmainfindingsandconclusions,asdoestheExecutiveSummary.OurperspectivehighlightstheroleoftheJointReviewPanel(JRP)asaCrowndecision‐makingbody,whichinturnimpliesaresponsibilityonthepartoftheapplicantandintervenorstoprovideinformationthatwillassisttheJRPtomakeaninformedanddefensibledecisioninaccordwithitsmandateandexistinglawsandpractices.Thescopeofthisreportcoversonlyeffectsrelatedtoroutinetankeroperationsandpossiblespillsofbitumen/crudeoilorcondensatewithinthewatersandlandsconsideredtobepartoftheGitga’atNation’straditionalterritory.
Therearemanyotherissuesthatwarrantattentionbeyondthoseaddressedinthisreport.Inparticular,severalotherconsiderationsmaycriticallyaffectthepublicinterest.Theseinclude,butarenotlimitedto
• futurepricingscenariosforoil‐sandsproduction
• impactsonecosystemsandhumansfromtheproject’sadditionalgreenhousegasemissionsandassociatedeffectsonglobalclimatechange
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• alternativepipelineroutings,bitumenshipmentvolumes,ormarinetransportationoptions,and
• theneedforadditionalpipelinecapacity(i.e.,whetherENGPissurplustoCanadianrequirements).
2. StandardsofPracticeforMajorProjectAssessments
2.1 InternationalStandardsandPractices
Inthissection,webrieflysummarizerecognizedstandardsofpracticefortheevaluationofmajorenergydevelopmentsandreviewtheextenttowhichtheEnbridgeapplicationmeetsthesestandards.Ourconclusionisthatimportantelementsofarequiredprojectassessmenthavenotbeencompletedbytheproponent.
Approachesforevaluatingtheimpactsofmajorenergyprojectsarewellestablished,basedontheoryandpracticesdevelopedoverthepastseveraldecadesinthefieldsofenvironmentalandsocialimpactassessment,economicandpolicyanalysis,andmulti‐criteriaimpactassessment.Theserecognizedstandardsofpracticedrawonavarietyofanalyticalframeworksforevaluatingproposedlargeprojectinitiatives.Althoughtheyarerootedindifferentdisciplines,differentanalyticaltraditionsanddifferentconsultationrequirements,alloftheseframeworksseektoclarifyhowaproposedprojectwillaffecttheinterestsofpotentiallyaffectedpartiesacrossarangeofeconomic,environmental,socio‐cultural,andhealthdimensionsandwhether,onbalance,theestimatedgainsassociatedwiththeprojectareexpectedtooutweighitsestimatedlosses.
Eventhoughnosinglemethodisconsideredtobebestforalldecisioncontexts,thereareseveraluniversalandcommonlyacceptedprincipleswithwhichalldefensibleimpactassessmentsareexpectedtocomply.Tomeettheseminimumacceptableprofessionalstandards,thesesameprinciplesmustbeaddressedandmetintheexaminationoftheENGPapplication.Asdiscussedintheremainderofthissection,weemphasizethefollowingsubsetofstandardpracticesthatarerelevanttoassessingtheENGP:
− allkeyimpactsofconcernareidentified,includingenvironmental,economic,cultural,healthandsocialconsiderations;
− estimatesoftheconsequencesoftheproposedactionsincludeexplicitandtransparentrepresentationoftheassociateduncertainty;
− otherprojectalternativesareevaluated,inlightoftheirkeyimpactsovertime,andreasonsareprovidedwhytheyareinferiortotheproposedproject;
− thecriticaltrade‐offsthatareexpectedoverdifferentdimensionsofvalueandovertimearesummarizedclearly;and
− thedistributionalconsequencesoftheproposedprojectareassessedinlightofitsimpactsundervariousmitigationandcompensationstrategies.
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2.2Identifyingandevaluatingallrelevantprojectimpacts
Majorenergyprojectsaffectarangeofdifferentinterestsandconcerns(Keeney,1980;Vining&Boardman,2007)andanassessmentoftheirnetbenefitsmustincorporateaclearandcomprehensivedocumentationofallimportantbenefitandcostimpactcategories.TheCEAAspecificallyrequiresconsiderationofany“…changeonhealthandsocioeconomicconditions,onphysicalandculturalheritage”and“…onthecurrentuseoflandsandresourcesfortraditionalpurposesbyaboriginalpersons.”Inthisregard,thedeficienciesoftheENGPapplicationarefundamentalbecausemanyofthemostimportantprojectimpactsontheseconsiderations,bothfortheGitga’atNationandforallCanadians,areexcludedfromtheapplicant’ssummaryevaluationsofeffects.ForaFirstNationsuchastheGitga’at,manyoftheadverseimpactsoftheENGPstemfromitssignificanteffectsonecosystemservicesandresource‐basedactivitiesthatarenotpricedortradedinconventionaleconomicmarkets.Theseincludetraditionalharvests,theintergenerationaltransferofknowledgespecifictotheGitga’atculture,andthetradingoffoodbetweenfamiliesandwithmembersofotherFirstNations–allactivitiesthatconstitutecentralelementsoftheGitga’atwayoflife(Turneretal,2008;Gunton&Joseph,2010).AlthoughsomeoftheseeffectsarenotedinthereportspreparedbyEnbridge’sconsultants,theyarelargelyomittedfromoverallprojectevaluationsandthustheirimportancetotheprojectassessmentisobscured.Fromanationalperspective,theevaluationmethodologiesusedbytheproponentfailtoincludeimportantnon‐usevaluesassociatedwiththeexistenceofpristinenaturalareas.Withoutincorporatingtheseimportantnon‐marketelementsexplicitlyintoprojectanalyses,itiseasyforthemtobeleftoutofsummariesoftheanticipatedeffectsoftheENGPoneithertheGitga’atNationorallCanadians.
2.2.1FullyincludingprojectimpactsontheGitga’atNation
TheENGPapplicationandsupportingtechnicalinformationfallsfarshortofacknowledgedstandardswithrespecttoathoroughevaluationofeffectsontheGitga’atNation:itfailstoidentifycriticallyimportantimpacts,anditprematurelydismissesothersasinsignificantonthebasisofinadequateandinsomecasesinappropriateanalysisorconclusions.CriticalimpactareasthatwillbeaffectedbytheENGPincludefivekeyconcernsfundamentaltothewellbeingofmembersoftheGigtga’atNation:
− Economiceffects:includingbothusevalues(somevaluedinmarkets,suchascommercialfishingortourism,andothersnon‐market,suchastraditionalharvestsandecosystemservices)andnon‐usevalues(thevaluepeopleplaceon,forexample,theexistenceofspeciesorunusualecosystems);
− Environmentaleffects:includingtheabundanceanddistributionofanimalandplantspecies,alongwithmoregeneralecosystemcharacteristicsrelatingtothebiodiversityandresilienceofthenaturalenvironment;
− Socialeffects:includingmacroeffects(e.g,lossofjobs,diversionsofcommunityfocus),mid‐rangeeffects(e.g.,socialdisruptions),andmicroeffects(e.g.,increasedstresslevels,fearandworry,disruptionstodailylife);
− Culturaleffects:includingeffectsonculturalknowledge,assetsandinstitutionssuchasfoodsharing,impactsonspecificculturalsites,andeffectsonceremonies,language,knowledgetransfer,ortheconnectionofindividualsandthecommunitytothelandandocean;and
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− Healtheffects:includingdirectandindirecteffectsonhealth,dietandnutritionrelatedtotheabundanceorqualityoffoods,airorwaterpollution,ornoiseandvisualimpacts.
− AreviewofthefivereportspreparedbytheGigta’atFirstNationconsultantsdemonstratesthatEnbridgehasnotsuccessfullyidentifiedmanyofthepotentialadverseeffectsonsocial,cultural,economic,healthorecosystemvaluesthatmightbecausedbythemarinetransportationaspectsoftheENGP.Basedontheseindependentreviews,wesummarizethemajorimpactsassociatedwithbothroutineoperationsandaccidentalspillsinTable1belowandnotethatmanyoftheseimpactshavebeeneithermissedentirelyoronlypartiallyidentifiedaspartoftheENGPprojectevaluationsummaries.
Table1.MajorimpactsoftheENGP
RoutineOperations MajorSpill CommentsNaturalEnvironment
Low‐leveleffectsonsomemarinespecies
Moderatetosevereeffectsonabundanceanddistributionoffish,invertebrates,seaweed,&marinebirds
EcosystemeffectsanduncertaintyregardingimpactsareomittedfromENGPevaluations
EconomicActivity
Lossofincomeandemploymentintourismandcommercialfishingsectors,decreasesinnon‐useandecosystemservicevalues
Severelossesinmanycommercial&traditionalharvests;lossoflivelihood;highlossestonon‐market&nonuservalues
Adverseeffectsonmanynon‐market&non‐usegoodsandservicesarenotincludedinENGPevaluations
Health
Somelossofhealthduetodisruptionoftraditionalharvestpatterns
Moderatetoseverelossofhealthduetorestrictionsontraditionaldiet,fearsoffoodcontamination
ImpactsonhealthofGitga’atapeopleviachangesintraditionaldietarelargelyignoredinENGPanalysis
Society
Diversionofcommunityfocus,socialdisruption,increasedstress&worry
Highlevelsofsocialdisruption,strainsoncommunityrelationships,heightenedlevelsofstress&anxiety
Communitystress,lossofcommunityidentity,&resultsof“livinginfear”areomittedfromENGPevaluations
Culture
Someimpactsonfeasting,fooduseandsharing,andknowledgetransmission.
Highlevelsofimpactonfoodsharing&trading,damagetoculturallandscape,&lossesintraditionalharvestsadverselyaffectGitga’atlivelihood&culturalidentity
Impactsonkeyfood‐basedactivitiesandpractices,includingceremonies,foodsharing&knowledgetransmission,areomittedfromENGPanalyses
2.2.2FullyincludingprojectimpactsonallCanadians
Asecondcriticalomission,inlightofstandardprojectevaluationpractices,isthefailureoftheENGPapplicationtofullyidentifyandexaminethefullrangeofproject‐relatedcostsandrisksaswellasbenefitsfromanationalperspective(wediscussthistopicmorefullyinSection3.3).AlthoughEnbridgearguesthat,“fromaneconomicperspective,theprojectisclearlyintheCanadianpublicinterest”(Volume2,p1‐14),theirestimatesofthepublicinterestvalueare
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producedusingthemethodofEconomicImpactAnalysis(EconIA)ratherthanmethodsofCost‐BenefitAnalysisorMulti‐AttributeDecisionAnalysis.TheproblemisthatanEconIAmethodologyfocusesonthegrosseconomicbenefitsofaprojectandlargelyignoresbothitsneteconomicbenefits–thatis,thebenefitsnetoftheassociatedcosts–andthepotentialeffectsonsocial,environmental,health,orculturalconsiderations.Asaresult,theresultsofanEconIAprovideaverylimitedperspectiveontheoverallcostsandrisksassociatedwiththeproposedENGP.WithoutanunderstandingofthemechanicsandassumptionshiddenwithinanEconIAapproach,arevieweroftheENGPapplicationmayfailtoseethatmanyofthekeyaspectsofanassessment–includingitsoveralleffectsoneconomic,environmental,social,healthandculturalvalues‐‐areomittedfromthesummaryanalysesofprojecteffects.
Twoleadingevaluationmethodsforassessingmajorenergyprojects,widelyusedinCanadaandthroughoutNorthAmerica,arecost‐benefitanalysisandmulti‐attributeutilityanalysis.
Amultipleaccountcost‐benefitanalysis(CBA)framework(Boardmanetal,2006;Shaffer,2010)identifiestheanticipatedbenefitsandcosts(includingrisks)ofaproposeddevelopmentandseekstotranslateasmanyoftheseimpactsaspossibleintomonetaryterms.CBAhasastrongtheoreticalfoundationinwelfareeconomicsanditsusefordecadesintheevaluationofmajorproposedpublicandprivateresourcedevelopmentshasledtoitsadoptionasalegalrequirementforprojectapprovalandregulatoryimpactassessmentinmanyjurisdictions.
AcriticalelementofCBA–andeitherastrengthoraweakness,dependingonone’sperspective–isitsabilitytocompareawiderangeofimpactsbytrackingimpactsinthecommonunitofmoney.Itisnowwellestablishedthatafullassessmentofcostsandbenefitsmustincludeimpactsthatarenottradedinconventionalmarkets–outdoorrecreationisacommonexample,asispollutionormanyexamplesofecosystemservices(e.g.,carbonsequestrationbenefitsofforestsandintertidalplantcommunities).Non‐marketimpactstypicallyaremonetizedthroughvarioustechniquesthateithertrytoinferthevalueofanimpactbaseduponthepreferencesofindividualsasrevealedinmarkets,orbytheirstatedpreferencesasrevealedinsurveyresults.Table2displayshowsomeoftheimportanteconomiccostsandbenefitsoftheENGPmightbeexaminedthroughadoptionofaCBAapproach.
Table2.IllustrativeexampleofENGPimpactsthroughthelensofCost‐BenefitAnalysis
Benefits ENGP RevenuesfromshippingIncrementalemployment
Revenuestocompanies&government(local,provincial,federal) Oilsandsexpansion Revenuesfromoilsales Revenuesfromupgrading Revenuesfromrefining
IncrementalemploymentCosts ENGP Capitalcosts(companiesandgovernments) Operationalandmonitoringcosts(companiesandgovernments) Environmentalcosts,includingnon‐marketecosystemservices Social&healthcosts Costsofforgoneorpostponedeconomicopportunities Oilsandsexpansion Capital,Operational,EnvironmentalandSocialcosts GovernmentCosts Usercosts(fromconsumptionofnaturalcapital)
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Multi‐attributeDecisionAnalysis(DA)isanalternativeandalsowidely‐usedapproachtoevaluatingtheanticipatedcosts,benefits,andrisksofmajorenergyinitiatives(Keeney&Raiffa,1993;vonWinterfeldt&Edwards,1986).Underamulti‐attributeapproach,monetizedimpactsofaprojectareassessedusingindollarswhereasnon‐monetizedimpactsareassessedeitherquantitativelyorqualitatively,usingscalesandsupportingnarrativesthatareeasilyrelatedtotheimpactthatisunderconsideration.AcriticalelementofaDAprojectreviewisthuscomingupwithgoodmeasurestotracktheperformanceofdifferentactionsonallthefundamentalobjectivesthatmightbeaffectedbyaproject,includinganumberofimportantconcernsthatareomittedfromtheENGPanalysessuchasthedegreeofpublicsupport,theeffectsonaFirstNation’sculturalidentity,ortheimpactofperceivedrisksonthereputationofacountry(Keeney&Gregory,1994;Failing,Gregory&Harstone,2007).Aftertheseimpactcomponentshavebeenweighedorbalancedaspartofamulti‐attributeanalysis,itisthenpossibletodevelopandexaminetradeoffsacrossthefullrangeofpotentiallyaffectedprojectbenefitsandcosts.
BothCBAandDAmethodsprovidemoreusefulinsightstodecisionmakerswhentheyareusedtocompareseveralalternativeprojectplans.Ifapipelineforbitumenexportisdesired,forexample,thenexplicitanddetailedanalysesshouldcomparetheprosandconsofseveraldifferentpipelineprojects;ifmarinetransportforbitumenexportsisdesired,thenexplicitanddetailedanalysesshouldcomparetheprosandconsofseveraldifferentmarinetransportalternatives.AsdiscussedinSection2.5,thesetrade‐offsshouldreflectthevaluesofappropriatedecisionmakersratherthan(asinthecaseoftheENGPapplication)thoseoftheprojectproponent.
2.3ExplicitAnalysisofUncertainty
Foranymajorprojectinvolvinglargeinvestmentsandpotentiallysignificanteffectsonnaturalresourcesorcommunities,acceptedpracticewithrespecttothetreatmentofuncertaintyincludesthefollowingfourpoints:
• Presentingexplicitestimatesofuncertaintyinkeyprojectinputsandtheconsequencesofproposedactions.Aspartofarisk‐assessmentorimpact‐assessmentprocess(NationalResearchCouncil,2009),thisinvolvescharacterizingtherangeofuncertainoutcomesandtheassociatedprobabilities.
• Reportingkeyuncertaintiesinquantitativeprobabilisticterms,showingmean/medianandupperandlowervalues(Morgan&Henrion,1990).
• Usingbestpracticeswhenelicitingjudgementsfromexperts.Understandingconsequencesandcharacterizinguncertaintyformajorenergyprojectsinevitablyinvolvestheuseofexpertjudgmentbecausetherearegapsintheexistingknowledgebaseandtherelevanceofpriorexperience.Oftenexpertshaveconflictingviews,andproblemsemergewhenthejudgmentsofexpertscannotbefullyunderstoodorreconciled.Standardprotocolsforelicitingjudgmentsfrommultipleexpertshavebeen
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developed(Keeney&vonWinterfeldt,1991)andarenowinwideuse;thesehelptominimizebiasandimprovethetransparencyofjudgments.
• Makingclearandtransparentjudgementsabouttheacceptabilityofrisks.Judgmentsaboutwhetherandhowmuchriskisacceptablearevalue‐basedjudgmentsconcerningrisktoleranceandshouldbemadebythedecisionmaker,nottheproponent.
TheENGPapplicationisdeficientineachofthesefouressentialrequirementsrelatingtothetreatmentandpresentationofuncertainty.Despitetheinitialrecognition(seeVol2Appendix,Economics,CommercialandFinancing,p.30)that“Thereareconsiderableuncertainties,especiallywithrespecttovariousenergyandenvironmentalpolicies,shiftsinoilmarkets,futureoilprices,andoilproduction…”thereisnoincorporationofthisuncertaintyinthequantitativeevaluationsofwhatarereferredtothe“publicinterest”benefitsoftheproposedproject.Thisoversightisstriking,giventhelargebodyofliteratureandexperiencewithrespecttoacceptableandstandardmethodsofriskassessmentforlargeenergyprojects.
TwocriticalsourcesofuncertaintywillprofoundlyinfluencethedeterminationofwhethertheENGPisinthepublicinterest.
‐ Theprobabilityofanoilspill.Whenquestionedabouttheprobabilityofoilspills,EnbridgeconcludesintheresponsetoInformationRequestNo2(p.190)thateventhough“multipleadverseandsignificanteffectstothemarinebiophysicalenvironmentandhumanuse”wouldoccurintheeventofaspill,“WhatisimportantinassessingtheseadverseandsignificanteffectsisthelikelihoodorstatisticalprobabilitythataspillwilloccurduringthelifeoftheNGP.”Becausetheyconclude(p.188)that“…amajormarineoilspillisnotlikelytooccurduringthelifeoftheproject,”thereisnoreasontoevaluatespillimpactsincloserdetail.ThisapproachandEnbridge`sconclusionsaboutboththeuncertaintyandthemulti‐dimensionalriskconsequencesassociatedwithanoil1spillarebiasedandinconsistentwithacceptedanalyticalandregulatorypracticesandleadingpeer‐reviewedliterature(AndersonandLabelle,2000;NationalResearchCouncil,1996).
‐ Thepriceofoil.Theomissionofsensitivityanalysesonthefuturepriceofoilisastrikinggap
inEnbridge’s‘publicinterest’assessment.Forexample,theHBBCEconomicImpactsreportnotesthatthebenefitsoftheprojectaresensitivetotheassumedvalueforWestTexasIntermediate(WTI)oilpricesoverthenextseveraldecades.EnbridgeusesthelatestUSEnergyInformationAdministrationforecastforWTI,whichishigherthantheNEB`sown“ReferenceCaseScenario”forecastforWTI(NEB,2011).Thisdifferencealonecandramaticallyaffectestimatesoftheproject’sfinancialviabilityandassessmentsofprojectbenefits.
Manyotherimportantsourcesofuncertaintyunderlietheproponent`sassumptionsabouteconomicbenefits,anyofwhichmightsignificantlyaffectdeterminationsabouttheproject`snetbenefits.Theseinclude:worldwidedemandforenergy,shippingcosts(e.g.,fromBCto
1Thesamecanbesaidforacondensatespill.Inthisreportwelimitourselvestotheexaminationofthetreatmentofoilspills.
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ChinaorotherAsianmarkets),thepricesofcompetingenergyalternatives,andpossiblerestrictions(e.g.,intheUSorEurope)onexportsofoil‐sandsbitumen.Withoutanadequatereviewoftheuncertaintyassociatedwiththesekeyinputstothedecision,predictionsoftheproject’seffects–regardingrevenues,jobs,orenvironmentalandsocialimpacts–areincompleteandfailtoprovideadefensiblebasisforJRPdecisions.
2.4ComparisonofProjectAlternatives
Makinginformeddecisionsaboutaproposednaturalresourcedevelopmentrequiresthattheproponenthascarefullyexamineddirectprojectalternatives–alternativeroutes,terminalsites,seasonalconstraints,etc.–andclearlypresentsthisinformationforconsiderationbydecisionmakers.Attheleast,insofarastheENGPispresumedtohavethepotentialforsignificantbenefitsaswellassignificantcostsandrisks,EnbridgeisexpectedtoprovidedetailsonwhytheirchosenprojectdesignisbetterthanallotherreasonablealternativesfromthestandpointofCanada’snationalinterest.Intheabsenceofacomparisonwithalternatives,itisnotpossibletodeterminetheextenttowhichthebestpossible“…balanceofeconomic,environmentalandsocialinterests…”(accordingtotheNEBAct)hasbeenachievedbecausethereexiststheveryrealpossibilitythatadifferentprojectalternativemayeitheryieldsubstantiallyreducedeconomic,environmental,orsociallossesor,ontheotherhand,yieldsubstantiallylargereconomic,environmental,orsocialbenefits.
Thisperspectiveissupportedbystandardpracticeinprojectandpolicyanalysis(Stokey&Zeckhauser,1978)aswellasextensiveresearchinjudgementanddecisionmaking,whichhasshownthatpeople(actingasindividuals,judges,juries,orpanels)oftenmakedifferentjudgmentsaboutthevalueoracceptabilityofaproposedactionoritemwhentheyviewitinisolationratherthencompareitagainstalternatives(Bazerman2002;Hsee,1996).Forexample,alossof1,000hectaresofhabitatduetoconstructionofaprojectmightbeviewedasunacceptableifthereexistsanalternativethatdeliversthesamebenefitsbutwithno(orlower)lossofhabitat.Ontheotherhand,thissamehabitatlossmightbeviewedasacceptableifitcanbedemonstratedthatnobetteralternativeexists–insuchacase,thelossofhabitatistrulyunavoidableifonewishestogainthebenefitsoftheproposedaction.
ThatthepresenceofalternativesisimportantandwidelyrecognizedisdemonstratedbytheannouncementonNovember10,2011ofUSPresidentBarackObamatopostponehisdecisiontoapproveorrejectormodifytheKeystoneXLpipeline,alsodesignedtoexportbitumenfromtheoilsandstoaforeignmarket,duetoinsufficientinformationprovidedbytheproponentconcerningalternatives.Clearlythepresentationofaproposedprojectinrelationtoasetofrealisticalternativesconstitutesessentialinformationforresponsibledecisionmaking.
Fromtheperspectiveofcomparingtheproposedprojecttorealisticalternatives,theENGPapplicationisdeficientinfiveimportantways:
‐ Itfailstodemonstratethatrelevantalternativeshavebeenadequatelyinvestigated.TheENGPapplicationprovidesdetailed(althoughnotnecessarilycomprehensiveoraccurate)evaluationsofasingleproposedplanfortransportingbitumenbypipelinefromAlbertatoKitimatandthenbytankerstoandfromexternalports.Thisisonlyonepossiblealternativefortransportingoil,composedofalargenumberofsub‐componentsandalargenumberof
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underlyingassumptionsaboutwhyandinwhatwaysthesecomponentsmightbepreferabletootherreasonableoptionsthathavebeenconsidered.
‐ Theapplicationdismissesotheralternativesasinfeasiblewithoutpresentingadequatejustification.Enbridgereports(seeSection4ofVolume1:OverviewandGeneralInformationalsoVolume3,Section2)thatvariousotheralternativeshavebeenidentifiedandstudiedandthattheselectedalternatives,forbothpipelineconstructionandmarinetankertraffic,arepreferred.Theapplicationstatesthattherehasbeenareviewofsitingofroutealternativesfortheterminalsandpipelinealongwith“otherdesignconsiderations”(unstated);criteriapresentedasguidingthisreviewincludethe‘constructability”ofthepipelines(undefined),the“suitability”oftankerberthing(undefined),andthelikelihoodoftheprojecttoaffect“sensitiveenvironmentalandsocio‐economiccomponents”(withneitherthecomponentsnorsensitivitydefined).TheinformationthatEnbridgehasprovidedforreviewislargelyqualitativeandthedescriptionsofcriteriaaresufficientlyvaguethatitisnotpossibletodiscriminatethebasisforEnbridge’schosenproject.
‐ Enbridgehasfailedtodevelopagoodunderstandingoftheinterestsofaffected
communitiessuchastheGitga’atNation.Assuch,Enbridgehasmissedtheopportunitytogeneratealternativesthatcanmeaningfullyaddressstakeholderinterests–totrulyexaminethepossibilityforcreatingproject‐relatedbenefitsortoexploretrulyeffectivemitigationandcompensationoptionsthatmaydecreaseoravoiditsresidualadverseeffects.
‐ Enbridgehasfailedtoprovideessentialinformationrelatingtothestreamofanticipated
projectbenefitsandcostsoverthe30‐yearexpectedlifeoftheENGPandhasnotprovidedsufficientinformationabouthowthisstreamofbenefitsandcostshasbeenconverted(throughuseofanunspecifieddiscountrate)toanetpresentvalue(NPV)estimate.Thisomissionissignificant:becausetheENGPinvolvesbothexhaustibleandrenewablenaturalresources,explicitrecognitionofthefactthatthebenefitsandcostsoftheprojectwilloccuratdifferentpointsintimeunderliesbothprivateandsocialdeterminationsregardingwhethertheprojectaddressessustainabilitycriteria.
‐ Theapplicationfailstoprovideacomprehensiveanalysisofcumulativeeffects‐‐acrossthe
fullrangeofeconomic,environmental,social,cultural,andhealthdimensions‐‐stemmingfromtheENGP.ThisomissionisimportantbecauseofpossibleincreasesovertimeinthevolumeofbitumencrudebeingshippedbyENGPtankers(presumablywithassociatedincreasesintankernumbers)andbecauseotherexpectedincreasesinmarinevesseltraffic(e.g.,LNGshipmentsfromKitimat)willaddtoadverseeffectsexperiencedbytheGitga’atastheresultofroutineENGPoperations.
Withrespecttoamegaprojectofsuchnationalsignificance,itisexpectedthatamuchhigherassessmentstandardwithrespecttothepresentationoftheENGP’sprosandconsrelativetoalternativeswouldbeupheldbytheproponent.
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2.5ExplicitIdentificationofTrade‐offs
BecausetheENGPapplicationfailstoidentifyallrelevantimpactsandtocomparealternatives,itfollowsthatitfailstoreportimportanttrade‐offs.Yetanymajorenergydevelopmentprojectwillresultinmultipleimpactsand,importantly,theseimpactswillaffectdifferentstakeholdersandgovernments(includingFirstNations)indifferentways.Thismeansthatnooneprojectalternativewillbebestforallstakeholdersoverallaspectsofperformance‐–someprojectdesignswillbebetterforsomestakeholdersintermsofeconomicreturns,otherswillbebetterintermsofreducingormitigatingadversesocialandculturaleffects,andsoforth.
Twoimplicationsfollow.First,informationaboutanticipatedprojectconsequencesshouldbeorganizedinawaythatexposesandpromotesdialogueabouttrade‐offs.Second,thesedifficultvalue‐basedtradeoffswillneedtobeaddressedbydecisionmakersandbalancedappropriately.Proponentsofprojectsthataffectthepublicinterestshouldnotbetheoneswhomakethesekeyvalue‐basedtrade‐offs.Instead,valuebasedtrade‐offsshouldonlybemadebythosewithlegitimacytorepresentthepublicinterest–inthiscase,themembersoftheJRPcarrytheresponsibilitytounderstandalltherelevantperspectivesandtomakerecommendationsonthesekeyjudgments.
DecisionmakersneedtoweighthecostandbenefitsoftheENGPandmakeajudgmentthatreflectsprojecttrade‐offsacrossmultipledimensionsofvalue.Informeddecisionmakingrequiresthepresentationofappropriateinformation,reflectingtheviewsofpotentiallyaffectedcitizensaswellasdecisionmakers,onwhichtobasethisvalue‐basedweighingofcostsandbenefitsandrisks.YettheENGPapplicationfailstoprovidethisinformationortoexposetherelevanttrade‐offs.Keylimitationsinclude:
Enbridge`sapplicationfocusesonalimitedsetofbenefits,relying(asnotedearlier)oneconomicimpactassessmentmethodswhichhavemajordeficiencies,andignoresmanyimpactsonactivitiescentraltothewell‐beingoftheGitga’atNation.Fromtheperspectiveofeithercost‐benefitanalysisormulti‐attributedecisionanalysis,therepresentationoftrade‐offsintheENGPisinadequatebecauseimportantpotentialimpactsoftheprojectarenotincluded.
‐ EnbridgehashiddenmanyofthekeyNGPtrade‐offs.Forexample,Enbridgestatesthatithasconsideredprojectalternativesandrejectedthemonthebasisoffeasibility(e.g.,constructabilityorsuitabilityconcerns).Butonlyrarelyisfeasibilitysoclear;typicallyjudgmentsaboutfeasibilityinvolvesubjectivejudgmentsabouttheacceptabilityofcostincreases,timedelays(e.g.,toconductadditionalanalyses),orequipmentreliability.Again,thesearevalue‐basedjudgmentsthatshould,formajorprojectsaffectingthepublicinterest,bemadenotbytheproponentbutbystakeholdersandstatutorydecision‐makers(e.g.,membersoftheJRP)withlegitimacytolookafterthepublicinterest.
Asacaseinpoint,wenotetherecentre‐submissionbyTasekoMinesforitsgoldandcoppermineatFishLakeBC.Taseko’soriginalproposalwouldhaveusedFishLakeasatailingspondforwastefromthemine,anditarguedthatthiswastheonlyprofitablealternative.Thenewproposalusesasmallerlakefortailings.Theproponentsaysthatbecausethepriceofgoldissomuchhigheritnowcanaffordtheextra$300millionassociatedwiththisalternative.Thatthe
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companywasabletocomeupwiththisalternativesoquicklyaftertherejectionofthefirstapplicationsuggestseitherthatithadalreadyevaluateditorthatdoingsowasnotunreasonablyonerous–indeedforinvestmentsofthismagnitude,wecanassumethatanyprudentinvestorwouldcarefullyevaluatealternatives.Whilesomealternativesmaytrulybeeconomicallyunattractivetoinvestors,otherlower‐impactalternativesmaywellbeviable,withlowerbutstillattractiveprofitmargins.Anyprojectthathassignificantresidualimpactsinvolvestrade‐offs,andmakinginformedchoicesaboutthem–finding(accordingtotheNEBStrategicPlan,2008‐2011)thebest“…balanceofeconomic,environmental,andsocialinterests…”‐‐requiresanexplicitandtransparentevaluationofalternatives.
2.6DistributionofCostsandBenefits
Themagnitudeofprojecteffectsisonlyoneaspectofimpactassessment;italsomatterswhogainsorlosesfromaproject.Thisisespeciallytruewhenthosewhobearthecostsarenotthesameasthosewhowillbereceivingthebenefits,whichisanaccuratecharacteristicoftheENGPapplicationandpartiallyexplainsthepolarizationbetweenstrongsupportersoftheNGP(suchastheproponentandtheprovinceofAlberta)andstrongopponents(suchasmanylocalcommunities).
Astandardmethodforaddressingthedistributionalasymmetriesofalargeenergyprojectisforwinnerstocompensatelosers,andinthiscontextEnbridgehasofferedbothcashandownershipsharestocommunities(whichhavebeenrejectedbymanyFirstNations,includingtheGitga’atapeople).InthecaseofamegaprojectsuchasENGP,however,thispracticemaynotbesufficient,forthreefundamentalreasons:
First,manyofthelossestobesufferedbytheGitga’atpeoplemaynotbeamenabletocompensationofanyform;instead,thesenon‐mitigatablelossesmaybesoseverethattheythreatenthecontinuedexistenceandsurvivaloftheNation.
Second,manyofthelossestocoastalFirstNationssuchastheGitga’atpeople–includinglossestoactivities,ecosystemservices,andplacescentraltotheGitga’atcultureandtraditionaleconomythatcanonlybeidentifiedthroughdetailedinterviewswithcommunitymembers‐‐willbeextremelydifficulttoidentifyandtoquantifyintermsamenabletomitigationorcompensation(Turneretal,2008).
Third,fromapracticalperspective,eveniftheimpactswereadequatelyidentified,theadministrativedemandsandlegalburdensassociatedwiththecreationandimplementationofarevenueredistributionschememayprovetobeintractableorprohibitivelycostly.InthecaseofENGP,thisproblemisfundamentalbecauseitisnottheproponentwhowillbeartheburdenofimpactsimposedbyeitherroutinetankertrafficor,shouldanaccidentaloilspilloccur,contaminationofthemarineenvironment.Thisisbecausetheliabilityforspillswillrestwiththecarrier(s),notwiththeownerofthepipeline.ThisisanimportantgapintheENGPapplicationandinthereviewprocess.
ThesharedconcernoftheNEBActandCEAAwithrespecttothedistributionofproject‐relatedbenefitsandcostscanbecontrastedwithhowEnbridgeexaminedtheENGP’spotentialbenefitsandcostsWhileEnbridgeidentifiesmanyofthegroupsthatmaybeaffectednegativelybythe
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ENGP,thereisverylimitedassessmentastohoweachFirstNationmaybeaffectedandonlylimitedinformationisprovidedonthedistributionofimpacts(i.e.,effectsarepresentedintermsof“Canadianandregionalinvestment,labourincome,overallvalueadded(orGrossDomesticProduct),employmentandgovernmentrevenues;seeAppendix2ofVolume2).Asaresult,theidentificationofthosewhomayexperiencethepotentiallymostsignificantcostsandrisksisobscuredinEnbridge’sassessment.ThisomissioneffectivelypreventstheJRPandotherresponsiblefederalauthoritiesfrommakinganinformedassessmentabouttheproject`simpactoneithertheGitga’atNation,onotherFirstNations,oronthepublicinterest.
3. CriticalEvaluationIssues
Inthissection,weaddressseveralselectedevaluationissuesinmoredetail.TheintentistoidentifygapsintheinformationthathasbeensubmittedbyEnbridgeandoffersuggestionsaboutwhatreadilycanandshouldbedone–usingwidelyacceptedpractices–toimprovetheabilityoftheJRPandotherresponsibleCrownauthoritiestomakeaninformedchoice.
3.1EstimatingtheProbabilityofMarineOilSpills
Enbridgeacknowledgesthat“theoutcomeofanyassessmentoftheenvironmentaleffectsofamajorspill…wouldarriveatasimilarconclusionofmultipleadverseandsignificanteffectstothemarinebiophysicalenvironmentalandhumanuse”(EnbridgeresponsetoFederalIRNo2,p190).Thisresponsepointstotheimportanceofconsideringthelikelihoodorstatisticalprobabilitythataspillwilloccurduringthelifeoftheproject(reportedelsewhereasa30yeareconomiclife).Theproponenthasfurtheracknowledged(FederalIRNo2,p182)that“thereareaninfinitenumberofscenariosthatmighttranspireinrespectofspillevents”butconcludes(FederalIRNo2,p188)that“amajormarinespillisnotlikelytooccurduringthelifeoftheproject.”
Inthefollowingsub‐sectionsweprovideabriefreviewofthemarineoilspillprobabilitycalculationpresentedintheENGPapplication,contrastthatwithanalternatecalculation,andthendiscusstheliteratureandrecognizedstandardsofpracticeoncombiningexistingdatawiththejudgementsofexpertstoestimatethesignificanceofevents,suchasanoilspill,thatarecharacterizedbybothuncertaintyandhighconsequences.OurintentistohighlightthelimitationofthemethodsusedbyEnbridgetoestimatemarineoilspillprobabilitiesandtounderscoretheimportanceofusingwidelyacceptedmethodologiestoconductthesecalculationsinordertoensurethatdefensibleinformationisavailablefordecisionmakingaspartofGovernment’sreviewoftheENGPapplication.
3.1.1CompetingEstimatesofProbability
ThemarinetransportationcomponentoftheENGPapplicationincludestheuseoftankersofvarioussizestotransportoil(bitumen)outofKitimatandtobringcondensatebackintotheportofKitimat.Accordingtotheproposal,approximately220tankerswillvisitKitimateachyear,with1.2transitsperdayintheconfinedchannelassessmentarea.Approximately32%of
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project‐basedmarinetrafficwillbebycondensatetankersand68%willbebytankerscarryingbitumencrude.TheaveragesizeoftankersforENGPisexpectedtobeabout40%largerthanthecapacityoftheExxonValdez.
Vol8Coftheapplicationconcludesthatanoilspillofanysizehasthepotentialtooccuroncein350yearsandacondensatespillhasthepotentialtooccuroncein890years(i.e.,“amajormarinespillisnotlikelytooccur).”Vol8CoftheSection52application(RiskAssessmentandManagementofSpills,Section3)presentsreturnperiodsforspillsofvarioussizes,whereReturnPeriodisdefinedas“therecurrenceintervalinyearsbetweenincidents”andanoilspillisdefinedas“thebreachingofthetanker’scargocontainmentsystem.”ThesearesummarizedinTable3,basedonestimatedprojecttrafficof220tankersperyearandwiththeuseofmitigationthatisdefinedbytheproponentas“primarilytheuseofescorttugs.”Table3.SpillReturnPeriodsReportedintheENGPApplication.
SpillSize(bbls) SpillSize(m3) ReturnPeriod(years)
31,500 5000 550
126,000 20,000 2800
>252,000 >40,000 15,000
TheseconclusionsarebasedonaquantitativeriskassessmentcompletedfortheTERMPOLreviewprocess.Estimatesaresaidtobe“…basedonfrequencyassessmentofworldwidetankerdatawithappropriatescalingfactorsapplied(i.e.,wind,current,andmarinetrafficconditionsthatcouldbepresent)tocapturelocalconditions”andthat“TheQRAfollowsinternationalbestpracticefromtheIMOdefinitionofaformalsafetyassessment.”DespitetheimportanceoftheseestimatesandthesuggesteduseofastandardQRA,fewdetailsareprovidedintheENGPapplicationmaterialsregardingtherationaleforthemethodsusedbyEnbridgeortheuncertaintyassociatedwiththeestimatesofmarineoilspillfrequency.
TheseresultssuppliedbytheproponentdiffersubstantiallyfromthoseofProfessorL.ChanprovidedintheHBBCHealthImpactsreport,whichestimatesthereturnperiodforalargemarineoilspillfortheENGPatjustover11years(seeTable4).Thisdramaticallydifferentestimatedreturnperiodforamarineoilspillsuggeststhat,overthecourseoftheENGPproject’s30‐yearlifetime,atleastonemajoroilspillislikelytooccur.Chan’sestimates,whichuseastandardmethodforcalculatingspillsbasedonthevolumeofoiltransportedratherthana“pervoyage”methodologyasintroducedbytheproponent,reflectbothmethodsanddatabasesofmarineoilspillfrequencyusedtodevelopprobabilisticestimatesofthelikelihoodofoilspillsofdifferentmagnitudesbytheUSDepartmentofInteriorandtheanalysisofAndersonandLaBelle(2000).TheAndersonandLaBelleworkwasfirstdevelopedin1975andextensivelyrevisedin2000.ItconstitutesthestandardofpracticeadoptedbymanyNorthAmericanandinternationalorganizations(includingtheNationalOceanographicandAtmosphericAdministrationintheUS).
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AccordingtoAndersonandLaBelle(2000),therateofspillsfromoiltankersatseahasdecreasedoverthepast35years.Priortothisperiod(i.e.pre‐1974),thespillrateworldwide,intheU.S.andfortankerscarryingAlaskanNorthSlope(ANS)crudeoilhadremainedconstantatapproximately0.83,0.51and0.77significantspillsperbillionbarrels(Bbbl)handled,respectively;whereanyspillover1000bblisconsideredsignificantand1Bbbl=109bbl.Thesevaluesdroppedto0.67,0.36and0.56spillsperBbblhandled(1974‐1999data)and,later,to0.46,0.29and0.46spillsperBbblhandled(1985‐1999data).
GiventheclimaticandgeographicsimilaritiesbetweenAlaskanwaterwaysandthoseofthenarrowpassagewaysofthePacificNorthCoast,andinparticularthoseleadingupDouglasChannel,itisreasonabletoassumethattheriskofexperiencingamajorspillfromanoiltankerinthewatersofthePacificNorthCoastwillbesimilartothoseofAlaska;equatingto0.46spillsperBbblhandledovertheperiod1985‐1999.Intotal,11tankerspills≥1,000bblassociatedwiththetransportationofANScrudeoiloccurredbetween1977and1999.These11spillsaremadeupofthe240,000bblExxonValdezspill(1989)and10otherspillswhichwerelessthanorequalto15,000bblinsize.Overthis15yearperiod,threeANSspills(thatis,twootherspillsinadditiontotheExxonValdezspill)exceeded10,000bbl.AssumingthattheEnbridgepipelinewoulddeliverapproximately525,000barrelsofcrudeoilperdaytotankers2,thisequatesto31milliontonsofcrudeoilhandledeachyearor191.6millionbarrels.Atameanspillrateof0.46spillsperbillionbarrels(Bbbl)handled,thisequatesto0.09spillsperyear.UsingdataadaptedfromAndersonandLaBelle(2000),ChancalculatesthemeanspillsizeforTankers(AlaskaNorthSlopeCrude,atsea),of68,700bblsandconcludes(Table4)thatthereturnperiodforanaverageoilspillof68,700bblsis11.3years.Table4.OilSpillReturnPeriodsEstimatedontheBasisofAverageSpillVolumesandENGPTankerCapacity
AverageSpillSize
(bbls)
AverageSpillSize
(m3)
ReturnPeriod(years)
68,700 10,900 11.3
Weacknowledgethatthisspecificestimateofareturnperiodof11.3yearsforlargespillsisnotdefinitiveandisopentoreviewinthelightofnewinformation.Forexample,morerecent(post‐1999)averagespillratesgenerallycontinuetodecreaseandotherbasesfortheseestimates‐‐suchasusingtheworldwidespillratesratherthantheAlaskadata,mayprovideamorerelevantbasisforpredictingthefrequencyofENGPspills.Informationprovidedin2011byITOPF(theInternationalTankerOwners’OilPollutionFederation),forexample,showsthattheannualnumberofwhatarereferredtoas“major”oilspills(exceeding700tonnes)decreased
2Ourcalculationsreferenceonlythisinitialvolumeofbitumencrudeshipments,althoughtheENGPapplicationreferstoapossibleincreaseinvolumesshipped–from525,000bbls/dayto850,000bbls/day‐‐aspartofalaterexpansion.
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fromanaverageof7.8forthedecade1990‐99toanaverageof3.3forthedecade2000‐2009(source:ITOPFoiltankerspillstatistics,2010).YetevenifthisrevisedfactorwereintroducedintotheChanoil‐spillcalculation,itwouldstillbe“likely”thatamajoroilspillwilloccurduringthe30‐yearlifeoftheproject.Ontheotherhand,itmayalsobethat,withongoingglobalclimatechange,thefrequencyofextremeweathereventsmaybeescalatingandthatthiswillresultinincreasedestimatesoftheprobabilityoflargemarineoilspills.Inthisregard,ITOPFreportsthat,for2010,fourlargeoilspillswererecorded,which“isanincreaseonthefiguresfor2008and2009”,andthatfourmediummarineoilspillsalsowererecorded–resultinginatotalofeightmediumorlargeoilspillsfromtankersinthemostrecentyearforwhichinformationisavailable.Thecontrastbetweenthesereturnperiodsforlargespillsandthereturnperiodputforthbytheproponentisbothstrikingandhighlyconsequential.Bothestimatesareproducedbyreputableprofessionals,andbothpresumablyhavesomemerit.Althoughtheexpertiseoftheleadauthorisnotinthespecifictopicsofmarineoilspillsoroiltransportsafety,thedisparityraisedhererelatestomoregeneralissuesofacceptedpracticespertainingtothetreatmentofuncertaintyaspartofnaturalresourcedecisionmakingprocessesand,inparticular,thetreatmentofcompetingjudgmentsfromdifferentexpertsinwaysthateffectivelyavoidthemanyproblemsassociatedwiththephenomenonof“duellingexperts.”Inthenextsectionwethereforeintroduceasuggestedmethodologyforaddressingthequestionofspillfrequencythatmatchesthesignificanceofthetopicwithanappropriatelyrigorousanalyticalapproach.
3.1.2BestPracticesinElicitingJudgementsfromExpertsRegardingtheFrequencyandMagnitudeofMarineOilSpills
Bothoftheoilspillestimatesnotedaboveareproducedbyexperiencedprofessionals,usingacombinationofdataandexpertjudgment.Theyleadtostrikinglydifferentresults.Thisisnotsurprising;thereisalargeandwell‐citedbodyofresearchontheroleandfallibilityofexpertjudgmentinpredictingoutcomesunderconditionsofhighuncertainty(Burgman,2004).Whatissurprising,givenEnbridge`sacknowledgementthataspillwouldresultinmultipleadverseandsignificanteffectsandthenoveltyandlackofexperienceassociatedwithtransportingbitumen(orcondensate)inWrightSoundandotherareasneartotheBCcoast,isthefailuretosubmittheestimatesofspillprobabilitiestoamorerigorousassessmentandtobemoretransparentinthedescriptionsoftheiranalysis.
Acommonapproachusedtoestimateuncertainoutcomes,particularlywhenthepotentialconsequencesofroutineoraccidentaleventsaresevere,istocombineevidencefromexistingdatawithinsightsfromrelevantmodelsaspartofaformalprocesstoelicittheopinionsofindividuals3recognizedasexpertsonthetopic.Theexpertjudgmentprocessinvolvesaskingadiversegroupofexpertstoreviewandsynthesizethefullrangeofrelevanttheoryandevidenceandthenprovidejudgmentsabouttheuncertainoutcomesofconcernintheformofprobabilisticestimates(Morgan&Keith,1995).Formalpracticesfortheelicitationofexpertjudgmenthavebeenwidelyusedindecisionanalysisinarangeofapplicationsoverthepast
3Akeytothesuccessofanyexpertjudgmentprocessistheselectionofmultipleexpertsrepresentingdifferentaffiliations,perspectives,experiences,andknowledgesources.
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threedecades,includingarangeofbusinessapplicationsaswellasenergyandenvironmentalpolicyproblems(vonWinterfeldtandEdwards,1986;MorganandHenrion,1990;Budescu,Broomell&Por,2009).
Researchandpracticeinapplieddecisionanalysisandbehaviouraldecisiontheoryhaveresultedinthedevelopmentofwidely‐acceptedelicitationprotocolsdesignedtoimprovethequalityandtransparencyofjudgments.Theseprotocolsusearangeofbehaviouralandnumericalmethodstostructure,elicit,combineandcommunicatethejudgmentsofexperts.Theyimprovetheperformanceofexperts(accuracyoftheirjudgments)throughtraining,calibration,feedback,consistentcommunicationformats,awarenessofmotivationalandcognitivebiases,andthesequencingandframingofelicitationandverificationquestions.Whilethemethodsmostapplicabletoanygivensituationmayvary,thereiswideagreementonthefollowingcorecharacteristics:
‐ Awell‐designedquestionthatisunambiguousandfocusedonquestionsoffactratherthanvalues;
‐ Selectionofmultipleexpertsrepresentingdifferentdisciplines,affiliations,worldviews
andknowledgesources;‐ Carefulpreparationofexpertsincludingtraininginbiasawarenessandavoidance,
calibrationandexposuretorelevanttechnicalmaterials;
‐ Documentationofexperts’conceptualmodels–differentexpertshavedifferentconceptualmodelsabouthowsystemsworkandhowquantitiescanbeestimated.Byelicitingjudgmentsfromexpertswithdifferentmodels,amorecompleteunderstanding
oftherangeofpossibleoutcomesisachieved.Thedocumentationofthesemodelsimprovesthetransparencyandreplicabilityofjudgmentsandfacilitatespeerreview.
‐ Useofastructuredelicitationprotocolthatusesbestpracticesinthesequencingand
framingofquestionstominimizebias;‐ Theelicitationandreportingof(atminimum)quantitativeprobabilisticexpressionsof
impact,includingbotha“mostlikely”estimateandplausibleupperandlowerbounds,
sothattheexpertis90%confident(i.e.,9timesoutof10)thatthe“true”value–whichwillonlybecomeknowninthefuture–wouldfallwithinthespecifiedrange.
‐ Thedocumentationofconditionalizingassumptions–underwhatconditionstheupperandlowervaluesoftheelicitedrangemightoccur.
‐ Elicitationandaggregationmethodsthatusebothindividualelicitation(topromoteindependentthinking)andgroupdeliberation(topromotelearning).
Theelicitationanddocumentationofarangeofjudgmentsfromdifferentexpertsallowsdecisionmakerstogainafullunderstandingoftheuncertaintyassociatedwithaparticularquestion.Sometimesthiskindofexpertprocessleadstoareductioninuncertainty–asexpertsagreeonthebestdatasetstouseforexample,orlearnfromeachother,reducingtherangeofpossibleoutcomesintheirfinaljudgments.Attemptstoreachafalseconsensusamongexpertsshouldbeavoidedhowever;sometimesdecisionmakersneedtoacceptthatuncertaintyishighandmakeadecisionbasedontheirrisktolerance.
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GiventhemagnitudeofpotentiallossesassociatedwithamajoraccidentaloilspillandthelargediscrepancybetweenthesetwoestimatesofthefrequencyofENGPmarineoilspills,webelievethataformalexpertjudgmentprocessiswarranted.Wewouldexpectthatasuitableprocess,onethatwouldmeettheexpectationsofriskmanagementprofessionalsandutilizeadefensiblemethodologyappropriatetothesignificanceoftheissue,wouldinvolve:
‐ Identificationof3‐7expertswithadiversityofexperienceinmarineoilspills,spill
responseandmitigation,tankeroperationsandacombinationoflocalandglobalknowledge;
‐ Structuringoftheelicitationbyadecisionanalysisprofessionalwithexpertisein
technicalelicitationandintegration;‐ Individualinterviewstorecordmentalmodelsandelicitprobabilisticjudgmentsabout
thefrequencyorreturnperiodofoilspillsofvaryingsizesundervariousconditionalizing
assumptions;‐ Aggregationofresultsbyatrainedanalystsothattheycanbemeaningfullycompared;‐ Aworkshopofexpertstoexploreareasofagreementanddifference,openlydiscussthe
rationaleandbasisforjudgments,synthesizeresultsandagreeonkeymessagestodecisionmakers.
Giventheavailabilityofwell‐establishedandbestpracticeswithrespecttoexpertjudgment,therelativeeasewithwhichtheycanbeelicited,andthesignificanceofconsequencesintheeventofalargemarineoilspill,inouropinion–andbasedonstandardsandpracticesusedinmanysimilartypesofdecisioncontextsinCanadaandintheUS‐‐thedevelopmentofamorecompleteunderstandingofspillprobabilitiesofdifferentmagnitudesisreadilyachievableandwouldaddsignificantlytothequalityofinformationavailabletoCrowndecision‐makers.
3.1.3Thebottomline:Whatisanacceptablelevelofmarineoilspillrisk?
Riskestimatesarealwaysacombinationofestimatedprobabilitiesandconsequences,bothsubjecttouncertainty.Howprobabilitiesareinterpretedvarieswiththeexpectedconsequencesofactionorinaction:a15%probabilitythatitwillraintodaymaybethoughtlowenoughthatanindividualwouldgoofftoworkwithoutarainjacketorumbrella,buta15%probabilitythateatingaforagedmushroomwillresultindeathissufficientlyhighthatthissameindividualwouldnoteatthemushroom.Fortheseriskmanagementissues,thebottomlineis“atwhatprobabilitydoestheriskbecomeunacceptable”andthisquestioncannotbeansweredwithoutreferencetotheexpectedconsequences:inonecasewegetwet,intheothercasewedie.
ThebottomlineriskmanagementquestionforENGPremains“atwhatprobabilitydoestheriskofanoilspillofaspecificsizeorrangebecomeunacceptable?”Enbridgehasacknowledgedthattheconsequencesofamajormarineoilspillwillbe“significantandadverse”,butfailtoconducttheminimumrequiredanalysesbecausetheyclaimthattheprobabilityissolowastoconcludethataspill“isnotlikelytooccurduringthelifeoftheproject”(ENGresponsetoFederalIR2,page188).InmakingthisclaimweassumeEnbridgeisrelyingontheCEAArequirementthatthedeterminationofsignificantadverseeffectshingesonaconclusionthatadverseeffectsare“likely,”whichisopentointerpretationbecausetheCEAAdoesnotprovideaquantitative
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probabilityrangeforwhatconstitutes“likely”and,therefore,whatwouldresultinanimpactbeingdeemedsignificant.4Nevertheless,fromthestandpointofbothcommonsenseandacceptedpracticesthroughouttheworldwhenmakingdecisionsaboutlargeenergydevelopments(andreferencingexamplessuchastherainjacket/mushroomexampleabove),itisclearthateveneventsthatareeitherformally“unlikely”or“notlikely”–onesthatwilloccurlessthan1/3ofthetime,accordingtostandardpractice–maystillbehighlysignificantfromthestandpointofmakinginformedriskmanagementdecisions.
SupposethatafteramorethoroughreviewofthemarineoilspillhistoryandthesafeguardsproposedbyENGPformarineoiltransportation,anexpertpanel(assuggestedintheprecedingsection)usingstandardandwell‐documentedmethodologiesagreesthatthe“bestestimate”ofreturnperiodforalargespillis150years‐‐anumberintermediatetothetwoestimates(byEnbridgeandbyDr.Chan)discussedabove–witha90%confidencerangeofbetween75and210years.Withaplanned30‐yearlifeoftheproject,thiswouldmeanthattheestimatedprobabilityofalargeoilspillduringthelifeoftheprojectisabout20%,with90%confidencethatthetrueprojectlifetimeprobabilityofalargespillisbetweenabout15%and40%.Noneoftheseestimateswouldsettheprobabilityofalargespillashighas50%,whichmeansthat(usingtheapplicant’slogic)aspillwouldnotbelikely–thatis,it’sprobabilityofoccurrence<.5.However,giventhemagnitudeoftheconsequencesofanoilspill–longtermandpotentiallyirreversibleimpactsonvaluedmarinespecies,thewell‐beingandperhapscontinuedexistenceoftheGitga’atNationandothercoastalFirstNation,andthereputationofBritishColumbia(discussedinthenextsection)–itisnotobviousthatan“unlikely”oreven“veryunlikely”(p,.1,accordingtocommonpractice)largespillfrequencyissufficientlyimprobablethattheENGPshouldreceivepermissiontoproceed.
Asananalogy,supposethatanexpertanalysisshowedthatthereservoirbehindalargedambeingproposedforthehillsaboveamedium‐sizedcity(oraglobally‐recognizedheritagesite)wouldexperienceacatastrophicfailureshouldamajorearthquakeoccur,andreliabledatashoweda20%probabilitythatanearthquakeofthismagnitudewouldoccuroverthenext30years.Itishardtoconceiveofanyscenariowherebytheresponsiblepublicofficialswouldconcludethatconstructionofthereservoirshouldproceed.
Insummary:Oncetheconsequencesandprobabilityofanoilspillhavebeenexaminedusingmethodsconsistentwithprofessionalstandards,thereremainsthequestionofwhetherornottheresultingriskisacceptable.Theanswertothisquestionisavaluejudgmentthatwillbeinformedby,butnotansweredby,science;instead,theacceptablelevelofriskwilldependontheestimatesoftheassociatedbenefitsandjudgementsbydecisionmakersofriskacceptabilitybasedontheirweighingofthesecostsandbenefitsandtheirsubjectiverisktolerances.
4Wenotethatthereexistsarichtheoreticalandappliedliteratureonthequantitativeinterpretationofverbalprobabilities(e.g.,Budescu,Broomell&Por,2009),whichunfortunatelyisignoredinboththeCEAAcriteriaandtheENGPapplicationmaterials.
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3.2IncorporatingPerceptionsofRisks
Thissectionexaminesthreeeffectsrelatedtoperceptionsofprojectrisks,noneofwhichhasbeenaddressedadequatelyaspartoftheENGPapplicationmaterials.Theseare
− PsychologicalandrelatedhealthriskstomembersoftheGitga’atNationandothergroupsasaresultoftheirperceptionsoftheproject’sroutineoperationandpossibleaccidentaloilspills,includinglivinginfearandotherriskfactorsrelatingtothecharacteristicsoftheENGP;
− Economicriskstothelocalandregionaleconomiesasaresultofstigmaeffectsonlocalproductsandresources,forexampleadverseeffectsoneco‐tourismrevenuesandsalesofproductsfromtheNorthandCentralCoasts,includingsalmonandhalibutandothermarineresources;
− ReputationalriskstotheProvinceofB.C.ortoCanadaasaresultofchangesinperceptionsintheaftermathofaprojectapprovalortheoccurrenceofoilspillsinthemarineenvironment.Thisincludespossibledramaticreductionsinthenon‐usevaluesassociatedwithretentionofapristineenvironmentinthenorthwestBCcoast.
3.2.1Psychologicalandrelatedhealtheffectsofriskperceptions
PerceptionsofrisksassociatedwiththeENGPprojectwillaffectmembersoftheGitga’atcommunitythroughavarietyofpsychologicalandphysicalchannels,asdiscussedintheaccompanyingHBBCreportsonculturalimpacts,socialimpacts,andhealthimpacts.ThreeENGPcharacteristicsareexpectedtoresultinunusuallyhighlevelsofperceivedrisk.
First,thecombinationofmaterials(oilandcondensate)andthemodeoftransit(largemarinetankers)advancedbytheENGPcreatesatextbook‐perfectexampleofanunusuallyhigh‐riskperceptionssituation.Ascarefullydescribedinworkdevelopedoverthepastseveraldecades(Slovic,1995),andwithmanyofthekeystudieshavingtakenplaceinthecontextofenergyinitiatives,themagnitudeofperceivedrisksiscloselycorrelatedwiththeoccurrenceofasmallsetofriskfactors.AlthoughnodetailedstudiesofriskperceptionshavebeenconductedintheGitga’atcommunity,thissetoffactorsincludestheextenttowhichaproject,activityortechnologyisviewedasresultingin:
− involuntaryexposuretoimpacts;− risksthatmayprovecatastrophictolocalpopulations;− contaminationorillnessesthataredreaded(e.g.,cancers);− effectsthatarenotwellknowntoscience(e.g.,persistenceofcontamination);− effectsthataredelayedoroccurovertime;− risksthatarelong‐lastingandmaybeimposedonfuturegenerations.
Importantly,thesecharacteristicsalsomayaffecttheperceptions(andthereforethewell‐being)ofmanyotherpeoplelivingontheNorthwestCoastofBCand,tosomedegree,peoplelivinginotherpartsofcoastalBC(includingVancouverandVictoria)aswellasotherpartsofCanadato
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theextentthattheirperceptionsofBC’snorthwestcoastasapristineenvironmentarealteredbyapprovalandstart‐upoftheENGPproject.
Second,andparticularlyforresidentsofHartleyBayorvisitorstotheGitga’atTerritory,thepresenceoftankerswillbehighlyvisible.Incontrasttotherelativelylow‐keyvisualandperceptualimpactsofthepipelineitselfformanyoftheinteriorBCandAlbertacommunitiesthroughwhichoilwillbeshipped,thetankervesseltrafficcarryingbitumentoAsianmarketsandreturningwithcondensatewillimpactthedailylifeandperceptionsforpeoplelivingatorvisitingmarineareasneartotheentranceoftheDouglasChannel.Thisdailyproximitytotankersmeansthat,atleastforsomeindividuals,therewillbelittleescapefromwhathasbeendescribedas“livinginfear”–thetankertrafficandanyassociatednoiseorwakeswillserveasaconstantreminderthatformerlypristinecoastalareashavebeenalteredandthat,atanymoment(asaconsequenceofanaccidentalspill),lifeasitalwayshasbeenmaysuddenlychange.
Third,itisexpected(andsupportedbyresultsoftheGitga’atsurvey,asreportedintheHBBCSocialandCulturereports)thatresidentsofthenorthwestBCcoastingeneral,andmembersoftheGitga’atNationlivinginPrinceRupertinparticular,areunusuallysensitivetorisksassociatedwithbothroutinetankertrafficandpossibleaccidentalmarinespillsofbitumencrudebecauseoftheirrecenthistorywiththesinkingoftheBCferryvesseltheQueenoftheNorth,whichranagroundonGilIslandinWrightSoundinlateMarch,2006.Thevessel‐‐loadedwith225,000litresofdieselfuel,15,000litresoflightoil,3,000litresofhydraulicfluid,and3,200litresofsterntubeoil–sankwithinonehourofrunningagroundand,overthepast4.5years,hascontinuedtodischargefuelproductsintothemarineenvironment.FromthestandpointoftheGitga’atpeople,andasnotedinthesurveyresultssummarizedintheaccompanyingHBBCreportonSocialimpacts,thesinkingoftheQueenoftheNorthremainsahighlysalientandsignificantevent.Inthelanguageofriskperceptions,thesinkingishighlyavailable–aneasilyrecalled,close‐at‐handadverseexperiencethathascontributedtoastateof“livinginfear”becauseitinvolvesalowprobabilityyethigh‐consequenceeventthat,despiteofficialassurancestothecontrary,actuallydidoccurandwithseriouseffectsontheenvironment,health,andwell‐beingoftheGitga’atcommunity.Ifa“safe”BCFerryrunsagroundonawell‐documentedisland,thenwhynotalsoafarlarger“safe”tankercarryingbitumencrudefromtheEnbridgepipeline.
3.2.2Economiceffectsofriskperceptions
Adverseperceptionsofriskcanresultinsharpdeclinesinthevalueofeconomicactivitiesandproductsasaresultofthembeingmarkedasstigmatizedandthereforeconsideredtobeinferioror,attheextreme,tobealtogetheravoided.Stigmaeffectsareparticularlydevastatingtotheextentthatsomethingwhichoriginallywasconsideredtobepositiveandgood–aproduct,anarea,oratechnology–isshunnedoravoidedbecausethesepositiveperceptionshavebeenoverturnedandwhatwasonceconsideredtobegoodordesirableisnowcontaminated.Well‐knownexamplesincludetechnologiessuchasnuclearenergy,oncethoughttobeahighlypromisingsourceofcheapandsafepowerbutnowseverelystigmatized;placessuchasportionsofthecoastlinesinsouthernFrance,Alaska,andLouisianaintheaftermathoftheAmacoCadiz,ExxonValdezandDeepwaterHorizonoilspills,orproductssuchasapplesformanyyearsafterscaresassociatedwithuseofthegrowthregulatorAlar(Gregory,
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Slovic&Flynn,1995).Ineachofthesecases,publicperceptionsofriskinitiatedbyaneventthatcapturedtheimaginationofthepublic–aradiationleak,anoilspillintothemarineenvironment,orreportsofsicknessamongconsumers–resultedinlossesofhundredsofmillionsorbillionsofdollarstoindustryandtotheaffectedworkersandtheircommunities.Stigmathus“remindsusthattechnology,liketheRomangodJanus,offerstwofaces:oneshowsthepotentialforbenefit,theothershowsthepotentialforrisk”(Gregoryetal.,1995).
AnobviouspotentialvictimofstigmatizationfromtheENGPisthetourismindustryintheGitga’atTerritory.Asnotedintheaccompanyingeconomicimpactsreport,touristsaredrawntotheGitga’atTerritorybyitswildnatureandbecauseitishometomanyrareandinternationallyrecognizedanimalsandplantssuchascougars,wolves,salmon,humpbackwhales,Steller’ssealions,grizzlybears,Kermode(“Spirit”)bears,andgiantwesternredcedar,andSitkaspruceinwhathasbecomeknownastheGreatBearRainforest.MuchofthetourismintheGitga’atTerritoryreliesuponthemaintenanceoftheseperceptionsandtheintegrityofthesenaturalfeaturesandwildlifepopulations.ThisreputationandtheassociatedrevenuesfromtourismwouldbeatriskfromtheENGPundereitherroutinetankeroperationsor,toaevengreaterdegree,followinganaccidentalspill.
3.2.3Reputationalandnon‐useeffectsofriskperceptions
Non‐usevaluesincludealtruistic,bequest,existence,andassociatedoptionvalues(Pearce,Atkinson&Mourato,2006).Thesevaluesaretypicallyestimatedbyeconomistsusingcontingentvaluationsurveysandsimilarinterview‐basedmethodologies(seeHBBCEconomyreport).Theunderlyingconceptisthatpeoplearewillingtopayforgoodsorservicesthatarenotpricedorsoldthroughconventionaleconomicmarkets–suchasthesecurityofknowledgethatapristineecosystemremainsintact,orthesatisfactionderivedfromseeingphotosoftheSpiritbear(asperthewidelyreadAugust,2011NationalGeographicarticles)–andthat,correspondingly,peoplewoulddemandcompensationforthediminishmentorlossofthesesamegoodsandservices.
Theexistenceofnon‐usevaluesissignificantinthecontextoftheENGPapplicationbecauseofthepotentialfordamage,eitherduetoroutinetankertraffic(whichcoulddiminishthepristinenatureofthearea)ortheaccidentalreleaseoflargeamountsofoilorcondensateintothemarineenvironment,totheGreatBearRainforest‐‐awildernessareaofglobalsignificancethatcontributestothereputationofCanadaasanationwithdiverseandprotectednaturalenvironments.FollowingoveradecadeofactivismbyenvironmentalgroupsandpartnerstheBCgovernmentdesignatedthearea(14,000km2oftheNorthandCentralCoasts)the“GreatBearRainforest”in2006.Thefinalagreement,negotiatedbetweenenvironmentalgroups,FirstNations,loggingcompanies,andtheBCgovernment,creatednewprotectedareas,establishedcollaborativeagreementsforlandmanagementandresourcedecisionmakingbetweenFirstNationsandtheB.C.government,andsecuredadditionalconservationfundingtosupportenhancedstewardshipandeconomicdiversification.
Whatdoesthismeanintermsofpossibleproject‐relatedcostsassociatedwithreductionsinnon‐usevalues?Althoughnoempiricalstudiesofthenon‐usevalueoftheGreatBearRainforesthaveyetbeenconducted(seeSection4.3oftheHBBCeconomicimpactsreportforadiscussionofnon‐usevaluechangesfollowingtheExxonValdezoilspill),twoillustrative
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estimateshelptodemonstratethesignificanceofpotentiallossesinnon‐usevalueduetotheENGP.
Afirstestimate,basedonothernon‐usevaluestudyresults,helpstoillustratethelikelymagnitudeofthepotentiallossesinnon‐usevalueiftheENGPapplicationwereapproved.Manystudiesofnon‐usevaluesinothercontextshaveestimatedannualhouseholdnon‐usevaluesof$25‐$85associatedwiththecontinuedprotectionofspecialnaturalresourceareas.Forexample,Loomis(1987)usedcontingentvaluationmethods(CVM)toestimatehouseholdnon‐usevaluesforarecreationallakeinCaliforniaof$42.71perhousehold,andSandersetal.(1990)estimatednon‐usevaluesof$81.96perhouseholdforpreserving15wildandscenicriversinColorado.ACVMstudybyCarsonetal(2003),basedonnon‐usedamagesoftheEVOSinPrinceWilliamSound,estimatedthenon‐usedamagesofEVOStobebetween$4.9and$7.2billion(in1991USD).Thesestudiesallusedwillingnesstopay(WTP)estimatesofvalue,whichmanyeconomists(Knetsch,2007)believeresultsinasignificantundervaluationoflossesascomparedtothetheoreticallymoreappropriatewillingness‐to‐accept(WTA)measureofvalue(typicallyexceedingWTPmeasuresbyafactorof3–10)5.TheEconomyreportestimatesthevalueofnon‐usedamagesfollowingamajoroilspillintheGitga’atTerritoryatbetween$1.1and$1.7billion(in2010$CDN)usingWTPmeasuresandbetween$3.3and$17.2billionusingaWTAmeasure(afterconversion).AlthoughcriticsquestiontheassumptionsofaCVMapproachandtheassumedprecisionofthesedollar‐basedquantitativeestimates(Kahneman&Knetsch,1992),itiswidelyacknowledgedthatmanypeoplewouldbewillingtopayapositiveamountinordertogainthegoodfeelingthatcomeswithsupportinga“goodcause”suchaspreservingapristinenaturalenvironmentor,morespecificallyinthiscase,helpingtoensureprotectionforthehomeoftheSpiritBear.
Asecondestimateassumesthatamajoroilspillwill‐‐atleastforseveralyears‐‐reducenon‐usevaluesassociatedwiththeareatozero.Assumingaconservativevalueof$25(basedonthestudyresultsnotedabove)forannualhouseholdnon‐usevaluesassociatedwithretentionofapristine(i.e.,noENGPtankertraffic)Gitga’atTerritory,thenthefollowingillustrativeestimatesofpotentialnon‐uselossescanbemade.
• AssumingonlyaCanadianmarketfornon‐usebenefitsassociatedwiththeGitga’atTerritory,thenbasedonapproximately15millionCanadianhouseholdstheestimatedannualnon‐usevaluecostsoftheprojectfollowingamajorspillwouldbe:15millionhouseholdsx$25/household=$375million(overtheaffectedperiodoftime).
• AssumingaUSaswellasCanadianmarketfornon‐usevalues,giventhatmanyAmericanstraveltothearea,thenbasedonapproximately165millionUSandCanadian
5UseoftheconceptuallycorrectWTAmeasurewouldestimatetheminimumdollarvalueindividuals’wouldacceptascompensationinreturnforrelinquishingtheirnon‐usevaluesoveraspecifiedperiodoftimeduetotankertrafficortheprobabilisticlossesassociatedwithamarineoilspill,ratherthanameasureofthesesameindividuals’willingnesstopaytopreventtheselosses.AdoptionofaWTAmeasurethereforeraisestheissueofhowtotreatthoserespondentswhorefusetoanswerthecompensationquestion,duetotheirunwillingnesstoacceptanyamountofmoneyinreturnforopeningthedoortoroutineENGPtankertrafficorpotentialoilspilllosses.
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householdstheestimatedannualnon‐usevaluecostsoftheprojectriseto$4.1billion(165millionhouseholdsx$25/household)overtheaffectedperiod.
• Eventhislattercalculationisconservative,inthatnon‐usevaluesassociatedwiththeGreatBearRainforestandtheGitga’atTerritorynowtapintoaworld‐widemarket.Thismeansthattheestimatedannualnon‐usevaluecostsofENGPwouldbehigher,beyondthisestimateof$4.1billion,totheextentthatthelossesexperiencedbypeopleoutsideofCanadaandtheUnitedStateswereincluded.
Thesevariousestimatesofnon‐usevaluecostsassociatedwithapprovaloftheENGPapplicationareillustrativebuttheyrefertoacomponentoftheproject’sevaluationthatisboth“real,”inthatitwouldcontributetoatruelossofwelfare6,andsignificant,inthatlossesareexpectedtototalmanybillionsofdollars.Inlinewithprovidinginformationforinformeddecisionmaking,furtherworkshouldbedonetodevelopamorerigorousestimateofthesevalues.Atminimum,theinclusionoflossestonon‐usevaluesduetoincreasedperceptionsofriskagainhighlightsimportantgapsintheENGPapplicationmaterialsandtheneedforacomprehensive“weighing”ofallthebenefits,costs,andrisksoftheENGPtoarriveatasoundestimateoftheoverallnetbenefitsoftheENGPproposal.
3.3AssessingNetBenefitsoftheENGP
TheENGPispromotedbyEnbridgeasprovidingverylargeeconomicbenefitstoCanada.AspartofVolume2ofitsApplication,EnbridgeestimatesthattheENGPprojectwillprovide:
‐ againof$270billioninCanadianGDP,oranaverageannualgainof$7.9billion;‐ anincreaseof$48billioninCanadianlabourincome,oranaverageincreaseof$1.4
billion;‐ againof$81billioningovernmentrevenues;‐ anincreaseof558,000person‐years(PY)ofemploymentinCanada,oranannual
averageincreaseofover16,000PY;and‐ “importantdiversification,optionandinsurancevalues”(Volume2,p1‐14).
Enbridgearguesthat,“fromaneconomicperspective,theProjectisclearlyintheCanadianpublicinterest”(Volume2,p1‐14).
Enbridge’sfiguresareimpressive,butastheyareproducedusingamethodwhichincorrectlyassumesthateconomicimpactsarethesameastheeconomicbenefitsoftheproject,theyprovideverylimitedperspectiveonthepublicinterestvalueoftheproject.Asnotedearlier,EconIAusestechniquessuchasinput‐outputmodelling,economicbaseanalysis,andmultiplierstoestimatedirect,indirect,andinducedeffects.WithoutanunderstandingofthemechanicsandassumptionshiddenwithinEconIA,areaderoftheENGPapplicationmaybemisledintoacceptingtheimpressiveresultscomingfromEconIAandfailtoseethat(a)EconIAmethodstendonlytoprovideanindicationofaproject’sgrosseconomicimpactsinsteadofitsneteconomicimpacts,andthat(b)manykeyimpacts,includingtheproject’sneteffectsonawiderangeofeconomic,environmental,social,healthandculturalvalues,areomittedfromthe
6Wenotethattheassessmentofdamagestonon‐usevaluesforlargeoilspillsisrequiredundertheU.S.DepartmentofInteriorregulationspromulgatedundertheOilPollutionPreventionActof1990.
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ENGPanalyses.ThreedeficienciesofEconIAmethods(discussedinmoredetailintheHBBCEconomicImpactsreport)highlighttheseprojectassessmentproblems.
AfirstproblemisthatinEconIAitisassumedthattherearenoconstraintsonprojectinputssuchalabourandcapitalforprojectdevelopment(ArmstrongandTaylor,2000ViningandBoardman2007).Whenusedforthepurposeofinformingdecisionmakersabouttheneteconomicimpactsofaproject,EconIAincorrectlyassumesthattherearenoopportunitycostsassociatedwithprojectexpendituresbecauseprojectresources(suchasinvestmentcapitalandlabour)areidleandotherwisewillnotbeused.ThusinEconIAprojectexpendituresareeffectivelyconsideredbenefitsandalljobslinkedtotheprojectareassumedtobeincrementalandnew.Inotherwords,inEconIAnoconsiderationisgiventocurrentusesoflabourandcapital(eventhoughmostlabourandinvestmentcapitalinCanadaisemployed)ortotheiralternativeuses.Althoughlargeprojectsundeniablyhaveeconomiceffectsextendingoutintothebroadereconomy,EconIAalsoincorrectlypresentsindirectandinducedimpactsasincrementaleconomicbenefitswhereasmostoftheseeffectsaremerelypaymentsforsuppliers’opportunitycosts.Forexample,purchasesbypipemanufacturersofsteel(anindirecteffectofEnbridgebuyingpipe)reflecttheopportunitycostsofsteel–thissteelcannolongerbeusedforsomethingelseandthustheimpactisacosttosociety,notabenefit.
AsecondissueisthatEconIAisfocusedonanarrowsetofeconomicindicatorsofprojectssuchasGDP,labourincome,governmentrevenue,andemployment.Althoughtheseindicatorscanbeassociatedwithsocialwell‐being,theyarenotnecessarilyso.AclassicexampleisGDP:oilspillsareexcellentwaystoboostGDP,asarewars.GDPmeasureseconomicactivitybutitdoesnotdistinguishbetweendesirableactivityandnon‐desirableactivity.EconIAalsoignoresenvironmental,cultural,social,andotherimpacts,eventhosethathaveobviouseconomicmanifestations,suchasthepublichealthcarecostsofalcoholisminducedbyunemploymentandthepublichealthcarecostsofairpollution‐inducedasthma.Theomissionofthesenon‐economicimpactsisparticularlyalarmingfromtheperspectiveofaneconomysuchasthatoftheGitga’atNation(andmanyotherFirstNationsinCanada),forwhomnon‐marketandnon‐monetizedproductionandtradingmechanismsarehighlyimportant(Nadasdy,1999).Afarwidervarietyofprojectimpacttypescanbeconsideredthroughthelensofcost‐benefitanalysisandothermulti‐accounteconomicimpactassessmentmethods{Pearce,2006)andastillwidervarietyofprojectimpactsthroughtheuseofqualitativeandquantitativedecisionanalysismethods(Turneretal.,2008;Gregory,Failing&Harstone,2008).
AnexampleofthistypeofomissioninEconIAisthedamagecostsofgreenhousegasemissions(GHGs)associatedwiththeENGPproject.SincetheENGPhasarguedthatoneofitsimportantbenefitsistoenableincreasedbitumenproductionconsistentwithgrowingglobaldemandforrefinedpetroleumproducts,itislogicaltoattributetheGHGemissionsassociatedwiththeincrementalbitumenproductionoftheproject,throughtoandincludingconsumption,inGHGdamagecostcalculationsasanenvironmentalexternalityoftheproject.UsingalifecycleGHGemissionfactorof500kgCO2eperbarrel(IHSCERA,2010)andaGHGdamagecostfactorof$50(2005USD;Tol.2005),theGHGdamagesoftheprojectareestimatedtobe$6.3billionayear$2010CDN).AlthoughtherearedebatesinGHGdamagecosting,concerningthemagnitudeofthedamagecostfactorandwhetherlifecycleemissionsshouldbeusedoronlyproductionemissions,anannualcostofthismagnitudecannotdefensiblybeomittedfromjudgementsconcerningthepublicinterestnetbenefitsoftheproposedENGPdevelopment.
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AthirdandrelateddeficiencyofEconIAisthatittendstoonlyexamineonesideofthebalancesheet.Positiveeconomiceffectsareexamined,butthenegativeeconomiceffectsofprojectstendtobeignored.Aclassicexampleisgovernmentrevenue.AsshowninTable2(Section2.2.2),pipelineprojectsmayleadtoincreasedsales,property,personal,andcorporateincometaxrevenueflowingtogovernments,butpipelinesalsocreateincrementalburdensongovernmentservicesandactivitiessuchasinfrastructuredemandsandenvironmentalmonitoring.
Insummary:Enbridge’suseofEconIAmethodstoconductitseconomicimpactassessmentresultsinapoorcharacterizationoftheENGP’seconomicimpactsandprovidesverylimitedinformationontheproject’seconomicbenefitsandpublicinterestvalue.Surprisingly,EnbridgeemploystheirEconIAresultsinisolationtoarguethepublicinterestvalueoftheproject,eventhoughthisdefinitionofpublicinterestisverydifferentfromthatintroducedbyeitherCEAAortheNEB.Underthesemandates,itisclearthatanyassessmentoftheENGP’spublicinterestbenefitsrequiresasystematicandcomprehensiveappraisalofthefullrangeofexpectedprojectimpacts,bothpositiveandnegative,acrossthemanydimensionsofenvironmental,cultural,social,health,andeconomicvalue.TheproblemswiththeENGPapplicationinthisregardstembothfromintentandinappropriatemethodology,inthatstandardassessmentmethods‐‐suchascost‐benefitanalysisormulti‐attributedecisionanalysis,ratherthanEconIA‐‐wouldneedtobeusedasaidstothisimportantdecision‐informingprocess.
3.4MitigationandCompensationEffectiveness
Intheeventofaspill,theproponentstates(seeNGresponsetoGitga’atIRNo1,p.49)that“…fairandpromptreimbursementofcompensationclaims..wouldsubstantiallymitigatebotheconomicandsocialcostsassociatedwithaspill.”TheENGPapplicationdescribestheproposedmitigationandcompensationapproachasincluding:
‐ thattankerswillbeaccompaniedbyescorts‐ thatharmsmustbedemonstratedquantitatively(Volume8C,p9‐26),‐ thatcompensationtocommercialfisherswillbebasedupontheirdemonstrationof
“directeconomicloss”(Volume8B,p13‐54),‐ thatcompensationtocommercialfishers,aboriginals,andcommercial‐recreational
lodgesandcharterswillbebaseduponpreviousyears’landings,harvests,andactivity(Volume8C,p8‐37);and
‐ thatcompensationwillbetimely(Volume8C,p9‐27).Yettheapplicationprovidesfewdetailsregardingwhatimpactswillbeeligibleformitigationorhowcompensationpaymentswillbedeterminedandignoresmanysuccessfulmitigationinitiativesundertakeninotherjurisdictions.ItalsofailstoaddressthekeypointthatneithertheleadresponsibilitynorthefinancialburdenforspillcleanupwillbebornebyEnbridge,whichgreatlyreducesincentivesforexploringmitigationoptions
Overall,theENGPmitigationstrategyreliesontheuseofescortsinallconfinedchannels(notfurtherdiscussedinthisreport)andtwogeneralmitigationmeasures,afisheriesliaisoncommittee(FLC)andmonetarycompensationpayments.Althoughbothstakeholdercommitteesandmonetarypaymentshaveahistoryofuseelsewhere,theirappropriatenessandlegitimacy
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asmeanstomitigatetheENGP’spotentialimpactsonmembersoftheGitga’atNationisopentoquestion.
3.4.1GeneraldeficienciesinENGPmitigationstrategies
WeacknowledgethatunderstandingthecomplexchangesandimplicationsoflossexperiencedbyAboriginalpeopleischallenging,forbothnativeandnon‐nativesocieties.YettheapproachtothemitigationofadverseprojecteffectsthatisoutlinedbyEnbridgefailstomeaningfullyaddresstherangeofanticipatedlossesandthusfailstomeetthemandatesofeithertheNEBorCEAAtoavoidsignificantadverseresidualharms.
AfirstgeneralcriticismisthattherangeofeligiblepotentiallossesisincompleteandfailstoincludemanyofthemostseriouspotentialimpactsoftheENGPontheGitga’atNation.AsoutlinedinmoredetailinotherHBBCimpactreviews,theseomissionsaresignificantinbothquantityandscope,cumulativelyincludingmanyofthemoreimportantcultural,social,health,andeconomicimplicationsoftheENGPfortheGitga’atNation.Theseomittedoronlypartiallydiscussedimpactsincludethreetypesofeffectsoftheproject:
− impactsthatalreadyareoccurring(e.g.,stressandworry,diversionoftimeandeffortawayfromotheractivitiestodealwithproject‐relatedconcerns),
− impactsthatarecertaintooccurshoulditbeapproved(e.g.,theadversehealthandsocialeffectsassociatedwithtankertrafficinterferingwithtraditionalharvestsorresultinginHartleyBayresidentslivinginfear,asrelatedtoseeingtankersnearbythatatanytimecouldrunagroundoraccidentallyspillcrudeoilintothemarineenvironment.
− impactsthatwouldoccuriftherewereanaccidentalmoderateorlargespillofoilorcondensate,whichwoulddamagemarineandterrestrialresourcesandadverselyimpactordestroyatleastportionsofthenormaldiet,culturalactivities,economiclivelihood,andsocialdynamicsoftheGitga’atNation.
AsecondgeneralcriticismisthattheENGPanalysesfailtofollowacceptedpracticesinthatthereisnoacknowledgementthatpotentialproject‐relatedgainsandlossesdonotaffectthewelfareorutilityofindividualstothesamedegree.AsfirstshownbyKahnemanandTversky(1979)‐‐workforwhichKahnemanlaterwasawardedthe2002NobelPrize‐‐lossesfromareferencepoint(inthiscase,thepre‐projectstatus)arefeltmorestronglyandhaveagreatereffect,byasmuchastwoorthreetimes,thandothesupposedlycomplementarygainsassociatedwiththesameinitiative.Thispointisneitheracademicnoresoteric:itmeansthatthesimultaneousexperienceofgainsandlossesconventionallythoughttobeequivalent(e.g.,alossofsomethingworth$100andthegainof$100)doesnotbringtheindividualbacktotheirstartingpointbut,instead,leavestheindividual(orcommunity)experiencinganetand,insomecases,highlysignificantloss.EconomistsincludingKnetsch(2007;p688)haveemphasizedthepracticalimportanceofthispointbetween“whatpeopleperceiveasagainwhattheythinkofaspreventingormitigatingadeteriorationinenvironmentalquality”inthecontextofdevelopingappropriatemeansforcompensatingenvironmentaldamages;lawyersincludingSunstein(2000)haveemphasizedtheimportanceofthisdistinctioninthecontextofcourt‐sanctioneddamageawards.
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Third,wenotethatinrecentyearsprojectmitigationproposalshaveshiftedtowardsensuringthatlargenaturalresourcedevelopmentsdon’tonlyminimizenegativeimpactsthroughdesignchangesandpaymentsbut,instead,seektoaddressunderlyingissuesoftrust(e.g.,throughmeaningfulconsultationprocesses)andtopropelsocietypositivelytowardseconomic,environmental,andsocialsustainability.Thistrendinprojectassessmentsandmitigationproposals–inlinewiththeCEAAmandateto“promotesustainabledevelopment”‐‐ispartofaglobalshiftinprojectreviewtowardswhatisbeinglabelled‘sustainabilityassessment’(Gibsonet.al,2005).Inagrowingnumberofcases(suchasthereviewofthenickelmineproposedforVoiseyBay,Newfoundland)decision‐makershaverequiredthattheproponentsdemonstratehowaprojectwouldcontributepositivelytotheenvironmental,economic,andsocialsustainabilityofalocalorregionalareaoverthelongterm,asopposedtosimplydeterminingifnegativeimpactsareacceptable.
Aspracticalexamples,insteadofofferingtopaylocalfishersandtourismoperatorsforspecifiedlossesintheeventofadverseeffectsfromroutineoperationsoraccidentaloilspills,theproponentmightbuildintotheprojectbudgeteconomicactivitiesthatwouldbenefitcoastalFirstNations.Alternatively,theproponentmightfollowtheleadofAlyeska(aftertheExxonValdezspill)whichsince1990hassoughttobuildtrustandcapacityinlocalcommunitiesbyfundingthePrinceWilliamSoundRegionalCitizenAdvisoryCouncil(PWSRCAC).TheCounciljointlyparticipatesinmonitoringtankeroperations,providinginputtothedesignofmitigationmeasures,initiatingstudiesrelatingtospillprevention,andotheroversightactivities.SimplestatementsbyENGPthatthecompanyis“willingtoworkwithFirstNations”arenotsufficient:tobesuccessful,mitigationorcompensationinitiativeswouldneedtobedevelopedthroughstructureddialogueswiththeGitga’atNationandotherNorthwestCoastresidents,recognizingthatoffersofcompensationormitigationwhichappeareminentlyreasonablefromthestandpointofEnbridgemayreasonablyberefusedandconsideredunacceptablebythosetowhomtheyareoffered‐‐becauseoftheperceivedincompensabilityofsomeimpacts,becauseofthediscrepancybetweenperceivedgainsandlosses,orbecauseofissuesstemmingfromalackoftrust.
3.4.2FisheriesLiaisonCommittee
Theproponentnotesthattheprojectmaycauseavarietyofnegativeeffectsoncommercial,FSC,andrecreationalfishers,includingdisruptiontoaccessanddamagetogear,andproposesestablishmentofaFLCtoaddresstheseimpacts.AkeyproblemwithENGP’srelianceontheFLCasameansofmitigationisthelackofdetailonwhatitwoulddoandhowitwouldresolveissuesbetweenfishersandtheproject.Asaresult,stakeholdersandFirstNationresourceusersaresimplyrequestedtohavefaith,andtohavefaithinanunnamedentity–theproponent?theshipper?thefederalgovernment?.Forexample,onp9‐21inVolume8CwearetoldthatENGPwillestablishaFLCandtheFLCwillsolveproblemsby“providingaforum”fordiscussionofmeasurestobetaken.Asanotherexample,ENGPwritesonp12‐34ofVolume8Bthat
AssumingthatappropriatemeasurescanbedevelopedwiththeFLCtoschedulefishingactivitiesinspecificlocationstolimitconflictswithtankers,itisreasonabletoconcludethatcumulativeeffectsonmarinefisheriescanbelimitedandwillbenotsignificant.
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TheassumptionthatdiscussionswithinaFLCcanresolveschedulingissuesfortraditionalandcommercialmarineharvestersappearsoptimisticandisnotsupportedbyENGP’sadmission,elsewhereintheapplication,thatithasnotclearlyidentifiedwherefishingnowoccursandalsodoesnotknowthevolumeoffuturenon‐projectshippingtrafficortheroutesitwillfollow.ThusthroughouttheapplicationENGPprovideslittleconcreteindicationofhowtheFLCwillsolveanyproblemsthatENGPitselfexpectswillarise.
Addingtothisinformationgapisalackofinformationontheextentofuseofthismeasureelsewhereandtheeffectivenessofthismeasurewhereithasbeenused.Theapplicationlacksthisinformation,andinresponsestostakeholders’InformationRequestsENGP,respondedinasuperficialmannerlackinggroundinginsolidevidence(e.g.,seeIRUndated#3172,p185}.Forexample,tobuilditscasethattheFLCisaviablemitigationmeasure,ENGPstatedthattheOneOceanfisheriesliaisoncommitteeinNewfoundlandisa“success.”WithoutfurtherdetailsconcerningthetypesofclaimsthatOneOceanhashandledorhow“success”isdefined,thisassertionisinsufficientevidenceforthecapabilitiesofthismitigationmeasure.
3.4.3SpecificshortcomingsinENGPcompensationstrategies
TheprimarymitigationmeasureproposedbyENGPiscompensation.ENGPrepeatedlyindicatesthatintheeventofeconomicorsocialdamagesduetotheprojectitwillcompensateharmedparties(e.g.,Volume1,p11‐32;Volume7C,p8‐11;Volume8B,p13‐54;Volume8C,p9‐21,p9‐27),raisingcompensationmeasuresinitsdiscussionofpotentialimpactsontraditionalharvests,commercialfishing,andtourism,andintermsofbothroutineprojectimpactsandintheeventofamajoraccidentalspill.FromthisblanketcoverageitwouldappearthatENGPconsidersimpactstobothmarket(e.g.,reducedcommercialfishingrevenue)andnon‐market(e.g.,reducedtraditionalharvestsofseaweed)impactsascompensable.Theoverallmessage,therefore,isthattherewillbenosignificantadverseeffectsfromtheprojectevenintheeventofadverseimpacts,whetheronmembersoftheGitga’atNationorotheraffectedparties.
WedoubtthatthiswillbethecaseandfindtheEnbridgestatementshighlymisleading.Overall,wefindthedeficienciesinthecompensationalternativesproposedbyENGPtobeunacceptablefromthestandpointofeitherrecentoil‐spillexperiencesorinformeddecisionmaking,particularlyinlightofthewiderolethatENGPexpectsthismitigationmeasuretoplay.Sixpointsarekeytothisconclusion.
First,itisnotclearwhatexactlyconstitutescompensableeconomicharms.Dodirecteconomiclossesincludelostbusinesssuchascancelledtouristvisitsuponnewsofthespill?Howwilluncertaintywithrespecttothedeterminationofharmsbetreated?7Doeconomiclossesincludelostinvestmentopportunities(e.g.,inshellfishaquaculture)becauseofthelackofbusinesscertaintyassociatedwiththeproject‐relatedriseintankertraffic?TheGitga’atandtheirpartnershaveinvestedsignificantresourcesinplanningasustainablefutureeconomy(inlinewiththemandateprovidedunderSection4oftheCEAAto“…promotesustainable
7Wenotethat,intheaftermathoftheExxonValdezoilspill,plaintiffswereunabletorecovereconomicharmsarisingfromthespillforwhichtheextentoftheharmwasunknownatthetimeoftrial(in1994).Thisplacesasubstantialburdenonthosesufferingharms,particularlyincaseswhereakeyspeciesmightstillberecovering‐‐oftenwithuncertainsuccess‐‐severalyearsafteranoilspill.
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development”),includingdevelopingavarietyofneweconomicopportunities(includingaquacultureandculturallysupportedecotourism)andavarietyofnewculturalandsocialinitiatives(e.g.,participationofGitga’atyouthintheprovincialGuardianWatchmenprogram).Howwilllostfutureopportunitiesbeaddressedthroughtheproposedcompensationschemes?TolimitcompensationtoconsiderationonlyofcurrentorpasteconomicactivitiesviolatestheindividualandcommunityrightsoftheGitga’attomoveforwardwithneweconomicandsocialopportunities,whichasdiscussedintheaccompanyingEconomyreportreflectanumberofhistoricalenvironmentalchangesandquotaorlicensingarrangementsthattheGitga’atconsidertobeunfairandtowhichtheGitga’atNationisintheprocessofseekingchanges.
Inthiscontext,itissignificantthat,inrecenthearingsbeforetheUSSupremeCourttoaddresscompensationnearly20yearsaftertheExxonValdezoilspill(SupremeCourtoftheUnitedSates,ExxonShippingCompanyv.GrantBakeretal;January29,2008,No.07‐219),“…maritimelawprecludedrespondentsfromrecoveringcompensatorydamagesforsome[other]economicharmsthattheysuffered,suchaslossesinthevalueoffishingpermitsandfishingvessels,losttaxrevenues,anddamagetoareatourism.Maritimelawalsoprecludedrespondentsfromrecoveringanycompensatorydamagesfortheirnon‐economicharms.”Thesenon‐economicharmsconsideredtonotbeeligibleforcompensationincluded(No.07‐219,p.2)“highratesofanxiety,depressing,andpost‐traumaticstressdisorderamongarearesidentsexposedtothespill”aswellas(No.07=219,p.4)“harmscausedbythespilltothetouristindustry,asconcernsaboutthespill’seffectsdiscouragedothertouristsfromtravelingtotheregion.”Thus,asconcludedintheSupremeCourtrecord(No.07‐219,p.2):“Specifically,asaresultoftherestrictiveconceptionofdamagesundermaritimelaw,compensatorydamageswereavailableforonlyasubsetoftheactualeconomicharmsinflictedbythespill,andfornoneofthenon‐economicharms.”
Second,itisnotclearwhoexactlywouldbeeligibleforcompensationorwhatmethodsforestimatingcompensationwouldbeconsideredappropriate?DoGitga’atfishingvesselownersgetallthecompensationforlostrevenues?Whataboutvesselcrewsthatmightloseemployment,andthoseemployedintheseafoodprocessingindustryorothersectorslinkedtothecommercialfishingindustry?WhataboutGitga’atpersonswhonolongercanengageintraditionalharvestsbecauseofdecreasesintheabundanceorqualityoftheirfoods(seeaccompanyingHealthreport)orbecauseofrestrictionsonaccesstotheresourcerelatedtoincreasesintankertrafficandtheassociatedsecurityzones?
ArelatedpointconcernscompensationforotherresidentsoftheNorthwestCoastofBC,otherpartsoftheprovinceofBC,orotherprovincesinCanadawhosewelfarehasbeendiminishedasadirectresultoftheapprovaloftheENGPprojectandtheassociatedincreasesintankertrafficandprobabilisticfearofanoilspill.AsdiscussedearlierinthisreportandintheEconomyreport,suchlossesarereal,potentiallyverylarge–amountingtobillionsofdollarsinpotentiallossesperyear–andwouldincludebothdirectuselossessuchasplannedvacationstotheBCcoastthatnolongertakeplac(andinsteadalesshighlyvaluedalternativelocationischosen)andnon‐uselossessuchasthelossinoptionvaluesassociatedwithnolongersimplyknowingthatthisportionofthepristineBCcoast,alongwithafunctionalandintactGitga’atFirstNationthatisabletomaintainatraditionalandsustainablewayoflife,isprotectedfornowandforthebenefitoffuturegenerations.AsstatedinthewidelydistributedmagazineResources(Boyd,
‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐Gregory,Failing&Joseph.InformedDecisions:ENGPImpactsReviewreport.12‐15,2011.
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2011;34),“Ingeneral,thelargerandmorepotentiallyirreversiblepotentialecologicaldamagesare…thehighertheoptionvalue.”
Third,littleinformationisprovidedintheapplicationabouttheexperienceofimpactedindividualswithexistingcompensationschemesinotherjurisdictions.Whatofotheroil‐spillcompensationschemesthatmightexistontheEastCoastofCanada,inAlaskaortheNorthSea,intheGulfofMexico,andinotherareasaroundtheworldinwhichamajorspillhasoccurredorinwhichthereexiststhethreatofmajoroilspills?Howwellhavetheseschemestendedtowork,ordotheytendtofailthoseharmedbyspills?
Recentexperienceswithcompensationschemesrelatingtodamagesfromoilspillsdonotsupporttheconclusionthattheywillbeeffectiveinredressinginequitiesinthedistributionofprojectbenefits.Forexample,Thebaudet.al.(2004;p5)compare“compensationclaimed”to“compensationpaid”followingsixmajoroilspillsthatoccurredinEuropeduring2001andreportadifferenceofnearly6:1intheratioof“totalcompensationclaimed”ascomparedto“totalcompensationpaid.”Onereasongivenforthislargediscrepancyisthat,aspartofinternationalinstitutionsgoverningcompensationclaimsandpayments,“…claimsrelatedtoecologicaldamageareacceptediftheycanbemeasuredintermsoffinancialcostsincurredinassociationwith(reasonable)measuresofre‐instatementoftheenvironmentfollowingaspill”andtheyconcludethat,asaresult,manywidely‐acceptedevaluationmethods(includingcontingentvaluation,travelcosts,andbenefit‐transfertechniques)“cannotbeaccepted”(Thebaudetal,2004,p.9).LargedifferencesbetweencompensationclaimsandpaymentsalsooccurredinbothAlaska(followingtheExxonValdezoilspill)andintheGulfofMexico(followingtheBPDeepwaterHorizonoilspill).BecausetheENGPapplicationmaterialsfailtoclearlystatethebasisonwhichcompensationclaimsshouldbemadeandthestandingofdifferentassessmentmethods,theassumptionisthatsimilarproblemswouldbeencounteredbythoseseekingdamagesintheeventofamarineoilspillinWrightSound.
Fourth,theproposedlimitstocompensationofdifferenttypesarenotclearand,significantly,italsoisnotclearwhethertheseamountswillbesufficienttocoveranticipatedclaims.AsBoulton(2010)finds,therearelimitstothecompensationfundsavailableinCanada,andtheavailablefundsaresubstantiallybelowwhatwaspaidoutfortheExxonValdezspill.IsENGPcommittingtotakeonresponsibilityforaccidentalspillsonbehalfoftheshippersithirestotransportbitumenandcondensate,andthustogobeyondwhatcurrentCanadianmarineoil‐spilllawrequiresorwhatcurrentCanadianandinternationalcompensationmechanismsprovideinthecaseofaccidentaloilspills?
Fifth–andthisisveryimportantfromthestandpointoftheGitga’atNation–itisnotclearwhatmethodswillbeusedtocalculateharmstotraditional(non‐market)harvests.WillENGPusetheadmittedlyflawed(intermsofprovidingpartialandminimumlossestimates)replacementcostapproach,describedbothhereand(morefully)intheEconomyreport,orwilltheyinsteaduseanothermethod?Ifso,whatmethodswillbeselected?Whowillbemakingthesecalculations–willtheybedonebyanindependentboardorbytheproponentanditscontractors?AndhowwillENGPestimatethemonetarycompensationforgoodsthatarenotsoldinanymarket?Theonlyreplacementcoststhatwewereabletocalculatestemfromthefactthatsomeofthepotentiallyimpactedgoods(suchassalmon)arealsotradedinmarkets,butfortheGitga’atNationmanyofthemostsignificantenvironmentalresources–fromthestandpointofdiet,
‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐Gregory,Failing&Joseph.InformedDecisions:ENGPImpactsReviewreport.12‐15,2011.
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health,culture,trade,andsociety–arenotsoldinmarketsandhavenomarket‐basedequivalent.Thisissueisfundamentaltothecontinuedhealth–and,intheeventofprojectapproval,tothecontinuedexistence–oftheGitga’atNation.
Finally,atnopointintheapplicationmaterialsdoestheproponentclearlyidentifywhichpotentialimpactsoftheprojecttheyacknowledgetobelossesthatcannotbecompensated.TheimpactanalysesprovidedinthefiveaccompanyingHBBCreportsunderscoretheimplicationsofthislackofinformationtoinformeddecision‐making.Thebottomlineisthat,intheeventofamajoroilspillintheGitga’atNation’sterritory,theproponentfailstoaddressthevalidityofcompensatinganationofindigenouspeopleforasignificantlossintheirabilitytomaintainandtopracticetheircultureandtheirwayoflife.Compensationmaybevalidintheeyesoftheharmedpersonwhenthereexistsubstitutesfortheitembeingcompensatedorwhenreplacementscanbeboughtfromexistingmarkets.However,whentheitemslostordamagedarenotconceivedofinmonetarytermsandwhenthelossisviewedasirreplaceable,then(a)compensationcannotbemade“inkind”becausethereisnomeaningfulsubstitutefortheloss,(b)monetarycompensationmaybeseenasaninvalidmeansofmitigationtothevictimand,further,(c)monetarycompensationwillbeviewedasemotionallyoffensiveanddegrading.Thislatterpointintroducesimportantissuesintothediscussionofcompensationapproaches,issuesthatcanonlybeaddressedthroughdeliberationsthatmeaningfullyinvolvetheGitga’atcommunityandotherpotentiallyinjuredparties.
4. Conclusion
Intoday’sregulatoryenvironment,governmentandprivate‐sectorentitiesregularlydemandsubstantiallymoreinformation,ofsubstantiallyhigherquality,formakingevenminordecisionsthanwhathasbeenprovidedtotheJRPbytheapplicant.InthecontextofadecisionofthesignificanceoftheproposedENGPproject,themagnitudeofthemethodological,information,andpresentationgapsanddeficienciesisalarmingandrendersimpossibleaninformeddecisiononthequestionofwhetherandtowhatdegreetheprojectcontributestoordetractsfromthepublicinterest.
TheENGPapplicationfailstoaddresskeyCEAAandNEBcriteria,andfailstomeetacceptedstandardsofassessmentformajorenergyprojects,intermsofprovidingtheminimumlevelsofinformationrequiredtomakeinformeddecisionsaboutthebalanceofimpactsacrossthefullrangeofexpectedprojectbenefits,costs,andrisks.Specifically:
− Keypotentialconsequencesoftheproposedproject,importanttotheGitga’atNationandothercitizensofCanada,areomittedfromtheanalyses.TheseomissionsincludemanynaturalresourcesandecosystemservicesnottradedineconomicmarketsthatareofcriticalimportancetotheGitga’ateconomy,culture,andsocietyaswellasincreasedperceptionsofriskthatresultinlossestoeconomicvaluesandcommunitywell‐being.
− Aspartofitseconomicbenefitsandpublicinterestdiscussions,theapplicationincorrectlyassumesthateconomicimpactsarethesameaseconomicbenefitsandignoresmanycostsandrisksoftheproject.ThesedeficienciesininformationandmethodsusedtocharacterizetheoverallvalueoftheENGPresultinincompleteandmisleadinginformation.
‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐Gregory,Failing&Joseph.InformedDecisions:ENGPImpactsReviewreport.12‐15,2011.
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− MethodsusedtodeterminewhethertheprojectisinthepublicinterestfailtoconformtoeitherCEAAandNEBmandatesortoacceptedstandardsforevaluatingtheenvironmental,socialandeconomiceffectsoflargeenergyprojects.
− Summarymeasuresofimpactsignificanceareoftenpresentedwithoutexplanation;thisisparticularlytrueofmanyriskestimates,whichfailtoreflectthestandarddefinitionofriskastheproductofprobabilityandconsequence,furtherinformedbythevaluesandriskperceptionsofpotentiallyaffectedgroups.
− Theuncertaintyassociatedwiththeanticipatedbenefits,costsandrisksoftheprojectislargelyignoredaspartofquantitativeanalyses;thisistrueforsuchkeyprojectelementsasoilprices,environmentalimpacts,andboththefrequencyandanticipatedconsequencesofoilspills.
− Noevidenceispresentedastowhytheproposedprojectispreferredtootheralternatives,andnoevidenceispresentedthattheeconomic,social,cultural,healthorenvironmentaltrade‐offsbetweenconsequencesoftheproposedprojectanditsleadingalternativeshavebeenaddressedexplicitlyasrequiredbytheNEBActandstandardprojectevaluationpractices.
− Importanttrade‐offsrelatedtothedistributionofconsequencesamongthedifferentinterests–includingtheGitga’atNation,otherNorthwestCoastFirstNations,Enbridgeanditscontractors,andthecitizensofBritishColumbiaorCanada–arenotacknowledged.
− Conclusionsabouttheprobabilityofanaccidentaloilorcondensatespillarebasedonlimitedanalysesthatignorekeydataandfailtofollowestablishedbestpracticesforincorporatingthejudgementsofexpertsconcerningspillfrequenciesofdifferentvolumes.Inlightofthesignificanceofthepotentialconsequencesofanoilspill,thislackofrigorousanalysisintheENGPapplicationconstitutesacriticalomission.
− PerceptionsoftherisksoftheENGPandtheireffectsonlocalandnationaleconomicvalues
(bothmarketandnon‐use)andthepsychologicalandphysicalhealthofindividualsarelargelyignored.
− AnalysesoftheexpectedpotentialforeffectivemitigationandcompensationoftheadverseeffectsofanoilspillignoremanyinitiativesundertakeninotherjurisdictionsaspartofoilpipelinedevelopmentsandignorethekeypointthatneithertheleadresponsibilitynorthefinancialburdenforspillcleanupwillbebornebyEnbridge,whichgreatlyreducesincentivesforexploringinnovativemitigationoptions.
− AnaïveandoverlyoptimisticanalysisispresentedoftheextenttowhichcompensationcanoffsetthelossesthatmaybeincurredbytheGitga’atNationandotherNorthwestCoastcommunities.Availableinformationonthesuccessofsimilarcompensationprogramsdoesnotsupportaconclusionthatcompensationwillredresstheinequitabledistributionalimpactsoftheproject.
‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐Gregory,Failing&Joseph.InformedDecisions:ENGPImpactsReviewreport.12‐15,2011.
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