This is the sixth part of Carbon Cache, an ongoing series about nature-based climate solutions.

The millennia-old red cedars of the Great Bear Rainforest, and the western hemlock, Douglas fir and Sitka spruce rubbing at their shoulders, capture a million tonnes of carbon from the atmosphere each year, holding onto it as long as the giant trees stand.

Since 2012, the work of the trees and plants of B.C.’s coastal rainforest have been generating credits — one credit for every tonne of carbon sequestered — that are bought by the B.C. government, companies and individuals wanting to offset their carbon emissions.

The goal is to create an economy that doesn’t rely on cutting down these carbon-sequestering senior citizens. In turn, the carbon credit revenue has helped to fund Guardian Watchmen programs in nine coastal First Nations. These Indigenous guardians patrol the landscape and conduct fisheries management and species monitoring.

The Great Bear Rainforest carbon project is the blueprint for carbon offset programs in Canada. And with nature-based climate solutions gaining traction globally, quantifying the amount of carbon Canada’s natural landscapes hold is an increasingly important task.

A study published in the Proceedings of the National Academy of Sciences in 2017 found the simple act of preserving wetlands, forests and grasslands could provide more than one-third of the emissions reductions needed to stabilize global temperature increases below 2 C by 2030 under the Paris Accord.

The federal government is now working to develop a national offset standard for the first time. While offset programs already exist in some provinces and via voluntary carbon markets, the federal standard will mark a new era of carbon markets in Canada.

Another big change is firing up the potential for carbon markets, too: Canada is now including nature-based emissions and sequestration in its biennial reports to the United Nations.

“Previous to 2020’s biennial report, we did not include any nature-based emissions or sequestration in our carbon footprint that we report to the Paris agreement or to Canadians,”  Joseph Pallant, director of climate innovation at Ecotrust Canada, told The Narwhal.

“How crazy is that? This is like six months ago that this has been changed.”

Joseph Pallant, director of climate innovation at Ecotrust Canada, says the development of a national offset standard creates a major incentive for governments to protect nature.

What that means in practice is that when humans impact natural landscapes (by, say, cutting down a forest or destroying a wetland), those emissions are now counted as part of Canada’s carbon footprint.

Pallant said that while some people aren’t fond of the idea of commodifying nature, the development of a national offset standard, along with the inclusion of nature-based emissions in Canada’s climate reports, creates a major incentive for governments to protect nature.

For example, Pallant is working on a forest carbon economy fund that will allow communities to unlock the value of carbon stored on the landscape, offering them options for revenue beyond logging and simultaneously helping Canada meet its climate goals.

“The goal is to make improvements in nature actually affect the Canadian federal government’s bottom line,” he said.

Carbon offsets could also “massively” help fund new Indigenous Protected Areas, according to Pallant.

While the Great Bear Rainforest is the leading example of how carbon offsets can work, it’s also an example of how things can get, well, complicated.

The Great Bear agreement has faced challenges in recent years, with the credits established in the forest struggling to find buyers. Across the country, various carbon offset programs have so far failed to get off the ground due to lack of demand for offsets and hefty costs to get projects underway.

Here’s what you need to know about carbon offsets and nature-based climate solutions.

What are nature-based climate solutions?

Nature-based climate solutions can look like a lot of different things in practice: carbon offsets from forest protection, designation of Indigenous Protected and Conserved Areas and national parks, restoring coastal ecosystems like kelp forests or ranchers earning carbon credits for maintaining native grasslands on their properties, to name just a few.

What brings all of these concepts together is the ultimate goal of protecting or restoring nature in part due to its ability to store carbon.

Lisa Young — executive director of Unama’ki Institute of Natural Resources, which represents five Mi’kmaq communities on Cape Breton Island — noted that Indigenous people have been practising conservation for thousands of years but new opportunities are emerging through Canada’s desire to reduce emissions and protect biodiversity.

“Not only are they exploring those kinds of concepts around green economy that will also mitigate the impacts of what we’re doing to the climate, but also the land itself is healing that as well,” she says. “It’s a two-pronged kind of thing.”

Api’soomaahka, or William Singer, is working with Blood Tribe Land Management in southern Alberta to convert his cultivated land back to native grasslands. Photo: Amber Bracken / The Narwhal

How do you monetize nature-based climate solutions?

One of the most fundamental issues at play around carbon offset projects is how greenhouse gas emissions are counted — and, more crucially, not counted.

“Nature is currently managed as a resource,” said Larry Sault, president and CEO of Anwaatin, a company that works with Indigenous communities on carbon sequestration projects. “Its value is only realized by its destruction.”

The concept is fairly straightforward: identify and protect an ecosystem that would otherwise lose its carbon sink functionality due to human impacts, calculate the amount of carbon presently or potentially stored in it and sell credits for the carbon the ecosystem sequesters to other entities to offset their own emissions.

Offsetting can include improved management practices of forests, farmlands, grasslands and wetlands, among others.

The federal government’s 2020 design paper for options for a federal greenhouse gas offset system requires offsets to be quantifiable, additional to a business-as-usual scenario, incremental to other incentives and verifiable.

Carbon credits garnered from offsetting can be sold in two types of carbon market: regulatory compliance or voluntary. On the regulated market, buyers are purchasing credits because of requirements by law to keep their carbon emissions below a certain threshold. If they fail to stay below that threshold, they can buy credits to offset their overage. On the voluntary market, credits are purchased voluntarily — say, to offset the emissions (and guilt) from a flight or a conference.

In terms of how credits are verified on those two markets, there isn’t a major difference, Pallant said. Some voluntary markets have more rigorous standards than some regulatory compliance markets, and vice-versa.

In October 2019, the carbon offset registry Climate Action Reserve adopted the Canada Grassland Protocol for the voluntary market. The Canadian Forage and Grasslands Association, which supported the creation of the protocol, is now evaluating the protocol by working with about 50 private land owners through a four-year pilot program. Photo: Amber Bracken / The Narwhal

How do you create demand for carbon credits?

Currently, the B.C. government is the only province or territory that has committed to maintaining zero emissions, meaning the province itself purchases a significant portion of the made-in-B.C. carbon credits.

“It’s something other governments should pick up,” Pallant said. “It’s something where they can put their money where their mouth is and, importantly, it can seed the field for development of the other systems.”

The B.C. government recently announced a new five-year agreement to buy carbon credits from the Great Bear Rainforest, for example.

“By the government saying ‘we’re going to backstop demand’ and guarantee there’s demand for around 750,000 tonnes of emissions reductions per year in B.C. … that makes it worthwhile to set up a carbon offset system … and it creates a business case for Indigenous communities like the Coastal First Nations,” Pallant said.

As evidenced by the Great Bear agreement, this system can help build an alternative economy to resource extraction. Regulations that limit the amount of carbon industry can emit, such as cap-and-trade systems, also create demand because those companies that are unable to stay below the limit are forced to buy offsets.

Jordan Wilson, a Heiltsuk Coastal Guardian Watchman, aboard one of the nation’s monitoring vessels in the Great Bear Rainforest. Photo: Louise Whitehouse / The Narwhal

In Alberta, for example, there is a regulated market for carbon credits for companies that have to reduce their emissions under the province’s Carbon Competitiveness Incentive Regulation, which targets companies that emit 100,000 tonnes of carbon per year or more.

While B.C.’s government has committed to net-zero emissions, the cancellation of the province’s cap-and-trade program has been the source of the Coastal First Nations’ struggle to find buyers outside of government for Great Bear carbon credits. The province backed out of its cap-and-trade plan in 2011, meaning there’s no requirement for companies to keep carbon emissions below a certain threshold, so offsets are only sold to the government and on a voluntary basis to companies — resulting in a huge backlog of unsold credits.

Similarly, the cancellation of Ontario’s cap-and-trade system under Premier Doug Ford’s government in 2018 meant aspiring projects had only the voluntary market to sell into. It was a move that swiftly immobilized carbon offset programs that were in the works, said Jason Rasevych, president of the Anishnawbe Business Professional Association, which is working with several Ontario First Nations to develop carbon offset programs.

Putting a price on carbon stored by nature is an awfully complex task that has been attempted since the Rio Summit in 1992 and Kyoto Protocol in 1997 with varying success. Jessica Dempsey, a UBC geography professor and author of Enterprising Nature, said that most forest offset proposals have “failed miserably.”

“It seems simple: let’s just pay people not to cut down forests or clear bogs and then we’ll create an economic interest in it and it won’t happen,” she said. “But in reality, setting all of that up and monitoring it is really complicated and bureaucratic and costly and politically challenging.”

What is the federal government doing about carbon offsets?

Well, one of the biggest things they’re doing is mandating a price on carbon nation-wide through the Pan-Canadian Framework on Clean Growth and Climate Change. This creates the conditions for carbon offsets to potentially develop.

In early July, the federal government published a position paper on options for a federal greenhouse gas offset program. The government still has to develop a protocol for offset projects, which would include how emissions reductions should be quantified for each type of project — such as forest offsets — as well as monitoring and reporting throughout the project’s life.

Robert Gibson, professor at the University of Waterloo’s Department of Environment and Resource Studies, said the federal government’s new impact assessment legislation and strategic assessment of climate change includes a requirement for decision-makers to consider the direct impacts of a project on emissions and carbon sinks, but so far there has been “no serious effort” made to define how those considerations would be made or what implications they would have.

“We’ve been doing horribly on all matter of greenhouse gas considerations and assessments,” he said, noting that Environment and Climate Change Canada is expected to provide a technical guide to quantifying the value of a carbon sink in the near future.

An oilsands operation butts up against boreal forest in northern Alberta. Photo: Louis Bockner / Sierra Club BC

How can Indigenous communities tap into carbon markets? 

From Thunder Bay, Ont., Rasevych has watched the development of the Great Bear Forest carbon project closely.

“It’s something they do as innovators and leaders — and they are very inspiring for First Nations leadership in northern Ontario to look at and identify potential for opportunities here,” Rasevych said.

There’s no question that there are plenty of opportunities for Indigenous communities to build an economy around Great Bear-inspired protection of carbon sinks such as forests and wetlands. Canada boasts 2.7 million square kilometres of boreal forest, with 70 per cent of Indigenous communities located in forested regions.

Indeed, Indigenous-led, nature-based carbon offsets could be a pathway toward reconciliation — if they’re done right. (Australia’s Aboriginal Carbon Fund is working with the First Nations Energy and Mining Council in Canada to bring the concept here.)

“Given the overlap of Indigenous territories and carbon sinks in Canada, it is unlikely that nature-based solutions could be widely implemented without upholding Indigenous rights to lands and resources and respecting Indigenous governance and knowledge systems in climate change policy,” says a recent paper published in the Canadian science journal FACETS.

Sault of Anwaatin stresses the core challenge in bringing more carbon offset projects online is the matter of Indigenous jurisdiction.

He said many carbon-rich areas remain under provincial governance, and the only way to move forward on the issue is to honour the spirit and intent of treaties, resolve outstanding land claims and implement the United Nations Declaration on the Rights of Indigenous Peoples.

‘It’s like paradise for us’: the Cree Nation’s fight to save the Broadback Forest

John Cutfeet, former band councillor for Kitchenuhmaykoosib Inninuwug First Nation in northwestern Ontario and research fellow at the Yellowhead Institute, agreed: “All those activities like conservation and managing carbon sequestration are done and are premised on the fact that government owns the land.”

“But Indigenous people have said ‘no, we never gave up the land in those treaties, we need to share.’ As long as that whole notion that Indigenous people have no land is in place, that’s one of the biggest challenges that we’re going to have to overcome.”

Sault recommended the creation of agreements to ensure Indigenous people are the beneficiaries of revenues generated from offset programs — including a separate certification for offsets from Indigenous-managed lands, with explicit co-benefits such as Indigenous Guardian programs for fire management and pest control, or cultural revitalization including youth.

“Nature-based solutions policy and projects that are advanced without the partnership or consent of Indigenous Nations can generate significant opposition from communities who consider such actions as ‘carbon colonialism’ and a threat to inherent land rights,” noted the FACETS paper.

A river flows through an area of the Great Bear Rainforest known as the Kitlope. An innovative carbon offset program has helped to fund conservation in the forest. Photo: Alex Harris / Raincoast

What kind of challenges have people faced in creating carbon offsets?

Rasevych works with three Indigenous communities — Eabametoong, Marten Falls and Aroland First Nations — that collectively harvest and manage the Ogoki Forest, about 400 kilometres northeast of Thunder Bay.

He said the First Nations are looking to take the next step to explore an offset project around more ecologically sustainable logging but currently lack capacity to conduct a feasibility study and create an up-to-date inventory of the stored carbon, biodiversity and harvesting volumes in the region. Without that, Rasevych said it’s impossible for communities to properly evaluate the economic trade-offs between commercial forestry and carbon offsetting.

Some money was available for First Nations to get started on this work through Ontario’s carbon pricing framework — until it was cancelled. The scrapping of the cap-and-trade system, Rasevych said, pretty well put an end to the funding for communities interested in developing offset programs.

A year after the Ford government cancelled the cap-and-trade system, a team of scholars from the University of Guelph convened a gathering of representatives from First Nations, Indigenous communities and environmental groups from across the country to hash out the impediments and opportunities in Indigenous-led conservation and carbon storage.

The battle for the ‘breathing lands’: Ontario’s Ring of Fire and the fate of its carbon-rich peatlands

Mary-Kate Craig, a PhD candidate at the University of Guelph studying Indigenous carbon markets and one of the authors of the FACETS paper, helped to host the gathering. She explained more than a dozen key barriers that were identified by participants, including: a lack of clarity about how to actually make carbon offsets work, absence of carbon markets to participate in, and concerns around financial and organizational capacity of Indigenous communities.

There are also hard-to-meet requirements for verifying carbon offset projects that can be a hindrance to them moving forward, she said. The “additionality” requirement, for example, means proponents have to prove protection or restoration of a forest, grassland or wetland could only have happened through the offset project and not by any other means. So, if there’s no threat, there’s no offset.

And the project proponent has to ensure the carbon emissions mitigated by the project aren’t simply displaced elsewhere — a form of “carbon leakage.” So the onus is on the proponent to prove managing its forest for carbon offsetting, for example, won’t just result in another area logged.

In order for the Great Bear Forest Carbon Project to come to fruition, the province had to sign an “atmospheric benefit sharing agreement” with the nine First Nations behind the offset project. B.C. is so far the only province or territory to sign one of these agreements that establish clear rules about Indigenous ownership of carbon that’s sequestered by their land, and their subsequent ability to sell carbon credits.

Heiltsuk Guardian Watchman Jordan Wilson, right, prepares salmon during “Salmon Days” on Heiltsuk territory in Bella Bella, B.C. Photo: Louise Whitehouse / The Narwhal

It also lays out who gets the benefits. In the case of Great Bear, the Coastal First Nations agreement allocates 80 per cent of revenue from offsets to First Nations and 20 per cent to the province.

Other proposed projects are lacking this critical element.

Take the Poplar River First Nation on the eastern shore of Lake Winnipeg, for example. Over the last several decades it has worked to conserve its traditional territory of Asatiwisipe Aki and collaborate with three nearby First Nations to establish Pimachiowin Aki, a 29,040-square-kilometre UNESCO World Heritage Site, in 2018.

A recent report by the International Institute for Sustainable Development explained that the area’s forests and wetlands store an estimated total of 444 million tonnes of carbon. Establishing a “payment for ecosystem services agreement,” through which the provincial government pays the nation for its work to conserve this carbon sink on a per-hectare basis, would enable a massive range of opportunities for the First Nation, including species and water monitoring, land-based education and jobs in fisheries, tourism and stewardship.

Establishing a carbon finance benefit-sharing agreement between Poplar River First Nation and the Government of Manitoba would mean offsets for the carbon sequestered by these lands could be sold to finance the First Nation’s work.

“They have so much information around the carbon, and they have done so much work to try to create a functioning offset,” said Mary-Kate Craig, a PhD candidate at the University of Guelph studying Indigenous-led carbon markets.

Yet so far, Poplar River hasn’t been able to formalize a conservation economy, which Craig said is “to do with the provincial government not giving them what they need to actually create that as a project.”

The International Institute for Sustainable Development found the forests and wetlands in Pimachiowin Aki store an estimated total of 444 million tonnes of carbon. Photo: Hidehiro Otake / UNESCO

Are carbon offsets just greenwashing?

Many people say that offsets need to be part of an energy transition plan in conjunction with large-scale emissions reductions in sectors like oil and gas extraction and transportation.

Shane Moffatt of Greenpeace Canada pointed to Prime Minister Justin Trudeau’s pledge to plant two billion trees with revenues from the Trans Mountain Pipeline as a worst-case scenario.

“They need to be in addition to drastic emissions reductions, not to somehow offset or balance them out,” he said. “That’s not going to get us anywhere and is just shuffling chairs on the Titanic.”

“Understandably, conservation interests have been pushing for recognition of the importance of maintaining the carbon sinks that we now have: wetlands and forests and so forth,” said Gibson of the University of Waterloo. “That’s fine, but we need to be much more ambitious than that if we’re going to get to net-zero.”

Prime Minister Justin Trudeau once promised to plant trees with revenues from the Trans Mountain oilsands pipeline, a strategy that doesn’t sit well with many environmentalists. Photo: Johann Simundsson

Are there more examples of successful carbon offset projects in Canada?

In 2011, three years after buying 136,000 acres of forest from a logging company in B.C.’s Selkirk Mountains, the Nature Conservancy of Canada sold its first round of carbon credits. That first sale through the Darkwoods Forest Carbon Project was for 700,000 credits — equivalent to 700,000 tonnes of carbon dioxide  — and netted more than $4 million on the voluntary market. The revenue from credits went back into conservation work on the property — and it continues to each year.

Pallant of Ecotrust Canada has been working for a decade and a half on forest carbon offset projects, trying to develop protocols and “clear the path” for successful projects.

He gives the example of the Cheakamus Community Forest, a collaboration between Ecotrust, Brinkman Climate, the town of Whistler and the First Nations of Squamish and Lil’watt.

Meet the Canadian farmers fighting climate change

With so much action both from the federal government and Indigenous governments, Rasevych of the Thunder Bay-based Anishnawbe Business Professional Association is convinced the movement toward carbon offsetting only requires a few more sparks to ignite.

“There needs to be a starting point,” he said. “There needs to be one First Nation or a group of First Nations that work together on pushing that agenda. Because it is something that our communities have a common vision about — and it’s something that could assist us globally.”

— With files from Emma Gilchrist

The Carbon Cache series is funded by Metcalf Foundation. As per The Narwhal’s editorial independence policy, the foundation has no editorial input into the articles.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

This is the second part of Carbon Cache, an ongoing series about nature-based climate solutions.

Compared to the Amazon or Great Bear Rainforest, the sprawling peatlands of Ontario’s Far North might seem a bit, well, boring.

“People don’t wake up and go ‘oh yeah, woohoo, decomposing organic material is the best!’ says Anna Baggio, the director of conservation planning for Wildlands League, in an interview with The Narwhal. “It’s not sexy. But it’s hugely valuable and we can’t even begin to get our heads around it.”

It’s true: Ontario’s peatlands — or muskeg, as the wetland ecosystem is often called — offer a mind-boggling range of ecological benefits. 

Like tropical and temperate rainforests, the peatlands sequester a huge amount of carbon, storing an estimated 35 billion tonnes of carbon in Ontario’s Far North alone (that’s equivalent to annual emissions from 39 billion cars). The peatlands also serve as critical habitat for wildlife including caribou, wolverines and many migratory birds. 

Anna Baggio, director of conservation planning for Wildlands League, poses for a photograph in Guelph, Ont. Baggio says while Canada’s peatlands may not be sexy, they’re invaluable when it comes to the battle against climate change. Photo: Christopher Katsarov Luna / The Narwhal

These benefits derive from the fact that bogs and fens in northern Ontario — especially in the Germany-sized Hudson Bay Lowlands, the world’s second largest peatland complex — remain relatively undisturbed, unlike many other places that have drained them for agriculture or flooded them for hydroelectric dams. 

But that may be changing quickly. 

Climate change is expected to lead to longer droughts, which will dry out peatlands and undermine carbon storage functions. Permafrost thaw may also accelerate carbon emissions.

Long-planned mining development in the region, an area about 540 kilometres northeast of Thunder Bay referred to as the “Ring of Fire,” could also result in severe impacts to peatlands due to the extraction process and related infrastructure, such as roads and transmission lines.

Combined, these changes are bringing to a head long-standing tensions about who has decision-making powers over the region: the pro-mining province, the conservation-leaning federal government or the dozens of First Nations throughout the Far North — many of which have conflicting views about industrial development in their homelands.

“We want to look after our own selves, with all the resources at our disposal: the air and the muskeg within our traditional lands,” says Chief Bruce Achneepineskum of Marten Falls First Nation, whose leadership supports development, in an interview with The Narwhal. “Therefore we must have a say in it.”

‘We really don’t get a do-over’

Peatlands are ancient ecological systems, which take thousands of years to form their characteristic layer of absorbent organic soil — but they’re also highly sensitive to impacts.

“If you have any type of disturbance that has the potential to have large-scale changes to how wet the site is or the vegetation community that’s there, you’re going to reduce the ability to store carbon,” says Maria Strack, a Canada Research Chair in ecosystem and climate at the University of Waterloo who specializes in peatland emissions, in an interview with The Narwhal.

Disturbance of peatlands releases carbon dioxide and methane directly into the atmosphere. And while peatlands are already a net contributor of methane, these changes also destroy the ecosystem’s future storage capabilities for carbon dioxide, turning them from a carbon sink into a carbon emitter. 

Like tropical and temperate rainforests, peatlands sequester a huge amount of carbon, storing an estimated 35 billion tonnes of carbon in Ontario’s Far North alone. Photo: Garth Lenz

While significant advances in ecosystem restoration practices have been made in the horticultural peat harvesting sector, Strack said it likely takes between 10 to 20 years to return carbon sink functions to rehabilitated landscapes; peat only grows up to one millimetre per year.

But left untouched, disturbed peatlands won’t naturally recover, especially at the far larger scale proposed in the North: “Once it’s built, we really don’t get a do-over,” says Baggio of Wildlands League.

Last year, findings published by Strack’s research team concluded that seismic exploration conducted for Alberta’s oil and gas industry has disturbed at least 1,900 square kilometres of peatland and increased methane emissions by 4,400 to 5,100 metric tonnes per year. 

That’s a worrisome trend given that methane has 25 times the global warming potential as carbon dioxide — and that the study underestimated the disturbed area and emissions, meaning “the impact is likely much higher.” 

How to put a value on natural landscapes

It’s a common theme in northern ecosystem research: scientists know the landscapes are of critical importance but don’t actually know that much about the specifics. 

Justina Ray, president and senior scientist of Wildlife Conservation Society Canada, explains in an interview with The Narwhal that northern regions are categorized by the federal government as “unmanaged lands,” meaning emissions related to land-use changes aren’t included in the national inventory — for good or for bad. 

Forestry and agriculture in the south gets most of the attention for so-called “land use, land-use change and forestry” emissions, both in terms of policy and scientific priorities. Ray says that “the whole story of carbon mitigation is you have to have a direct threat for the carbon to be of value and accounted for.” 

Justina Ray, president and senior scientist of Wildlife Conservation Society Canada, poses for a photograph at her home in Toronto in July. Photo: Christopher Katsarov Luna / The Narwhal

Currently, that direct threat doesn’t exist — so mechanisms aren’t in place to account for emissions from peatland disturbance and to integrate it into decision-making processes.

“We’re not really very prepared to be able to do the real in-depth accounting and carbon estimation,” Ray says. “We’re not positioned for the change that’s to come.”

The ‘breathing lands’

Northern Indigenous communities have known of the ecological significance of peatlands for countless generations. After all, it’s their land: the “breathing lands,” as elders of Kitchenuhmaykoosib Inninuwug First Nation call it.

“It’s been our source of food and source of livelihood as far as I can remember, back when we used the land quite a lot as a source of our livelihood,” says David Paul Achneepineskum, CEO of the tribal council Matawa First Nations that represents nine Ojibway and Cree First Nations, in an interview with The Narwhal. “A lot of people still think of it that way: their ancestors’ and their grandmothers’ and grandfathers’ way of life.”

The James Bay Lowlands in northern Ontario. Photo: Garth Lenz

But many First Nations communities in Ontario’s Far North live in extreme poverty, alongside decades-old boil water advisories, high food prices and horrific youth suicide crises. 

As a result, debates about the future of the muskeg — as a carbon sink or wildlife conservation area — are deeply intertwined with conflicting visions about industrial development, resource jobs, infrastructure and culture. 

For instance, Marten Falls and Webequie First Nations are taking active roles in encouraging mining development, serving as project proponents for the provincial and federal environmental assessments of the two roads required to “open up” the Ring of Fire. The first proposed mine is called Eagle’s Nest and would extract nickel, palladium, and copper.

“We should be able to be part of the economy and not continue to be marginalized in our own traditional lands,” says Chief Achneepineskum of Marten Falls in an interview with The Narwhal (Chief Achneepineskum is not related to David Paul Achneepineskum of Matawa First Nations). “All we’re trying to do is get a revenue base and build our own economies in our communities and prosper like anybody else in Canada.”

Webequie has hired SNC-Lavalin to support the nation’s environmental assessment process, while Marten Falls hired engineering giant AECOM. Last fall, Marten Falls received 300,000 shares from Noront Resources, a Canadian mining company that owns the majority of the Ring of Fire’s mining rights

Dayna Nadine Scott, associate professor at York University’s Osgoode Hall Law School who researches Ring of Fire development, says in an interview with The Narwhal that nobody would fault Marten Falls and Webequie for leveraging Ring of Fire development to get long-needed all-season roads built, but that “we should also not forget that Ontario is unwilling to provide the community infrastructure that is required unless it also serves the industry’s needs.

Dayna Nadine Scott, York University research chair in environmental law and justice in the green economy. Scott studies development in Ontario’s Ring of Fire. Photo: Christopher Katsarov Luna / The Narwhal

Other First Nations, including Neskantaga and Eabametoong, have publicly opposed the practice of other First Nations serving as project proponents for the environmental assessment process, arguing in a 2019 letter that “it is inconsistent with the Honour of the Crown to attempt to proceed with a delegated environmental assessment of the project in this manner, and to potentially aim to pit one First Nation against others.” 

Similarly, the recent announcement by Premier Doug Ford of an agreement with Marten Falls and Webequie First Nations to complete the “Northern Road Link” to the first proposed mine site in the Ring of Fire was slammed by other First Nations leaders. 

Fort Albany Chief Leo Metatawabin responded to the Northern Road Link announcement in a press release, saying that “our people will not accept this,” while Neskantaga First Nation Chief Chris Moonias said: “You can expect opposition if Ontario, or any road proponent, tries to put a shovel in the ground of our territory without our consent.”

Peter Moonias, a community Elder and former Chief of Neskantaga First Nation, posted notices along the Attawapiskat River identifying Neskantaga’s traditional, ancestral, historic and customary lands. This area was proposed as a potential site for a river crossing for future roads connecting the Ring of Fire to the rest of Ontario. Photo: Allan Lissner

Lawrence Sakanee, a Neskantaga First Nation community member, fishing near White Clay Rapids. Photo: Allan Lissner

Chief Chris Moonias of Neskantaga First Nation fishing near Kabania Lake. Photo: Allan Lissner

Discovery of chromite leads to mining rush

The conflict over the muskeg hasn’t always looked like this. 

The “Ring of Fire” was first discovered in 2007, leading to a massive rush of mining companies staking claims in the area. Chromite, used to manufacture a key component of stainless steel, was identified as a key resource by companies including Noront.

But in early 2010, several First Nations blockaded airstrips built by mining companies due to concerns about the environmental impacts of building infrastructure on frozen bogs and lack of consultation and benefits sharing with local communities. The two-month blockade was led by Marten Falls and Webequie — the same First Nations now acting as proponents for the roads. 

The next year, nine First Nations signed a “unity declaration” asserting their common rights to self-determination and consent prior to development. That was followed by the signing of a regional framework agreement with the province in 2014 and the Matawa Jurisdiction Table in 2017. 

Justina Ray holds her hand over the area of Ontario know as the Hudson Bay Lowlands, home to the world’s second largest peatland complex. Photo: Christopher Katsarov Luna / The Narwhal

Both of these at least nominally represented attempts at collaboration between the First Nations and province on planning for the region: while they enhanced existing decision-making processes, they didn’t give First Nations any new decision-making powers.

By mid-2017, Premier Kathleen Wynne announced she had run out of patience and demanded “meaningful progress in weeks, not months” from the First Nations concerning the proposed road into the territory. Only three months later, Ontario announced it was partnering with three of the nine First Nations to build the roads, including Marten Falls and Webequie.

Shortly after, Doug Ford — who had pledged “if I have to hop on a bulldozer myself, we’re going to start building roads to the Ring of Fire” — was elected as new premier of Ontario. 

His government, whose minister of mines Greg Rickford was briefly on Noront’s board between political jobs, ripped up the regional framework agreement signed in 2014 and continued to negotiate using Wynne’s so-called “divide and conquer” approach. Ontario is also moving to repeal the province’s controversial Far North Act to expedite development.

Regional assessment announced for Ring of Fire region

In February, the federal government announced it was embarking on a regional assessment of the Ring of Fire region under its new impact assessment legislation. 

Scott of York University says this process allows for evaluation of long-term and cumulative impacts of development at a watershed level, including the peatlands. It also presents an opportunity for the federal government to partner with Indigenous governing authorities to co-manage the regional assessment, she says, especially given Ontario doesn’t appear to be a willing partner for it.

“The huge significance of such a big intact ecosystem globally has not been really absorbed in Ontario,” says Scott, who submitted a formal request to the federal environment minister for a regional assessment on behalf of the Osgoode Environmental Justice and Sustainability Clinic. “That’s hopefully something the federal government can see as part of its central mandate.”

Scott submitted a request to the federal government, asking for a regional assessment of Ontario’s Ring of Fire region. Photo: Christopher Katsarov Luna / The Narwhal

Vern Cheecho, director of lands and resources for the Mushkegowuk Tribal Council that represents seven Cree First Nations in the Western James Bay and Hudson Bay region, says in an interview with The Narwhal that they’re pushing for the scope of the regional assessment to include cumulative impacts and downstream impacts to the peatlands and its carbon sink functions, as well as the marine region off the coast of James Bay.

“It’s basically been our goal to look at this whole region as one ecosystem: the watersheds, the wetlands, and the marine region,” he says.

The federal government has allocated funding to more than 60 Indigenous Protected and Conserved Areas through the Canada Nature Fund, including exploratory work by Kitchenuhmaykoosib Inninuwug First Nation to establish a protected area in the Fawn River Watershed in Northern Ontario.

As with many other things, the regional assessment is now on hold due to COVID-19. Yet the permitting and staking of mining claims in the Far North continues in spite of protests from First Nations, who have argued they don’t have the time or resources to respond to mining-related notifications while trying to manage a pandemic in under-resourced communities. 

Scott says she also fears this delay may mean the regional review could fall behind individual environmental assessments that are still underway, resulting in decisions being made about the roads and peatlands without having to take into account results from the regional assessment.

Noront Resources, the main mining firm operating in the Ring of Fire, remains optimistic about its prospects for mining production by 2024. Noront CEO Alan Coutts says in an interview with The Narwhal that it views the regional assessment as a positive.

“What we like about the federal process is it will bring all of this together,” Coutts says. “Up until now, you’ve done these environmental assessments on these little sections of the road, but there hasn’t been this all encompassing view. The regional assessment will bring that together.”

However, Noront’s shares are currently selling for 15 cents, down from 24 cents a year ago, amounting to a market capitalization of $64 million. Further, the province still hasn’t found the estimated $1.6 billion required to build the road to the Ring of Fire. 

An exhaustive Globe and Mail investigation published in October concluded that hype about the region’s alleged $60-billion mining future is “mostly aspirational hogwash” (“don’t even get me started on that Globe and Mail article,” Coutts says in an interview). He concedes a key critique of that article (that the 2012 feasibility study for Eagle’s Nest is outdated), but says the company is updating the pricing information and that the “fundamentals of the project are outstanding.”

One of the metals at the Eagle’s Nest site — palladium, used to build catalytic converters — has skyrocketed in price in recent years. Coutts stresses that much more mining will be required to build electric vehicle batteries and power the “green revolution,” especially nickel. Building the road and Eagle’s Nest would also enable future extraction of chromite — from which chromium is extracted to make stainless steel — at other mines.

Noront’s plan to process chromite in a ferrochrome smelter in Sault Ste. Marie has been met with significant local resistance. 

“I’ve got no doubt that there’s probably stuff up there,” says Joan Kuyek, co-founder of MiningWatch Canada and author of Unearthing Justice. “But is it worth what is going to now amount to $2 billion for a road — and the destruction of peatlands?”

Peatlands are the world’s largest terrestrial carbon stores. Photo: Garth Lenz

Muskeg ‘important to our future’

The future of industrial development in the region remains awfully unclear — but First Nations communities continue to fight for control over their lands.

For the last six years, Mushkegowuk Tribal Council has been conducting baseline studies into the health of nearby rivers. Vern Cheecho, director of lands and resources for the tribal council, says they’re gathering this data before any development starts in order to track future impacts of mining, road-building, and climate change. 

Coutts of Noront says there will be no surface tailings or wasterock at Eagle’s Nest, because its waste will be trucked out, and the road will mostly be built on high lands and esker (glacially deposited sand or gravel) material to reduce costs and environmental impacts. 

However, a 2015 report by the Northern Policy Institute wrote “string bogs and the muskeg will be a significant hurdle to overcome” when building the north-south road. Cheecho adds that the need to truck the mined materials out increases environmental risk: “There’s always the potential of something happening.” 

“How protected are we, really, from upstream development?” he asks. “We don’t know. We’re not just downstream: we’re down-muskeg.” 

Recent experience of mining in the area, such as the now-closed De Beers diamond mine near Attawapiskat First Nation that is accused of failing to report mercury and methyl mercury discharge data, also raises concerns for some local communities. 

Achneepineskum of Matawa First Nations notes that he’s glad the federal government announced its regional assessment but remains concerned that the province continues to hand out permits without full consultation with First Nations. Achneepineskum says that Ontario’s understanding of consultation is very different from what they believe it should be and that “we want full participation of our membership.” 

“This kind of land is most important to our future,” he says about the muskeg. “I’m talking about the world, in terms of climate change. We need to take care of our lands for our future generations.”

The Carbon Cache series is funded by Metcalf Foundation. As per The Narwhal’s editorial independence policy, the foundation has no editorial input into the articles.

Photo caption updated at 4 p.m. PST on July 13 to indicate that Justina Ray is pointing to the Hudson Bay Lowlands on the map, not to the Ring of Fire, as previously stated. 

Main photo caption updated at 12 p.m. PST on July 22 to correct the subject of the feature photo for this article. The photo is of Musselwhite gold mine, not Victor diamond mine, as previously stated. Thank you to a reader for bringing this to our attention.

Updated Aug. 9, 2022, at 9:32 a.m. ET: This article was updated to reflect in Metric measurements, rather than Imperial, the number of cars whose annual emissions are equal to 35 billion metric tonnes of stored carbon.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

Opposing a large hydro dam can be a lonely experience.

Just ask Roberta Frampton Benefiel, a long-time resident of the Labrador community of Happy Valley-Goose Bay, 36 kilometres from the boondoggle Muskrat Falls dam now nearing completion. 

As a member of the Labrador Land Protectors, which brings together both Indigenous and non-Indigenous people, Benefiel now faces the possibility of yet another megadam on the Churchill River. If the proposed Gull Island dam is built, the Churchill “won’t be a river anymore,” she said in an interview with The Narwhal.

Mercury rising: how the Muskrat Falls dam threatens Inuit way of life

Yet when reached on the phone last week, Benefiel sounded positive — even optimistic — about the future of a growing global movement to stop the construction of destructive hydro dams. 

She had just returned from a three-day conference in Winnipeg organized by Wa Ni Ska Tan (a word that means “rise up” or “wake up” in Cree) to discuss the devastating impacts of large hydro projects across Canada and around the world. 

The sold-out conference brought together about 300 people, many from communities impacted by projects like the Site C dam under construction in northeastern B.C., the Keeyask dam under construction in northern Manitoba and dams in the global south in countries including India, Panama, Brazil and Colombia.

Roberta Benefiel of the Labrador Land Protectors at the Muskrat Falls Public Inquiry in St. John’s, NL on Wednesday, March 27, 2019. Photo: Paul Daly / The Narwhal

“This was really where, as a riverkeeper in Canada fighting a dam, we needed to be,” said Benefiel, who is also a member of Grand Riverkeeper Labrador, a non-profit organization dedicated to protecting the Churchill River and its estuaries. 

“Because we’re so far away and because we were just one Canadian dam group it just didn’t seem to work as well as it does with this Wa Ni Ska Tan group. Connecting with all the Canadian-affected communities was so important.”

Senator Mary Jane McCallum, who has advocated for the rights of hydro-impacted communities in Manitoba, said in a keynote address to the conference that she wants to launch a special investigation into the impacts of large Canadian hydro dams on Indigenous communities.

“You represent hope because you speak it and you walk it,” the senator told the crowd. “You’re intelligent, focused, witty and know when to break out into tears or laughter. That’s all good medicine. You are role models to me and I will carry this weekend to Senate with me to let me know that I’m not alone. And neither are you.”

Mary Jane McCallum speaking at the conference. Photo: Wa Ni Ska Tan

Social and environmental impacts of dams felt globally

Such an experience was precisely what the conference’s organizers had hoped to foster. 

In a post-conference call with The Narwhal, Wa Ni Ska Tan’s Ramona Neckoway and Stephane McLachlan said the three packed days of panel discussions and strategizing helped combine isolated struggles into a powerful international network. 

Neckoway, who is from the hydro-impacted community of Nisichawayasihk Cree Nation in northern Manitoba, said photos of eastern Himalayan dams shown at the conference by political ecologist Deepa Joshi “are so familiar to me in terms of what we see, even though it was halfway around the world.” 

McLachlan, coordinator of the University of Manitoba’s Environmental Conservation Lab, recalled other moments such as when a band councillor from Tataskweyak Cree Nation in northern Manitoba asked to get 50 copies of a strategy handout from a Brazilian dam opponent. In another instance, a fisherman from South Indian Lake showed a delegate from Panama a map of all the projects that Manitoba Hydro International (a controversial consulting subsidiary of the Crown corporation) has led in the Central American country.

Each instance represented a sharing of knowledge and experience among people who may have never met outside the conference, Neckoway and McLachlan noted. 

On the last day of the conference Panamanian Jonathan González Quiel released a statement saying connecting with other hydro-impacted individuals and communities is critical. 

“We used to be just a group of different rivers, but now we have converged to create a big ocean.”

‘That’s not consultation. That’s bullying’

It wasn’t all hopeful, however, with many moments of sorrow and frustration expressed throughout the conference. 

The opening panel featured Indigenous people whose communities have been negatively affected by the Site C, Muskrat Falls and Keeyask dams. 

Connie Greyeyes of Fort St. John, B.C., said resource projects, including the Site C dam, have increased the price of basic needs such as housing and food while the creation of man camps has compromised the safety of Indigenous women and girls. 

Denise Cole of the Labrador Land Protectors spoke about the potential collapse of infrastructure for the Muskrat Falls dam that could flood the homes of 1,000 people, as well as the impending methylmercury contamination of fish, a traditional food source for local Indigenous people.

A reckoning for Muskrat Falls

Members of Manitoba’s Tataskweyak Cree Nation talked about how their water has become dirty and contaminated since the advent of dam construction, which they said has brought with it significant social disorder, the abuse of drugs and alcohol, racial discrimination and the destruction of ancestral practices of hunting, trapping, fishing, and gathering. Burial sites, artifacts, and ancient trails have all been lost.

Robert Spence, a band councillor for the nation, broke down in tears while describing some of the impacts of the Keeyask dam and other large hydro projects. 

“The water was supposed to be the answer to all of our people’s prayers,” he said to the room. “Whenever I hear the word ‘development’ I cringe. To me, it’s such a dirty word.”

Consultation and partnership agreements among the Crown corporations building the dams and impacted First Nations were also deeply criticized at the conference, with some dismissing these elements of the process as the equivalent of blackmail. 

Spence described the effort to consult Indigenous communities and come to an agreement around benefits sharing as “a piggybank for lawyers and consultants.”

Cole added the reliance on consultation with a small number of “established leadership” can lead to project managers and bureaucrats ignoring community members.

Connie Greyeyes, pictured far left, said consultation around large-scale hydro projects can feel like bullying. Denise Cole, second from left, from the Labrador Land Protectors warned of a rise in methylmercury in the Muskrat Falls reservoir. Moderating the panel is The Narwhal’s B.C. legislative reporter Sarah Cox, pictured far right. Cox is the author of Breaching the Peace: The Site C Dam and a Valley’s Stand against Big Hydro. Photo: Wa Ni Ska Tan

“Our idea of consultation means that we have a meaningful consultation and come to an agreement that fits for everyone,” Greyeyes said. 

“Not ‘here’s what we’re going to do, you’re going to like it and accept it and take this amount of money or you’re not going to get anything at all.’ ”

“That’s not consultation. That’s bullying. That’s the way it is.”

Two Treaty 8 First Nations in British Columbia — West Moberly First Nations and Prophet River First Nation — have filed civil actions alleging that the Site C dam, along with two previous dams on the Peace River, constitutes an unjustifiable infringement of their treaty rights. 

A third Treaty 8 First Nation, Blueberry River First Nations, has launched legal action on the grounds that the cumulative impacts of industrial development in its traditional territory, including the Site C dam, infringes its treaty rights. 

Hydro in global south comes with high costs, privatization, displacement

International activists brought stories of similar destruction and dispossession.

Deepa Joshi of Coventry University in the United Kingdom condemned the framing of hydroelectric power as a “climate solution” given its immense social and environmental impacts and greenhouse gas emissions from reservoirs. 

She attributed the expansion of the “green economy agenda” in the global south to the post-2008 recession and desire for investors to find new profitable markets. That shift, Joshi said, was enabled in countries like India by reforms that made dam-building less financially risky and more profitable. 

Latin American attendees of the conference also tied recent dam-building sprees to shifts in global political economy, with Elisa Estronioli of the Brazilian Movement of Communities Affected by Dams noting that Brazilians pay exceedingly high rates for electricity because the sector has been privatized. 

Many hydro-affected communities in northern Manitoba also pay very high costs for power despite being most impacted by its development.

Manitoba’s hydro mess points to Canada’s larger problem with megadams

Quiel said the same corporations are building and financing these “projects of death” in Honduras, Nicaragua, Costa Rica, and Panama: “We have to expose and visualize who this enemy is that’s threatening our region,” he said through a translator.

KJ Joy of the India-based Society for Promoting Participative Ecosystem Management said a conservative estimate of people displaced in India due to development projects over the last half-century is 40 to 50 million, with hydropower projects one of the biggest factors in displacement.

The Report of the World Commission on Dams, published in 2000, estimated that between 40 to 80 million people have been displaced globally by large dams, including between 26 and 58 million in India and China between the years 1950 and 1990. China’s Three Gorges Dam, completed in 2006, displaced an estimated 1.2 million people and flooded 13 cities.

On a much smaller scale, the forced displacement of people is also occurring in B.C. with the construction of the Site C dam. The global human rights group Amnesty International says the Site C project does not meet international standards for forced evictions. 

Costs of damages from Manitoba Hydro ‘incalculable,’ organizers say

As with any event of such a scale, there wasn’t one specific takeaway or solution that conclusively set the way forward. 

But many ideas emerged from a brainstorming session on the last day: class-action lawsuits against Crown corporations, engaging youth in hydro-impacted communities and helping them remember what life was like before the dams, improving public awareness with outreach and education campaigns, funding solar and wind power projects and introducing a moratorium on all new large dam projects while working to decommission existing ones.

Wa Ni Ska Tan organizers said the group will continue to strengthen international alliances, host more gatherings, and potentially work with McCallum on a special investigation into the impacts of large Canadian hydro projects on Indigenous communities. 

Benefiel said one of the biggest issues her group faces in drawing public attention to the impacts of Muskrat Falls is a lack of funding, especially compared to publicly funded Crown corporations that don’t have to raise money for TV ads, media relations or lawsuits.

An ‘invoice’ tallying the costs of hydro development in the province of Manitoba as ‘incalculable’ is delivered to Manitoba Hydro. Photo: Wa Ni Ska Tan

“They can outdo us in the media, they can out-fund us,” she said. “We really need to pull together and show a very strong resistance across the country in order to provide that glue that would pull in some funding for us to do these things.” 

That strong resistance was on full display at the end of the conference: a march through the freezing cold to the Manitoba Hydro building with banners, signs and chants led by Indigenous people from across Canada. 

There, conference participants delivered an invoice to the Crown corporation for a litany of hydro-caused damages: destruction of waterways, a decline in fish populations, methylmercury contamination and loss of culture among them. 

The total cost listed at the bottom of the invoice? 

“Incalculable: too great to be calculated or estimated.” 

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

When giant thunderstorms erupt over Lake Winnipeg in the summer, lightning sometimes strikes the sand of the eastern shore.

The astonishingly hot temperature of the lightning can fuse the quartz-rich sand into small fragments of “fulgurite,” which may light up with a flash when knocked together due to triboluminescence (the same natural phenomenon produced when crunching on a wintergreen-flavoured Lifesaver in the dark).

These fragments of “petrified lightning” are placed in rattles used in ceremony and in sweat lodges like the one that sits at a small peace camp — Camp Morning Star — erected on the traditional territory of the Hollow Water First Nation in mid-February by those opposed to the industrial removal of sand for use in major fracking operations across North America.

“The sand is connected to the stories” of the Hollow Water, explained MJ McCarron, a long-time resident of the area and participant of the camp, which consists of a small collection of tents, a tipi, a sweatlodge, and a communal area. McCarron, who previously worked with the Treaty Relations Commission of Manitoba and was a former teacher in Hollow Water said the sand itself plays a vital role in ceremonial aspects of the community, which she married into.

“In ceremonies surrounding death, they put the silica sand around the body because it was connected directly to the stars. They’re connected. This is sacred.”

Sand, used by the Hollow Water First Nation in ceremony, is highly valuable to the natural gas industry when used as a proppant in hydraulic fracturing operations. Photo: Austin Ban

No federal review to remove 1.2 million tonnes of sand each year for 54 years

Camp Morning Star was erected three months before Canadian Premium Sand received provincial approval to extract and process 1.2 million tonnes of silica sand — enough to fill 7,228 beach volleyball courts — every year from the Seymourville deposit near the Hollow Water First Nation, located 160 kilometres north of Winnipeg.

If built, the mine would operate 24/7 for 54 years, mining an average of five hectares each year, impacting a total 353 hectares over the life of the project — the rough equivalent to 654 football fields — to service fracking operations in Alberta, British Columbia and North Dakota.

The company proposes to use a “progressive rehabilitation” process that would limit the disturbance of land to 83 hectares in a given year and would attempt to restore the mine’s 10 to 30-metre pits in an ongoing fashion.

“I really don’t care what environmentalists have to say about it.” — Chief Larry Barker

Despite significant criticism of the project, the company — which was known as Claim Post Resources until mid-November — received an Environment Act Licence in May from the Government of Manitoba. The licence came with 98 conditions, including future water testing for contamination and survey work to identify plant species traditionally used by local Indigenous communities.

Location of the Hollow Water First Nation, approximately 160 kilometres north of Winnipeg, Manitoba. Map: Google Maps

One day after the province awarded the licence, federal Environment Minister Catherine McKenna issued a letter to the company stating the project would not be subjected to federal environment oversight. An online petition, calling for federal review of the project’s environmental and Indigenous rights impacts, has gathered more than 3,000 signatures.

In a December news release, Chief Larry Barker said: “I really don’t care what environmentalists have to say about it.”

Hollow Water First Nation’s chief and council endorsed the project, controversially waiving the community’s rights to Crown consultation.

But that hasn’t stopped residents of Hollow Water — along with people from nearby communities of Manigotagan and Seymourville and Winnipeg — from escalating opposition to the project.

“We’re at a point in our society where we certainly cannot afford to have more fossil fuel exploration,” McCarron stressed.

“And we certainly can’t afford to have mining exploration just anywhere.”

Demand for frac sand skyrocketing

Sand plays a vital role in fracking. In 2014, Drillinginfo.com described proppant — the industry term for sand and similar materials — as “the great oilfield innovation of the 21st century.”

Fracking uses high-pressure injections of water and chemicals to create tiny cracks underground that allow trapped oil and gas to be released and extracted. Proppant plays the critical function of keeping the cracks physically propped open after initial fracture.

But it can’t just be any kind of sand. Proppant granules have to be very specific dimensions, consistently round and spherical, “crush resistant” and with very high purity to ensure it doesn’t turn into powder under the immense pressure.

The silica sand at Hollow Water First Nation checks all those boxes and is highly attractive to companies looking to avoid more costly ceramic beads or other manufactured alternatives.

This isn’t the first time Manitoba’s silica sand has drawn commercial interest.

A silica sand quarry on Black Island, an important ceremonial site adjacent to Hollow Water, operated on and off between the 1920s and 1990s. The Manitoba government conducted exploratory drilling of the currently targeted Seymourville deposit in the 1980s, with other companies completing further drilling in the 2000s.

Demand for the sand is skyrocketing: drillers in the main shale fields of B.C. and Alberta consumed more than five million tonnes in 2018 — enough for over 30,000 sand volleyball courts).

Canadian Premium Sand reports a 25 per cent growth rate of proppant required per well, year over year.

A screenshot from a Canadian Premium Sand report, showing a significant growth in use of frac sand per well. This growth is largely driven by fracking operations in B.C. and Alberta. Graph: Canadian Premium Sand

There had long been rumours about a mine near Hollow Water. But it was not until November 2018 that community members started hearing specifics about the project.

Community referendum on project not conducted

Lisa Raven — a participant in Camp Morning Star, Hollow Water band member and executive director of Returning to Spirit, a non-profit that focuses on reconciliation and residential schools — told The Narwhal that some community members were angry about the proposal at an initial community meeting about the mine.

According to Raven, Chief Barker told the crowd there would be more information sessions and a referendum about the proposal, which quieted down the meeting. But a few weeks later, on November 29, Canadian Premium Sand issued a press release, stating the company had signed an economic participation agreement with the First Nation.

In the release, Barker said: “We have listened to our elders, our community members, our environmental advisors and our local neighbours. We have the mandate of our people to move forward in economic partnership with Canadian Premium Sand to build a prosperous future for our people in a way that protects and respects the lands we share, for the next 50 years and beyond.”

The website for Camp Morning Star states that while the project was approved by the band council, that may not be sufficient to satisfy the duty to consult under Section 35 of the Canadian constitution.

“That’s what it was for me,” Raven recalled in an interview with The Narwhal.

“I didn’t feel that I was consulted. I didn’t think anybody was. For me, that wasn’t true. That’s kind of where it started for me.”

Three months later, in the cold of February, Camp Morning Star was built.

Hollow Water First Nation has an unemployment rate of 34.2 per cent, more than five times the provincial average. Canadian Premium Sand estimates its project will require 75 workers at the mine itself and up to 50 workers as truck drivers to carry sand to Winnipeg. The company also committed to paving new and existing roads and upgrading water treatment facilities in Seymourville.

Yet McCarron expressed concerns that the good resource jobs will be filled by non-Indigenous outsiders, not locals in need of work — a trend that has been seen elsewhere in the province, including at Manitoba Hydro’s Keeyask dam.

Chief Barker did not respond to multiple requests for comment from The Narwhal.

Critics concerned about air quality, traffic safety, impacts on groundwater

Resistance to the project quickly started to coalesce after the company’s Environment Act Proposal was filed in late December.

Don Sullivan, former director of the Boreal Forest Network and government advisor for the Pimachiowin Aki UNESCO World Heritage site, came out of retirement to advocate against the project through an organization called What the Frack Manitoba. He was joined by Dennis LeNeveu, a physicist who previously worked in the nuclear fuel waste management program at Whiteshell Laboratories.

The ad-hoc group knew they would only have a short window to respond with public comment to the company’s proposal. McCarron said they worked through Christmas and much of January to compile a thorough counter-argument.

The three of them submitted 47 pages of comments in early February. They weren’t the only critics.

Dozens of other people — including cottage owners, Indigenous residents and local business owners — issued written concerns about the project’s potential impacts on groundwater, air quality, noise and vibration, fish habitat, hunting rights, worker health, permanent degradation of land, its immediate proximity to Lake Winnipeg and the brevity of the consultation process.

Lake Winnipeg. Photo: My name is Julie / Flickr

Many cottagers expressed serious opposition to the increase in traffic on highways, with the company estimating that 96 vehicles related to the project will enter and exit the First Nation every hour, with three or four of those being 40-tonne trucks carrying sand.

An air quality report submitted by the company as part of its Environment Act Proposal reported particulate matter output of up to two to five times the province’s ambient air quality criteria. While the company plans to eliminate silica sand exposure by fully enclosing its wash and dry facility under negative pressure and using waterproof sealed covers for the trucks, it made reference in its application to a “worst-case scenario” of “days of extended long, dry, hot weather during non-winter months coupled with high winds” that may spread the carcinogenic dust.

The Manitoba government explains on its website that climate change will mean “longer, warmer and drier summers,” a description resembling the company’s “worst-case scenario.”

Mining frac sand in West Texas. Photo: Shutterstock

“There’s nothing in there that says how they’re going to handle this,” said Eric Reder, director of the Wilderness Committee’s Manitoba office.

“What happens if the wind starts blowing? Do they have a five-hectare tarp that they’re going to pull out over this in a very strong wind and keep the sand in place? Are the kids from the daycare going to be running inside and everybody’s going to be putting on their P95 air filters? This is a horrible concept, and it’s a horrible concept to do at Hollow Water First Nation.”

A technical advisory committee assembled of experts by the province articulated many similar concerns.

Karen Robinson, medical officer of health for the Interlake-Eastern Regional Health Authority, wrote that potential impacts on air quality were “very concerning” as exposure to silica dust can cause silicosis, a serious lung disease. However, the technical advisory committee’s comments were not posted online until February 19, after the window for public comment closed. That meant the only information available to the public during the comment period was provided by the company.

A hydrogeological report detailing where the project would gather up to 750 litres per minute of water for processing the sand also was not completed before the public comment period, leading to concerns among critics that long-term reliance on groundwater supply could impact surface water, wetlands and fish habitat. A closure plan for the project had also not been completed before the closure of the comment period.

Glenn Leroux, president and CEO of Canadian Premium Sand, declined to comment for the article, writing in an email that he wouldn’t provide his perspective unless The Narwhal interviewed both Chief Barker and Seymourville Mayor Burnell Helgason.

Chief Barker and Helgason did not respond to numerous requests for comment.

A teepee at Camp Morning Star. Photo: Reg Simard

‘We cannot have business at all cost’

The future of the project is unclear.

Canadian Premium Sand — whose shares are mostly insider owned, with another 12.4 per cent owned by Calgary’s Paramount Resources as of July 2019 — has undergone a significant restructuring of management in recent years. The company’s founder and long-time president and CEO Charles Gryba was quietly ousted at the end of 2017, and wasn’t replaced by Leroux until March 2019. Its chief operating officer resigned in mid-June after just over a year at the company (but has since earned $1.1 million in consulting fees from Canadian Premium Sand through his other companies).

Capital costs for the mine are estimated at a sizable $220 million. The company hasn’t yet made its final investment decision about the project, but is conducting a capital optimization review that will be completed by the end of September to try to reduce the project’s large upfront expenses. The company’s latest management discussion and analysis filing reported a deficit of $24.9 million and rapidly declining cash holdings, and reiterated the need for additional financing.

“They’re not participating in a respectful process of true exchange of information. Our world can’t take that.” — MJ McCarron

Both Raven and McCarron told The Narwhal they have heard rumours the company may pull out of the community in the near future. But McCarron said that while it looks like the camp may have won for now, the underlying problem still remains as the company could sell its leases to someone else or get them off the land only to return next year.

“You’re never safe,” she said.

McCarron added that the group could have mounted a strong lawsuit over the consultation process but they don’t have nearly enough money to take on the government.

So far, the camp has received public support from NDP MP Niki Ashton and Manitoba NDP MLA Rob Altemeyer. The press secretary for Minister of Sustainable Development Rochelle Squires did not reply to a request for an interview with the provincial minister. Instead, a spokesperson for the Ministry of Growth, Enterprise and Trade responded in an email: “Environmental safety, including human health and safety, were components of the Environment Act review process.”

“This is the treaties all over again,” McCarron said. “People are coming in and snowballing people. They’re not participating in a respectful process of true exchange of information. Our world can’t take that. We cannot have business at all cost.”

Every week, the dozen or so people who have kept Camp Morning Star running come together to recommit themselves to the struggle: “One more week, one more week,” Raven tells herself.

If it’s a Saturday, the group will share a feast. If it’s a Sunday, they will enter the sweat lodge, shaking a rattle containing the fragments of sand they are fighting to defend.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.

After two years of advocacy and 70,000 letters sent, conservation organizations across Canada are celebrating the federal government’s decision to prohibit all oil and gas activities in marine protected areas.

“The public played a really big role in this change,” said Stephanie Hewson, staff lawyer at West Coast Environmental Law, in an interview with The Narwhal.

Marine protected areas — known as MPAs — are effectively national parks of the oceans, establishing strict guidelines about what kind of activities can occur in the ecologically sensitive regions. In 2010, Canada signed onto the Aichi Convention to protect biodiversity and the world’s ecosystems, committing to protect 10 per cent of coastal and marine areas by 2020.

The new rules will apply to all marine protected areas in Canada, including marine conservation and marine national wildlife areas, but the greatest effect will be felt in Marine Protected Areas managed under the Department of Fisheries and Oceans — most especially in the Laurentian Channel.

Proposed regulations published in June 2017 for the Laurentian Channel MPA — located between Nova Scotia and Newfoundland — allowed for extensive oil and gas exploration and production.

An access to information request filed by The Narwhal revealed that a close relationship between the oil industry and federal Department of Fisheries and Oceans may have contributed to that proposal.

But on Tuesday, Minister of Fisheries and Oceans Jonathan Wilkinson announced that four industrial activities — oil and gas, mining, waste dumping and bottom trawling — would be banned in all new marine protected areas, starting with the Laurentian Channel.

This fulfilled recommendations made by a national advisory panel that filed its final report in September 2018.

“I’m just greatly relieved that this trial balloon came down with a crash and the oil industry saw that they had pushed too far — and we’re actually going to have real marine protected areas,” Gretchen Fitzgerald, director of the Atlantic Canada chapter of the Sierra Club Canada Foundation, told The Narwhal.

“That’s wonderful news.”

The Canadian Association of Petroleum Producers (CAPP) declined comment for this article.

Canada’s current and proposed Marine Protected Areas. Source: Department of Fisheries and Oceans Canada. Map: Carol Linnitt / The Narwhal

Series of offshore near-misses raised alarm

The federal Liberals pledged in their last election platform to increase the amount of Canada’s oceans that are protected to 10 per cent in 2020, up from a mere 1.3 per cent in 2015.

Thursday’s announcement increases the amount of existing protection to 8.2 per cent.

Prior to the federal announcement, it was unclear what protection even meant.

The proposed permitting of activities such as seismic testing for oil and gas, which can have devastating impacts on nearby marine species that rely on sound to communicate, was viewed by many conservationists and wildlife experts as a serious compromise to the government’s vision for ocean protections.

Concerns only increased since 2017 with repeated offshore incidents. A BP Canada drilling unit off the coast of Nova Scotia spilled 136,000 litres of drilling mud in June 2018. Only five months later, an estimated 250,000 litres of oil spilled into the ocean from a Husky drilling platform, making it the largest spill in Newfoundland and Labrador’s history.

Those followed arguably the most dangerous recent near-miss, in 2016 when a heavy pipe from a Shell Canada rig landed within 12 metres of an exploration well — which could have caused a blowout if contacted.

“It’s sheer madness in our opinion that they’re drilling off our shores where they are,” Marilyn Keddy of the Campaign to Protect Offshore Nova Scotia, said.

“But particularly in marine protected areas? My goodness.”

Existing oil and gas licences won’t be cancelled

While the new regulations will prohibit industrial activities in new marine protected areas, including the Laurentian Channel, they won’t result in the immediate cancellation of oil and gas discovery licences in two protected areas where they have already been granted: the Tarium Niryutait MPA in the Mackenzie River Delta and Gully MPA near Nova Scotia.

There is currently no active exploration efforts in the regions, and Wilkinson said the licences will be reviewed again in the future.

The new regulations also don’t prohibit industrial activities in the more common “marine refuge,” which will be evaluated on a case-by-case basis via the impact assessment process. However, marine refuges that do allow such activities won’t be counted towards the 10 per cent commitment.

Nevertheless, representatives of environmental organizations view Thursday’s announcement as a strong and necessary first step.

“There’s a lot of research that’s very well documented that having this type of strongly protected area is essential for restoring ocean health,” Hewson said.

“Sometimes it’s talked about as an insurance policy for the oceans. Oceans are fluid and there aren’t real boundaries besides those drawn on the map but it’s still really important to have those types of protections established in concrete areas.”

Advocates call for stricter rules on offshore activities

Environmental advocates remain concerned about other aspects of ocean protection.

Fitzgerald of Sierra Club Canada said that recent Senate committee hearings concerning the new environmental impact assessment legislation (Bill C-69) demonstrates that it is “very clear that the offshore boards and oil-friendly people in provincial governments are trying to get deregulation in the rest of the ocean.”

An ongoing call for bids near Sable Island, a national park reserve, adds to her fears that the oil industry still holds disproportionate power in the region.

Members of the fishing industry have repeatedly expressed concerns about the potential impacts of a Deepwater Horizon-like oil spill on their livelihoods.

“We will always have to be vigilante,” Fitzgerald said.

Similarly, Keddy of the Campaign to Protect Offshore Nova Scotia said that her organization is actively calling for a full independent inquiry into offshore oil and gas development.

“Our feeling is that decisions have been made by the industry based on their so-called science and we think that there has to be a be a much, much fuller investigation of this,” she said.

“And communities have to have a say. We’re not letting up until they stop.”

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Canada’s Ministry of Natural Resources produced an internal memo in response to The Narwhal’s July 2018 investigation into gold mining taxes and royalties, a freedom of information request reveals.

The investigation, which compared mining payments in Canada to similar payments abroad, found Canadian governments were collecting far less than they could per ounce of gold extracted.

A month after the article was published, Glenn Mason, the assistant deputy minister for Natural Resources Canada’s land and minerals sector, submitted a memo to the department’s deputy minister that “provides an analysis of the article by The Narwhal.”

The memo relates details from The Narwhal’s investigation, including discrepancies between taxes and royalties paid by mining company Barrick Gold in Canada when compared to what it paid in the Dominican Republic.

In 2017, Barrick Gold extracted $250 million in gold from Ontario’s Hemlo mine while paying only $14.4 million — 5.8 per cent of the gold’s worth — in royalties and taxes. By comparison, the company extracted $817 million in gold from its Pueblo Viejo mine in the Dominican, paying $327 million  — 40 per cent — of the gold’s worth — in taxes and royalties.

While much of the four-page memo was redacted, two experts asked by The Narwhal to review the document said it reveals a great deal about how government has acclimatized to low tax rates for mining.

Andrew Bauer, a natural resource governance consultant formerly with the Natural Resource Governance Institute, said the memo offers an inside view of the government’s understanding of the industry.

“With all due respect to the staff at Natural Resources Canada who drafted the letter, there is an urgent need to improve Canadian public officials’ understanding of oil, gas and mining project financing and fiscal regimes, both at the federal and provincial levels,” Bauer told The Narwhal after reviewing the memo.

Screenshot of the internal memo prepared for Natural Resources Canada’s deputy minister.

‘There is no transparency on this in Canada’

The main concern voiced in the memo was that the Extractive Sector Transparency Measures Act (ESTMA) database The Narwhal used to assess payments doesn’t include information about production costs or profitability of mines.

“The cost per ounce of gold produced can vary significantly in different mines and countries,” Mason wrote in the memo. “A higher cost means a lower profit margin and a lower ‘ability to pay.’ ”

Mining royalties in Canada are determined based on profits. That’s different from many other countries, which apply them based on production.

Canada uses profits to assess royalty schemes, but  does not require companies to disclose numbers on profitability in the ESTMA disclosure database, which was launched in 2015. The database, Canada’s primary transparency mechanism for extractive companies, is still in its infancy and does not require companies to report information in a consistent manner.

In order to report on mining tax and royalty regimes and compare them to other jurisdictions, The Narwhal scoured annual reports of gold mining companies to provide a detailed breakdown of a mine’s “all-in sustaining cost” — an industry metric used to report production costs on a per-ounce basis.

The memo overlooked this original information gathering, which adds contextual analysis to the ESTMA data.

Pointing to Canada’s production costs isn’t a justification for low tax and royalty rates, according to Bauer, who suggested the argument about differing production costs is a distraction from the fundamental problem with Canadian tax and royalty frameworks.

Mine profitability around the world is dependent on many factors, Bauer said, not just the cost of production. Those factors include things like quality of the deposit, price of the commodity and financing costs.

Ugo Lapointe, long-time mining watchdog and coordinator for MiningWatch Canada, said companies that invest in Canada are well aware of high operational and labour costs — but are undeterred because of that high profit potential.

What’s most relevant, Lapointe said, is how little the Canadian public knows about mining costs and payments, in general.

“There is no transparency on this in Canada.”

The ESTMA database has only released piecemeal data self-reported by companies for 2016 and 2017.

“Arguments that higher operational and labour costs cut into profits for Canadian mines versus international mines remain to be proven with facts and figures,” Lapointe added.

‘Would you sell your house cheaply and declare success?’

An inequity may be baked into the very way we do mining in Canada, according to Bauer.

Private mining companies are designed to extract and sell as much mineral, say gold, as possible in a given year, even if overproduction means they aren’t fetching the best prices, Bauer added.

That means these minerals — non-renewable assets — are being sold off for much cheaper than if production was restricted until prices were higher and could guarantee better returns for the owners of the resource: Canadians.

Bauer also noted that mining is location-specific, which should allow governments to collect far more in revenue when compared to more mobile sectors like tech.

Percentage of fees paid per ounce of gold extracted at projects owned by three companies that operate in Canada and abroad. Source: Extractive Sector Transparency Measures Act. Graphic: The Narwhal

A gold deposit, unlike a factory, can’t move to a neighbouring jurisdiction where taxes and royalties are more favourable. High-quality deposits are relatively rare, meaning governments can ensure that the owners, its citizens, are getting full value.

“Would you sell your house cheaply and declare success?” Bauer asked.

“This approach is especially problematic since these resources are non-renewable, so if the asset is sold cheaply today, the lost revenue can never be recovered.”

Memo doesn’t address ‘very generous’ mining subsidies, tax avoidance strategies

A 2011 information bulletin from Natural Resources Canada reported that Canada collects considerably less in taxes and royalties than Australia, Indonesia, Peru, Tanzania or South Africa.

According to the bulletin, at a 15 per cent internal rate of return, a mining project in Canada pays an average effective tax rate of 22.5 per cent. That’s compared to 60.9 per cent in Peru, 74 per cent in Indonesia or 79.8 per cent in Western Australia.

In the memo, Mason notes this is in part because, “as an advanced economy, Canada receives more personal income tax revenue than corporate income tax revenue.” (Mason also notes that the “ESTMA database does not include source deductions paid by workers at a mine” so “the payment information is incomplete.”)

But Bauer said this comparison of personal versus corporate income tax is a “false dichotomy.” There’s no required trade-off between income tax from workers and that from companies. Both can happen.

Lapointe added that those figures don’t include a number of factors that further reduce the Canadian government’s take, including what Lapointe describes as “very generous direct and indirect subsidies.”

All tax breaks, flow-through shares, infrastructure spending and low securities for clean-up are instances where governments are effectively boosting the profitability of mines by requiring companies to pay less. Other such generous provisions include tax-deductible royalty payments, accelerated depreciation of capital assets and the carrying forward of tax credits and operating losses for up to 20 years.

Bauer said there may be a case for gifting such incentives to small exploration companies but “they make absolutely no sense” for large transnational mining companies.

Bauer notes that Canada’s mining sector comes with a series of key advantages to companies: a skilled workforce, established transportation networks, political stability and low electricity and water costs. As a result, he suggested that fiscal incentives like lower taxes and royalties aren’t necessary to entice investment.

Lapointe said the memo, presented to the deputy minister to add context to The Narwhal’s reporting, doesn’t touch on the way Canada works to attract investment from the mining industry.

“The memo makes no allusion to these direct and indirect subsidies,” he said.

The memo also didn’t address the practice of “base erosion and profit shifting,” which The Narwhal’s original article referenced.

The OECD defines this as “tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations.”

Lapointe says this practice is arguably “the biggest fiscal issue around mining in Canada.”

Due to a lack of government data it isn’t possible to say how prevalent the practice is, although there is evidence of it occurring in several instances.

The Canada Revenue Agency (CRA) attempted to bring charges against Saskatchewan-based uranium behemoth Cameco for shifting profits to a European subsidiary. A CRA audit found profit transfers during 2003, 2005 and 2006 would have added an additional $484.4 million to Cameco’s income.

According to accounting firm Grant Thornton, the Tax Court of Canada’s decision on the Cameco case “dealt a serious blow” to the CRA’s attempts to curb the practice.

Other mining companies that have been hit with accusations of tax avoidance include Silver Wheaton and Turquoise Hill Resources.

Claims Canadian system ‘sound and efficient’ not backed up by independent evidence

Despite all this, the memo assured the deputy minister of Natural Resources Canada that the country “has been recognized on an international basis as sound and efficient.”

Bauer said that position is supported by industry lobby groups, such as the Mining Association of Canada, but is not based on independent assessments.

“The statement from Natural Resources Canada demonstrates a failure to carry out independent analyses,” he told The Narwhal.

As an example, Bauer pointed to a 2013 report from the University of Calgary’s School of Public Policy, which recommended that provinces “start eliminating preferential and wasteful tax breaks for miners,” as “provincial treasuries certainly cannot afford these breaks, and neither can the Canadian economy as a whole.”

Mining also creates a notoriously low number of jobs per dollar invested — similar to oil and gas extraction — and automated trucking may further reduce employment opportunities.

There are 255 mines in Canada that a recent report by the Office of the Auditor General found are not adequately regulated.

Mines can also cause long-term impacts on the environment, as seen with the Mount Polley tailings disaster or Elk Valley mines in B.C. Mines can represent costly long-term liabilities that are often left to taxpayers, as with the Tulsequah Chief mine in B.C. or the Giant mine in the Northwest Territories.

NRCan Memo on Mining Taxation Royalties Canada by The Narwhal on Scribd

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When it comes to the oilsands, there’s a particular gloss that accompanies industry’s presentation of in-situ extraction.

Unlike the pronounced nature of open-pit mines, with the accompanying heavy haulers and seemingly endless horizons of tailings ponds, in-situ — meaning in ground or in place — operations have a much less visible footprint.

Cenovus has gone so far as to dub these operations — which require the injection of steam underground to heat viscous oil, allowing it to be pumped to surface — “a different oil sands.”

While they certainly do represent the future of the oilsands — in-situ projects have already outpaced mining production and are set to increase by one million barrels per day by 2030 — they also come with their own set of problems.

In-situ oilsands operations are incredibly greenhouse gas-intensive — requiring copious quantities of natural gas, often obtained from fracking, to produce the steam that’s injected underground.

Operations require extensive roads and seismic lines that expose threatened caribou to an increased risk from wolves and create habitat disturbances that are connected to low reproduction and calf survival rates. These compounding impacts to caribou are part of the underlying justification of the province’s controversial wolf cull.

And the proposed use of solvents as a substitute for steam has given new rise to long-held concerns about groundwater contamination from steam-injection processes.

The cumulative impacts of in-situ operations are extensive, which is why many onlookers are scratching their heads as Ottawa allows for their exemption under new environmental assessment laws — leaving reviews entirely in the hands of the province.

“To have the country’s main environmental assessment law leave the highest-carbon projects off the list is just unacceptable to us,” Patrick DeRochie, climate and energy program manager at Environmental Defence, told The Narwhal.

“The notion that provinces are able to step in and do this is not true. It doesn’t hold water.”

New legislation keeps Harper’s project list

As The Narwhal reported in April, Canada’s proposed environmental assessment rules — designed to restore public trust in the federal process for reviewing major projects — were released without any details on what kinds of projects would trigger review under the new legislation.

Back in 2012, the Harper government radically overhauled the country’s environmental assessment processes and introduced the use of a “project list” to determine whether a project — like a dam, power plant or oilsands mine — would be subject to a federal review.

Unlike the previous regime, which relied on automatic “triggers,” the project list dramatically narrowed the activities eligible for federal assessment and accorded a great deal of discretionary power to the federal environment minister.

Thousands of projects per year were no longer reviewed by Ottawa.

Outcry ensued.

The current federal government’s solution, Bill C-69, a new and controversial impact assessment bill currently under debate in the Senate, will overhaul the 2012 legislation — but keep the project list intact.

The contents of that list remain undisclosed to the public. But from the get-go Environment Minister Catherine McKenna indicated in-situ oilsands projects would be exempt from the list.

In a statement e-mailed to The Narwhal, a spokesperson for the Canadian Environmental Assessment Agency confirmed this is still the case: “At this time, the approach to draft regulations to support the Impact Assessment Act remains unchanged.”

Last week, the federal environment ministry confirmed to The Globe and Mail that in-situ projects “fall within the exemption eligibility.”

Anna Johnston, staff lawyer at West Coast Environmental Law, said that the case for not returning to the previous approach of “triggers” in Bill C-69 was premised on the expansion of Harper’s project list.

The exemption of in-situ operations seriously undermines that expectation, Johnston said, adding many of the impacts of these operations, including those affecting Indigenous rights, fall under federal jurisdiction.

According to Johnston, Ottawa can and should assess factors like health and safety of nearby communities and workers, the potential use of solvents and impacts on species from habitat fragmentation.

Many in-situ projects occur within the critical habitat of boreal caribou, she said, and the federal government has made it “very clear” that Alberta isn’t doing a sufficient job to protect habitat.

“Why would it then entrust the provincial government to assess in-situ for its effects on boreal caribou when Alberta has demonstrated it hasn’t been doing that job adequately?” she asked.

In-situ emissions 43 per cent higher than mining

According to a recent analysis by the Pembina Institute, in-situ extraction produced an average of 43 per cent more emissions per barrel than mining in 2016. That’s a serious concern for climate policy analysts given that all new oilsands production after roughly 2022 will come from in-situ projects.

Ambitious claims are frequently made by industry and government that per-barrel emissions will soon plummet with the implementation of new technologies.

But Pembina analyst Jan Gorski told The Narwhal that most emissions reductions have occurred in upgrading, not extraction, with little signs of improvement in mining or in-situ extraction.

Furthermore, the most promising technologies are still in early stages and will only apply to new projects, not expansions (which is where production is set to grow).

“The greater question is that it hasn’t yet been shown how oilsands emissions, even as they are today, would be compatible with our emissions targets,” Gorski said.

“You take into account that there’s going to be more growth and it just makes the problem worse.”

Recent studies have also questioned current estimates of methane leakage from extraction of natural gas, used heavily by in-situ producers. A journal article in Elementa from earlier this year indicated that emissions from operations near Red Deer may be 15 times higher than reported.

Alberta Premier Rachel Notley touring the Nexen Long Lake facility in September. The Long Lake facility is expected to produce 26,000 barrels of oil per day at full capacity. Photo: Chris Schwarz / Government of Alberta

Alberta won’t introduce emissions cap regulations before election

Complicating matters, the federal government has justified exemption of in-situ extraction from the project list because of Alberta’s 100-megatonne oilsands emissions cap.

But recently Alberta announced that, despite the fact the cap was legislated in 2016, it will delay the implementation of final regulations for the cap until after the next provincial election.

This puts the future of the cap itself in a precarious position, given the potential for a United Conservative Party victory in 2019.

The United Conservative Party is a loud and vocal opponent of both the 100-megatonne emissions cap and the idea of capitulating to the federal government’s national carbon levy.

Party leader Jason Kenney vowed to scrap Alberta’s carbon levy and fight Ottawa’s pan-Canadian climate framework, including requirements for a carbon tax. Kenney’s stance could end up pitting Alberta against the federal government, much like the current battle taking place between Saskatchewan and Ottawa.

At the heart of these federation feuds is the question of whether or not greenhouse gas emissions fall under the authority of the federal government or the provinces, said Stephen Hazell, former director of legislative and regulatory affairs at the Canadian Environmental Assessment Agency.

The Saskatchewan Court of Appeal will soon rule on the constitutionality of the federal government’s plan to impose a carbon tax on the province, he said.

Hazell, now director of conservation with Nature Canada, said that should the matter rise to the level of the Supreme Court of Canada, he has no doubt that a requirement to assess projects on their carbon emissions would be upheld.

“I reject the idea that greenhouse gas emissions are not a matter of federal interest and authority,” he said.

Latest oilsands mega mine proposal a reality check for Alberta’s emissions cap

Hazell said in-situ operations fit neatly within the category of major projects likely to have significant adverse environmental impacts — a trigger under former environmental assessment rules.

“Given that climate change could destroy human civilization, maybe it might be a good idea to include high-carbon projects for assessment under the new legislation,” he said.

DeRouchie of Environment Defence said that Canada has made a promise to the international community to limit greenhouse gas emissions.

“The federal government has responsibility for the entire country to meet its climate targets,” DeRouchie said.

“We’ve seen provinces failing in the past, and continuing to put in place plans that will fail in the future. There’s actually a requirement for the federal government to meet those national commitments, and that means bringing the provinces along.”

Oilsands emissions are expected to hit 115 megatonnes of annual emissions by 2030, consuming 22 per cent of Canada’s carbon budget under the Paris Agreement.

The Pembina Institute has calculated that if all currently approved oilsands projects are built, they will add up to 131 megatonnes per year.

New environmental assessment rules allow for multi-jurisdiction collaboration

Were in-situ projects to be included under federal environmental assessment rules, it would be a first, Martin Olszynski, associate professor of law at the University of Calgary and expert in environmental assessments, told The Narwhal.

In-situ operations have never been captured by the federal environment assessment regime and it would be a significant change to include such projects in the process, he said, adding he would be surprised to see such a move given the high tension between Alberta and Ottawa.

Olszynski said, however, that in-situ oilsands extraction should be subjected to rigorous environmental assessment processes, especially if conducted at the provincial level.

“Alberta claims that it has those,” he said in an interview.

“My own sense, based on my own research, is there are a lot of things that aren’t being done very well. We are reasonably decent at documenting impacts but it’d be hard to imagine that the assessment process really changes the outcome or the way we approach these projects.”

It devours our land

Some have pointed to a collaborative solution. The new federal impact assessment framework is designed for collaborations between different levels of government.

Johnston said that if the federal government joins in existing provincial assessments, it could ensure oversight while maintaining the practice of “one project, one review.”

The new legislation also allows for integration of Indigenous environmental assessment processes.

According to Johnston, exemptions undermine a strong feature of the new rules: allowing for substitutions. The new legislation provides for the option of substituting a provincial assessment for a federal one, when and where it makes sense to do so.

“If Alberta believes that its processes are that good, then it can just rely on these substitution provisions,” she said. Johnston added a benefit of having a substitution provision as opposed to an exemption is that the federal government retains decision-making authority when it comes to how an assessment will be conducted and by what agency.

Olszynski said there’s also a fair bit of malleability with the future of the project list.

Because it’s a cabinet regulation, with the legislation offering no clear criteria about what can go on or off the list, a new government can add or subtract from the list — or even scrap it entirely — with very little effort. That could be very good or very bad, depending on one’s perspective of whoever forms the next government, he said.

Johnston said that while the bill may go to committee as early as next week, actual considerations won’t commence in any way until February — meaning there’s still time for people to voice their concerns about the exemption of in-situ. (You can find your MP’s contact information on this website)

She emphasized that much of the criticism about Bill C-69 is missing the mark and undermining the potential for improvements.

“If everybody could just step back and take a deep breath and think a little bit more realistically about this bill, then maybe they’d recognize that impact assessment has a really key role to play in ensuring responsible development — and it’d actually be beneficial to have more projects subject to it because it’s almost never used to stop projects but to design projects more responsibly,” she said.

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It’s now been half a decade since the catastrophic Lac-Mégantic rail disaster in southern Quebec. On the night of July 6, 2013, a runaway train carrying shale oil from North Dakota exploded, killing 47 people and destroying most of the town’s centre.

But despite being the deadliest event in the country’s history since the Halifax Explosion in 1917, the Lac-Mégantic disaster has largely faded from the public’s consciousness outside of Quebec.

Bruce Campbell, the former executive director of the Canadian Centre of Policy Alternatives and expert in oil-by-rail regulations, wants to change that — and ensure that the proper people and policies are blamed. In his new book The Lac-Mégantic Rail Disaster: Public Betrayal, Justice Denied, Campbell traces with careful detail all the factors that led up to the catastrophe, including rail deregulation in the 1980s and 1990s, industry-captured regulators, reduction in crew sizes, unsafe train cars transporting volatile oil, and corporate reluctance to implement costly safety measures.

Some policies have been changed since. Many have not. And oil-by-rail shipments continue to grow.

In Lac-Mégantic itself, the memory of the disaster lingers, and has powered an ongoing push by locals and activists to clean up the industry and prevent a similar disaster from befalling another town.

In April 2018, the Quebec legislature issued a unanimous call for a public commission of inquiry into the disaster. The federal government rejected the request, saying the existing Transport Safety Board report explained everything in detail and that the necessary work has been completed. The federal government later opted to controversially reroute the tracks around the town.

The Narwhal chatted with Campbell about the causes of the disaster and what’s changed since — both for the oil-by-rail industry and for the town.

What made you want to write a book about the disaster in the first place? Was there a certain moment where you realized this was something you wanted to devote a couple of years to?

I watched it, like millions of others, and was horrified that it could happen so close to home. I’ve done a lot of policy work, including deregulation work. Once I started listening to the blame game going on, I thought I could provide something that would be independent, without any vested interests. My former colleague lost three members of her extended family. Two little girls and their mother. That certainly changed things.

You trace the disaster all the way back to the deregulation in the 1980s under Mulroney, and everything that followed. Why was it important for you to rewind it back to that point?

I didn’t start off as an expert on rail safety regulation, but the more I read it the more I saw the stages. I saw a series of policies that progressively removed safety protections and gave increasing power to the companies. Its enabler, or sibling policy — austerity — weakened the regulator. It became more and more dysfunctional internally. Of course, [Canadian National Railway] was privatized, which further enabled this process.

The landmarks were the Rail Safety Review Act, which came into force in 1988 and introduced rules which gave companies a lot of leeway to write the rules that were previously written by the department. They always had a lot of influence, but this really increased their ability to basically write the rules and the approval was largely a rubber stamp. They had great ability, as I documented throughout the book…to block, delay, dilute.

Then there was the privatization in the mid-90s, the budget cuts and the real quantum leap to the safety management system in 2001 — which in practice became the oxymoron of industry self-regulation. Of course, Harper came in with his ideology and the new regulatory policy. This was all happening at the same time as the recession, when they were re-elected in 2008, and that’s when the unconventional oil-by-rail boom got rolling.

Has the government shifted anything in its approach, or answered any of these questions in a meaningful way?

There have been a number of smaller or modest changes that happened, especially in the year after. Obviously, when something like this happens, the public wakes up and says “holy smokes, the government doesn’t have safety as its first priority.”

The government makes a big to-do about all of the things that it’s done. Some of them were important, like getting rid of single-person trains. They did that immediately, within weeks.

There were a number of high-profile things which I go into in the book. The Trudeau government comes in and [transportation minister Marc] Garneau says “rail safety is my top priority.” There were a number of things he did in big public announcements in 2016: he accelerated the elimination of remaining DOT-111 [oil-carrying train cars] and just recently of the unjacketed CPC-1232s, which are both slightly modified versions of the original DOT-111s.

Most fundamentally, it’s the regulatory capture issue.

It’s the ongoing relationship with the regulator: the necessary measures to strengthen the regulator to its capacity, its power, its resources. There’s been no change in that regard. There are still problems about brake securement. The whole safety management system is hugely problematic. They haven’t dealt with the problems. There’s still very little unannounced on-site inspections.

How is the community dealing with the legacy of this tragedy? Are impacts ongoing?

In 2016, I spoke at the anniversary event to the crowd. I built up this relationship. It was that relationship that really opened my eyes to the aftershocks. When the cameras go away, memories tend to fade and become more distant.

It’s one thing to talk about all the events that went on in the lead-up and the aftermath and what governments have done. But what’s going on inside?

Certainly, the people and activists I met are in a sense heroes in this story. They’re relentless and really courageous. The tendency — and it affects a large percent of the population — is that they’re worn out and apathetic and just want to move out and don’t want to hear anything more.

But they keep pushing. When I did my press conference on Parliament Hill, they came up from Lac Megantic to be there. They’re resolute.

There’s the ongoing trauma, the PTSD, the health effects, the environmental effects, the interaction with the wildlife and the air and how that’s affected health. There’s all of those things that are with the community five years after. You’ve got this big open desert where the town used to be. There’s a big open desert where the historic town centre was.

I make the analogy to Naomi Klein’s The Shock Doctrine and the ‘disaster capitalists’ that came and persuaded the municipal council of a clean slate, just wipe everything out. So they destroyed, by order of municipal council, more buildings than were demolished in the actual fire. They argued it was just to be absolutely sure, but it was done. There’s still a lot of opposition to it.

Ambulance chasers and case runners came up from Texas: they basically conned the victims’ families with going with [them] and got a finders’ fee of $10 or $15 million. The Quebec bar wasn’t there to protect any of these people. They were totally vulnerable.

Those were some of the aftereffects.

The fact the coalition continues to find evidence of threats and risks to safety that haven’t been addressed. If those risks are still there — where there was the worst rail disaster — what’s happening in the rest of Canada if they allow these risks to continue to exist? It’s a real cautionary tale.

Where should we go from here?

To be clear, my book is not an argument for more pipelines as an alternative to rail. Pipeline dangers are well known, as is the Orwellian assertion that Canada can meet its climate commitments while at the same time increasing oil production.

Rather — to the extent that oil by rail is a reality and is growing, and Canada continues to expand the production and export of oil — fundamental changes are required to make it safer.

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It’s the largest project in the history of Enbridge, itself the largest oil and gas pipeline company in North America. If completed as planned in mid-2019, it will boost oilsands export capacity by 375,000 barrels per day — over half of what the Trans Mountain Expansion will add.

But it’s likely you’ve never heard of Line 3.

“A lot of people don’t even know it exists,” said Laura Cameron, a community organizer with the Manitoba Energy Justice Coalition, in an interview with The Narwhal. “There just hasn’t been very much conversation around it.”

The Line 3 Replacement Program, or Line 3 for short, spans almost 1,700 kilometres and transports diluted bitumen from the oilsands from Hardisty, Alberta, to Superior, Wisconsin.

Due to the age and jeopardized quality of the existing pipeline, capacity of Line 3 has been cut in half. Installing a new and slightly wider pipe means that the company can return it to original levels.

In an era of hotly contested oilsands pipelines, Line 3 hasn’t received much attention.

“They wanted this one to happen quietly and under the radar,” said Adam Scott, senior advisor at Oil Change International, in an interview with The Narwhal.

The Line 3 replacement project: what you need to know

On the Canadian side, Line 3 runs from near Edmonton to the Manitoban bordertown of Gretna, crossing Saskatchewan near Regina on the way.

Once it crosses the 49th parallel, the pipeline travels through the upper northeast corner of North Dakota before charging through 542 kilometres of Minnesota and concluding at the mouth of Lake Superior in Wisconsin.

From there, oil can be transported to refineries across the continent.

The new project requires the installation of 18 new pump stations and three new storage terminals in Alberta.

Line 3 was given the go-ahead by the federal government in late November 2016, at the same time Trans Mountain was approved and after the plug was pulled on Enbridge’s beleaguered Northern Gateway pipeline.

The project passed the final major regulatory hurdle in June after being approved by Minnesota’s Public Utilities Board after a lengthy delay.

The existing pipeline will be decommissioned and left in the ground. This concerns many who argue that it could represent an environmental liability for decades to come.

Cameron of the Manitoba Energy Justice Coalition said the abandoned line “has the potential to damage local environments through metal deteriorating and making farmland pretty unstable.”

In an e-mail, Enbridge spokesperson Juli Kellner wrote: “Enbridge will continue to monitor the deactivated pipeline and maintain the right-of-way. Independent engineering research and analysis have determined that deactivated pipelines with adequate cover will have a very long life as load-bearing structures, even after decades of deactivation. Environmental regulatory requirements prohibit altering current hydrology. Therefore, the Line 3 deactivation process will protect water resources to ensure that the deactivated pipeline will not drain any fields, lakes, rivers, streams or other wetland areas.”

Concerns over Enbridge pipeline safety

In 2010, Enbridge’s Line 6B pipeline spilled more than 20,000 barrels of diluted bitumen into Michigan’s Kalamazoo River.

As part of the subsequent settlement with the federal government, the pipeline company was required to replace the U.S. portion of Line 3 by the end of 2017, pending state approvals.

That hasn’t been a simple process.

In early 2017, the Assembly of Manitoba Chiefs filed a court challenge to stop the pipeline.

Ojibwe activist Winona LaDuke and her organization Honor the Earth have led the charge in Minnesota against its construction, which will transport diluted bitumen from the Alberta oilsands along a new route through ancestral wild rice fields and waterways.

Because of the Kalamazoo spill — which has cost more than $1 billion to clean up — many eyes in Minnesota are on the newly proposed project.

Line 3 has also seen a series of spills over the years.

In 1991, Line 3 spilled 40,000 barrels near Grand Rapids. In 1999, the pipeline spilled 20,000 barrels of heavy crude near Regina. In 2007, two workers in Minnesota were killed in an explosion while attempting to repair the pipeline. Such fears are compounded by multiple spills on the nearby TransCanada Keystone pipeline. And earlier this month, an Enbridge pipeline transporting natural gas exploded near Prince George, requiring evacuations and residents to reduce gas consumption.

“The idea of cleanup is always overstated,” Scott said. “It’s not technically possible in a lot of cases. You’ll end up with toxic bitumen getting into aquifers and sediment, and the impacts can be generational.”

Pipeline emissions

There are also major concerns about long-term carbon lock-in effects. The Intergovernmental Panel on Climate Change (IPCC) recently published its latest report which warned of catastrophic impacts if the world fails to slash emissions by 2030.

Given the high costs for the pipeline, Enbridge will be very motivated to ship as much oil as possible for as long as possible.

Scott said that itself will incentivize new upstream production, such as Teck’s proposed Frontier mine — which will emit at least four megatonnes of carbon dioxide every year.

By offering lower cost shipping for the foreseeable future, marginal oilsands projects are made more economical.

Why haven’t I heard of this thing before?

Patrick McCurdy, professor of communication at the University of Ottawa and expert in oilsands advertising, noted in an interview with The Narwhal that Line 3 doesn’t pass through many dense urban centres. That’s compared to Trans Mountain, which has faced its greatest opposition in Burnaby and Vancouver.

“Media requires novelty or numbers, and neither of those boxes have been ticked,” McCurdy said.

Shane Gunster, associate professor in communication at Simon Fraser University, told The Narwhal that independent online media outlets in B.C. helped popularize knowledge of both Trans Mountain and Northern Gateway — which in turn forced traditional media outlets such as the Vancouver Sun to pay attention.

Gunster said Line 3 also lacks “charismatic species” like orcas to capture public attention.

“I hate to say it, but I think people just aren’t as concerned about prairies and wetlands as they are about the ocean and coastal environments,” he said.

Another factor is the clever rhetorical construction by Enbridge. Unlike Trans Mountain, which is explicitly named as an expansion, Line 3 has been portrayed as a means of preventing leaks: replacing an old rusty pipe with a new and improved version.

“Enbridge has done a really good job in billing this as a replacement project,” said Cameron of the Manitoba Energy Justice Coalition. “They’ve constructed this narrative that it’s just replacing the existing pipeline which is aging, and it’s just sort of a routine maintenance project. That’s been a big part of the fact that people have just accepted it as common practice and necessary.”

So how close is Line 3 to completion?

Enbridge is banking on an in-service date by the second half of 2019.

Cameron of the Manitoba Energy Justice Coalition said the pipeline is being constructed right now in Manitoba, with other portions already completed in Saskatchewan and the U.S.

But resistance continues to mount.

In July, the Spirit of the Buffalo prayer camp launched near Gretna, Manitoba. Meanwhile, in late September, a group of Indigenous land defenders and allies named Great Plains Resistance stopped construction for a day near Morden, Manitoba. A collective of Indigenous and environmental organizations also requested a reconsideration of the Line 3 approval by Minnesota’s Public Utilities Board.

Gunster of Simon Fraser University said that while Line 3 hasn’t received much public attention, that could quickly change, as it did for the Dakota Access Pipeline in light of Standing Rock.

So stay tuned — this may be the first but probably won’t be the last you hear of the Line 3 pipeline.

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Canadians might imagine Burnaby as the main site of protest against the Trans Mountain oil pipeline and tanker project, the Vancouver suburb marked as it is by dozens of peaceful demonstrations, arrests and associated court challenges in recent years.

But a new line of opposition is now being drawn on sandy beaches some 1,300 kilometres to the south — in the Bay Area of California. There, residents are increasingly concerned that the expansion of Trans Mountain may result in a major uptick in tankers carrying Alberta oilsands crude to the region’s five refineries, which comes with increased risks of spills, local air pollution, refinery accidents and a locking in of fossil fuel usage for decades to come.

Communities have specifically identified the proposed reconfiguration of the Phillips 66 Rodeo refinery near San Francisco to process more oilsands crude as a sign of things to come — and are already fighting back.

Contrary to the claims often made by government and industry, expanded oilsands production is far more likely to go to California than Asia: the state is much closer in proximity, sports the specialized refining capacity to process heavy oil and needs new imports to make up for dwindling domestic production.

“At a time when the whole world should be looking at strategies for a managed and just transition off fossil fuels, here we have big fossil fuel corporations like Phillips 66 spending resources to process more dangerous forms of crude like the Alberta tarsands,” said Pennie Opal Plant, co-founder of Idle No More SF Bay.

Recently, the local community and organizers were joined in Oakland, Calif., by members of the Tsleil-Waututh Nation, on whose traditional territory in the Burrard Inlet the Trans Mountain pipeline terminates. The Tsleil-Waututh were there to raise awareness about the controversial Canadian pipeline’s connection to refineries south of the border.

Not long after, a teach-in and prayer walk was held at the gates of the refinery.

“This is the first step in demanding that no tarsands are allowed to come through the Bay,” Opal Plant told The Narwhal.

“It’s communities up and down the state that have been stopping these projects,” said Greg Karras, senior scientist at the Richmond office of Communities for a Better Environment. “We’ve been batting like .900.”

Refinery explosion sent 15,000 residents to hospital

California isn’t currently importing much oilsands crude, if any at all. But it’s not for a lack of trying.

A bit of context: production from both the Alaska North Slope and central California oil fields has been declining in recent years, requiring increased imports from other countries.

Most has come from Saudi Arabia and Latin America.

In recent years, Phillips 66 (a spin off from ConocoPhillips) attempted to build an oil train terminal to bring about 50,000 barrels per day of oilsands crude to its San Francisco refinery. Three years of community opposition culminated in late 2017, when the county blocked the project from proceeding.

The region has experienced a series of major refinery-related incidents, helping to galvanize protest.

In August 2012, a massive explosion at Chevron’s refinery in nearby Richmond sent 15,000 people to the emergency room with respiratory issues. Matt Krogh, extreme oil campaign director at Stand.earth, told The Narwhal that the explosion was certified to be caused by sulfidation corrosion caused by high-sulphur crude (which may have included oilsands crude).

In September 2017, a corroded pipe at the Phillips 66 refinery spilled a barrel of gas oil, which itself followed a spill a year earlier during a tanker uploading that sent 100 people to hospital. Then, last month, a 25-acre fire started at Tesoro’s refinery, and had to be contained by Contra Costa County firefighters. Opal Plant of Idle No More noted that the Phillips 66 refinery is very close to a low-income community and across the street from a nursery school.

“People are increasingly aware of the expansion proposal for Phillips 66 and that it would involve tarsands,” Krogh said. “And they’re increasingly opposed and turning out to try to stop it.”

‘This is the sucking sound at the other end of the Trans Mountain’

There are two types of permits related to Phillips 66 — both of which residents are concerned about.

The first is a permit amendment from the local air district to triple the number of oil tankers that come through the bay, as well as the amount of crude they can take in via the wharf. The refinery is currently limited to 40,000 barrels per day from the wharf, and it wants to expand that to its a limit of 130,000 barrels per day. That would increase annual tanker traffic from 59 to 135 tankers.

“You have a massive increase in oil tanker traffic, likely carrying tarsands which regardless of what people in Alberta say is actually really hard to clean up,” said Krogh of Stand.earth.

There’s an ongoing bureaucratic squabble going on about that permit amendment, as it’s unclear if a land-use permit will be required from the county in addition to a permit from the air district. The confusion results from the fact the refinery is located in an unincorporated area under the county planning area. The first draft of the environmental impact report (California’s equivalent of an environmental assessment) is currently in a bit of a standstill because of this as well.

John Gioia, supervisor at Contra Costa County and member of the Bay Area Air Quality Management District, told The Narwhal that Phillips 66 recently appointed a new refinery manager and there hasn’t been any move to push the application to the point where a decision is made about the land-use permit issue.

But that could change quickly.

“The concern has been that if that project were built, it would increase the amount of crude that could come in over the wharf and therefore provide Phillips greater flexibility on where it obtains its crude for its refinery,” he said.

That’s where oilsands crude might come in. In mid-August, the air quality district issued a permit allowing for an increase of 4,000 barrels per day in hydrocracking capacity, required to break down heavy oil into usable fuels. That itself followed a 23,000 barrel per expansion of hydrocracking capacity in January, which prompted Idle No More SF Bay to start conducting actions at the air quality office.

It’s a process that Karras of Communities for a Better Environment described as “piecemealing.” He said in an interview with The Narwhal that hydrocracking is the bottleneck for expanding oil flow at the refinery, as it’s the only way that it can refine more oilsands crude into usable fuels.

“What they’ve told investors and what they’ve shown through the refinery changes they’re trying to make is they’re targeting diluted bitumen,” he said. “It’s very clear what this is about. This is the sucking sound at the other end of the Trans Mountain.”

Gioia warned against reading too much into the latest permit as the air district’s staff issued it based on a controversial decade-old approval that the board members are “still trying to understand.” However, he agreed that the expansion of Trans Mountain would make it cheaper and easier for heavy crude to be shipped to the global market, including California.

“The bottom line is opening up the tarsands through the pipeline increases the likelihood that a refinery like Phillips with extra wharf capacity could refine that product,” he said.

Declining consumption in California may lead to increased exports

This is all going down at the same time as some other big shifts in California, which may further complicate things.

In an unprecedented move earlier this month, California Gov. Jerry Brown signed an executive order pledging economy-wide carbon neutrality by 2045.

What’s less clear is how oil production and refining falls into that scenario.

Peter Erickson of the Stockholm Environment Institute said in an interview with The Narwhal that many oil fields in California are late in their lifespan and require a lot of steam to get oil to flow, like Alberta’s in-situ projects; that, in turn, needs a lot of power, which often comes in the form of natural gas. It’s also quite dirty oil, leading to products like petcoke being exported to Asian countries (increasing the lifecycle emissions intensity to oilsands levels).

However, he said the potential for declining oil consumption due to the increase in electric vehicles and public transportation will raise more questions about the expansion of imports from the oilsands.

“If they continue to give out more oil permits, it looks like imports would be slated to decrease,” he said. “If they were to stop giving out new oil permits for in-state production then imports might actually hold fairly steady. It all depends on what you think is going to happen locally. Despite the demonstrators in San Francisco earlier this week, it doesn’t seem like California is inclined to ramp down its oil production any faster than it already is.”

It’s also related to the future of oil exports from California itself. In 2017, the West Coast region (including Alaska, California, Oregon, Arizona, Nevada and Washington, collectively referred to by the U.S. government as PADD 5) exported an average of 102,000 barrels of distillate fuel oil per day, 128,000 barrels per day of petroleum coke and 56,000 barrels per day of motor gasoline.

Sejal Choksi-Chugh, executive director of San Francisco Baykeeper, said that it’s not fair for California to decarbonize while continuing to expose local communities in air pollution and potential explosions — and exporting dirty fuels to other countries to burn.

“The whole world is paying attention to climate change now,” she said.

“It seems to be very hypocritical of both the Canadian government and the California government to be taking these really large climate steps while putting a Band-Aid on this problem … It does seem we need climate leaders who are willing to rip the Band-Aid off and think about how to actually stop the fuel from being processed in the first place.”

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Imperial Metals, the owner of the Mount Polley and Red Chris copper-gold mines in British Columbia, is “totally on the brink” of bankruptcy according to a mining accounting expert.

“They’re not even close to making money,” Thomas Schneider, an expert on financial reporting of environmental liabilities and assistant professor of accounting at Ryerson University, told The Narwhal. “It’s just a matter of ‘can this company make enough cash flow.’ And they’re just coming off a strike.”

“This company is on the brink,” he added. “There’s no two ways about it.”

Imperial’s share price was at press time $1.33, down from over $18 per share in early 2014.

The company is currently surviving on debt, paying $75 million per year in interest expense. Interest payments are being made by issuing shares to creditors rather than cash — yet another bad sign. Recently, Imperial issued 3.1 million shares valued at $1.97 each to pay off interest of $6.1 million. But shares are now $1.33, meaning that similar attempts may require the issuing of even more shares to pay interest, which could lead to dilution and an even lower share price.

Schneider said that it “looks to me like a downward spiral.”

The company’s latest quarterly financial statement reported a net loss of $36.6 million. These losses were blamed primarily on the recent two-month strike at Mount Polley and lower-than-expected recovery at Red Chris, exacerbating an already weak financial position from a few years of low copper prices and the sizable impacts of the tailings disaster.

Copper prices have continued to decline since the start of the trade war between the United States and China in early July.

The big date that Schneider said to watch is October 1: by then, the company needs to have re-negotiated a $200-million credit facility — a type of loan from investors — some $44.1 million of which is currently used to secure letters of credit for reclamation costs at its mines.

If the group of creditors decide to walk away rather than continue finance the struggling company, Schneider said Imperial Metals will suddenly face massive unfunded reclamation costs.

In a recent conference call with investors and analysts, Imperial’s chief financial officer said: “We are in discussions with our lenders and continue to work on financing alternatives and solutions for this debt.”

Imperial Metals did not respond to multiple requests for comment.

‘Holy cow, what are we financing?’

A spokesperson for the B.C. ministry of energy, mines and petroleum resources said in an e-mail that the province’s chief inspector of mines can demand payment in full in the case of a non-renewal of letters of credit.

The company’s reclamation costs are now estimated at $100.9 million with only $14.3 million secured in cash. Schneider said that an immediate requirement to secure the remaining amount would “for sure trigger bankruptcy.”

The figure of $100.9 million is the result of a “discount rate” that estimates the present value of future liabilities based on anticipated rate of return of investments. The higher the discount rate due to perceived risk, the less that has to be set aside today.

According to Imperial Metals, the full “undiscounted” cost of its environmental liabilities is $173.6 million.

“When are the creditors going to say ‘holy cow, what are we financing?’ We’re financing the B.C. government not to have to do the clean up, so why don’t we just walk away and let the government do the clean up?’ ” Schneider said.

The company’s second quarter report for 2018 indicated that it was planning to pay for $28.4 million of the $100.9 million in future site reclamation provisions in “mineral property, plant and equipment.”

The company may be required to cover that amount in cash, which would likely require them to take on even more debt. Another $14.3 million is held as reclamation deposits, up from $4.7 million in 2016.

An estimated $86.3 million in reclamation costs are expected to be paid between 2018 and 2046, leaving about $14.7 million after 2046. Schneider said the undiscounted liabilities after 2046 may be around $100 million.

“How many equity investors care about a liability that the company has to pay in 2046?” Schneider said.

“Who really cares about it? We do. The government does. The people do. At the end of the day the equity investors don’t give a damn, and the longer you can put this stuff out the better it for the equity investors and the worse it is for the general public.”

‘The whole clean up thing is a real misnomer’

It’s unclear if that figure of $100.9 million is even enough to pay for future costs.

Imperial Metals acknowledged as much in its latest annual report: “The actual costs of reclamation set out in mine plans are estimates only and may not represent the actual amounts that will be required to complete all reclamation activity. If actual costs are significantly higher than our estimates, then our results from operations and financial position could be materially adversely affected.”

For many, the Mount Polley mine is the most immediate concern when it comes to clean up. The 2014 tailings breach released 25 billion litres of waste into nearby waterways and forests.

In 2017, Imperial Metals estimated a total of $67.4 million had been spent in clean-up costs for the Mount Polley spill. Of that, $15.5 million has been paid directly by government departments, with another $23.6 million eligible for tax refunds.

A field of debris and dried sediment at the mouth of what was Hazeltine Creek one week after the collapse of the Mount Polley tailings pond. Photo: Farhan Umedaly, Vovo Productions

The company increased its rehabilitation provision for the Mount Polley mine by $5.8 million in 2017. Schneider said that amount is the company’s best estimate of what is required to finish cleaning up Mount Polley, with $3.6 million of it being spent in 2018.

But local residents said in interviews with The Narwhal that the catastrophe is far from over.

“The whole clean up thing is a real misnomer,” said Jacinda Mack, co-founder of Stand for Water and member of the Xatśūll (Soda Creek) First Nation. “All they did was re-engineer. Everything is still in Quesnel Lake, Polley Lake, in the forest. And they say it would be more disruptive to try to remove the tailings. But if those tailings were filled with gold, they would find a way to remove those tailings.”

“Communities have received zero compensation,” Nikki Skuce, project director of Northern Confluence, said. “There’s been no fines or charges. Reclamation isn’t done. We don’t know what the long term impacts are on salmon and the water of Quesnel Lake.”

Douglas Watt, a retired metallurgist and member of the Mount Polley Mining Corporation’s public liaison committee, said it could take up to 1,000 years for the “totally devastated” Hazeltine Creek to return to what it used to be. The biggest concern for local residents, he said, is that Mount Polley received a permit in April 2017 to discharge effluent into Quesnel Lake until the end of 2022.

Watt said that immediately after the mine received the permit, the publicly announced life of the mine went up by another four years, to 2026. He said that within a few months of receiving the permit, the mine was already out of compliance with some of the permit’s conditions — and that it’s still out of compliance to this day.

“Our biggest fear is that they’re going to now ask the ministry for a permit amendment to continue to discharge their effluent beyond 2022,” said Watt, who worked for Imperial Metals in the late 1980s. “I’m pretty sure they’re probably working on that now.”

On August 15, it was announced that the B.C. Environmental Appeal Board will hear an appeal of the permit from a member of Concerned Citizens of Quesnel Lake at the end of January 2019.

Jacinda Mack in Victoria to speak with MLAs about mining reform in B.C. Photo: Taylor Roades / The Narwhal

Multiple lawsuits against Imperial Metals quashed by courts

Multiple lawsuits have been filed against the company for the spill, but all have been quashed.

Time has run out for criminal charges to be pressed in B.C. However, federal charges can still be laid sometime in the next year.

In 2017, Bev Sellars — the former chief of Xatśūll First Nation — filed a private prosecution against the company, but the B.C. Crown Prosecution Service halted the case after it concluded there wasn’t a high enough chance of conviction.

Ugo Lapointe of MiningWatch Canada also launched a federal private prosecution for alleged contravention of the Fisheries Act, but that was similarly stayed before he had the chance to present evidence in a court hearing.

“We’re concerned with not only the clean-up of the spill but the actual closure of the mine site and the clean up of the whole mine site,” Lapointe said in an interview with The Narwhal.

“You’re now dealing with a company that is not super financially viable, and it’s an increased risk for the public.”

A recent economic analysis by the Ecofiscal Commission found mines in B.C. often operate without adequate reclamation bonds and assurances, creating a major liability for the province’s taxpayers.

Majority owner of Imperial Metals donated more than $850,000 to BC Liberals

Imperial Metals’ majority owner, N. Murray Edwards, currently boasts a net worth of $2.9 billion, making him one of the wealthiest Canadians.

Companies owned by Edwards have historically been major donors to the BC Liberals, who governed the province for 16 years until one year ago.

Dermod Travis, executive director of IntegrityBC, wrote in an e-mail that total donations to the Liberals by companies owned or controlled by Murray Edwards total more than $850,000 since 2005.

That includes $199,180 from oilsands giant Canadian Natural Resources Ltd., $179,440 from Imperial Metals, $99,500 from Horizon Construction Management and $90,000 from CNR ECHO Resources.

In 2013, Edwards helped organize a million-dollar fundraiser for former premier Christy Clark’s re-election.

In 2004, an order in council forgave $2.9 million owed to the B.C. government by Huckleberry Mines, of which Imperial Metals then owned 50 per cent.

In 2017, then-interim leader of the federal Conservatives Rona Ambrose vacationed with Edwards for close to two weeks in the Caribbean.

Environmental liabilities may be underestimated

There’s also the strange situation of Imperial’s Huckleberry Mine, a copper mine that closed operations in late 2016 but may reopen in 2019 if copper prices increase.

Until April 2017, a syndicate of Japanese companies owned the other half of Huckleberry, but Imperial took it over after the syndicate couldn’t pay $77 million that it owed to the project. It was primarily because of that acquisition that the company declared a net profit in 2017. That followed consecutive years of significant losses, including losses of $96 million in 2015 and $54 million in 2016.

But Schneider said that it appears the estimated $22-million future reclamation liabilities for Huckleberry was improperly reported in the annual report, potentially requiring a reissuing of the financial documents.

The possible misreporting had to do with the “discount rate” used in reporting reclamation costs.. Schneider said Imperial Metals should have used a “risk free” discount rate of 3.2 per cent on reclamation liabilities at Huckleberry — but instead used a “credit risk adjusted interest rate” of 6.3 per cent.

That choice lowered the reported present cost of the liability. Schneider said it could end up as a difference of $20 to $30 million than if the company had used a “risk free” rate (let alone undiscounted rate).

In the end, the Huckleberry reclamation could end up costing as much as $100 million. The mine has an identified potential for acid rock drainage, which if triggered can result in significant impacts on ecosystems and wildlife.

Schneider said that Imperial Metals should potentially have to restate its financial figures, preferably providing an undiscounted amount. That would give investors and the public a far better idea of what the real costs might be.

Deloitte, which audited the company’s financial statements, refused to answer a question about the discount rate, writing: “Our policies and our code of professional conduct prohibit us from discussing any information about clients or the work that we do for them.”

The manager of investor and industry education at the British Columbia Securities Commission also said in an e-mail that “we do not comment about specific companies or market participants.”

Imperial Metals could still be rescued

It’s not known if Imperial Metals will end up declaring bankruptcy.

The creditors may renew the $200 million credit facility in October, hopeful for improved cash flows from the mining operations. Schneider said that creditors may not want to take the assets over given the company’s very high debt-to-equity ratio.

“Maybe things are in place and all will be fine — we shall see,” Schneider said.

Or Edwards or the companies he controls — which currently own 40 per cent of the company and more than $200 million of Imperial’s debt — could come to the rescue.

Lapointe of MiningWatch Canada said Imperial Metals has “pulled similar financial stunts” before, and that Edwards or affiliates will often bail companies out.

Sustained lobbying efforts could also help.

“The companies that are in bad financial situations like this for a number of years tend to lobby the government even more and try to leverage any kind of political support they can get to then get any possible subsidies or tax breaks or lower securities,” Lapointe said.

In 2016, the B.C. government introduced a deferred payment program for up to three-quarters of monthly electricity billing depending on the price of commodities.

At the end of June, Imperial Metals owed $73.5 million to the utility company. Of that, $51.4 million is to partially reimburse BC Hydro for the cost of building the controversial $736 million Northwest Transmission Line, with the remaining $22.1 million for deferred electricity costs.

But Lapointe said that if Imperial Metals does end up collapsing, another company could come along, strip it of valuable assets and leave clean-up for governments.

“Even by clearing the debt away by folding it into bankruptcy, the projects may be so marginal and high cost that the new company will be able to run the mine again for four or five years and then call it off again,” he said.

‘It’s a very tense relationship’

It didn’t have to happen like this.

Skuce said that the mining rules in Alaska and Quebec require full payment within two or three years of a mine opening, which limits public liability and dissuades high-risk projects from proceeding.

Lapointe said that Quebec’s new measures, introduced in 2013, require half of securities to be paid during the permitting process and the other half during the first two years of operation.

“Typically, the more financially risky a project or company is, the more risky it is for the environment and communities,” he said. “It’s pretty simple logic: they’re scrambling to survive. They’ll prioritize the money to survive, which is the operations and revenues. And they’ll often cut corners on everything else, including putting in place the best technologies or environmental practices or best design because they cost more money.”

Meanwhile, Mack said her community isn’t receiving regular updates from the company, and are instead instructed to check its website. But things aren’t up to date, she said, and information is often only available for a short period of time before it’s removed. As a result, she said that community meetings have dwindled from 150 people shortly after the disaster to only a handful of dedicated members.

“I would say it’s a very tense relationship,” she said. “A lot of people have stopped attending meetings out of frustration and anger.”

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