We’ve been reporting a lot about the Energy East pipeline and the Charest affair over the past few weeks.
National Observer has published 14 unique news articles about the Charest affair thus far and it has been clear to us that this saga is generating a great deal of interest in Quebec because it involves the former premier, Jean Charest.
But what has been going on behind the scenes at Canada's pipeline regulator, the National Energy Board (NEB) has significance for everyone in Canada.
We've uncovered secrets about how the NEB operates through revelations that raise important questions about whether this regulator can be trusted to oversee industry and protect public safety. Internal records show that the Board's president and chief executive, Peter Watson, was in the room for meetings when participants tried to engage in inappropriate conversations. And as two environmental lawyers recently put it, there is no evidence that Watson or anyone else tried to stop it.
If you're just returning from a lengthy summer vacation, here's a primer to help you catch up.
What's Energy East?
The Energy East pipeline project is the largest ever pipeline proposed in Canada. If built, it would stretch out across Canada from Alberta to New Brunswick along a 4,500-kilometre route. It's being proposed by TransCanada Corp, the Calgary-based company that unsuccessfully tried to build the Keystone XL pipeline from Alberta to the gulf coast of Texas.
Energy East is a much larger project than KXL. While the Keystone XL pipeline to Texas would have had a capacity to ship about 830,000 barrels of oil per day, Energy East would have a capacity to ship up to 1.1 million barrels of oil per day toward refineries in Quebec and then to Saint John, New Brunswick. Along the way, the pipeline goes near or through a number of major waterways in Saskatchewan, Manitoba and Ontario.
Oil companies and many business leaders say that Energy East is a good project that will boost profits, create jobs and help struggling energy companies find a new way to export their oil to foreign markets.
Some project supporters also believe the pipeline can help more Canadians use Canadian oil instead of importing crude products from abroad - although this depends entirely on global oil prices. And there's no way for Canadian governments or industry to control the global market.
Along the pipeline route, many stakeholders are opposed, including First Nations leaders, landowners, farmers, environmentalists and mayors who say the project is too risky because it will inevitably lead to catastrophic spills while pushing Canada’s climate change goals out of reach.
TransCanada has submitted an application for Energy East to the NEB that has nearly 40,000 pages and it's still making numerous changes to the project. Notably, it still hasn't figured out a safe way to run the pipeline under two major Canadian rivers: the Ottawa River near Montreal and the Saint Lawrence River near Quebec City.
Some were outraged to read the revelations about the Charest affair. They say it shows that either the company proposing the project or the regulator has been dancing around federal rules in order to get it approved.
The company has declined to say whether any of its employees knew about the meeting before it occurred. It has also stated that no one instructed Charest to participate in the meeting on TransCanada's behalf. The NEB denies doing anything wrong and has posted a lengthy note on its website, defending the behaviour of its senior executives and Board members in Quebec.
Meantime, the NEB is in charge of leading public hearings to review the pros and cons of Energy East and will then make recommendations to the federal government on whether it should be approved and what conditions should apply.
What is the NEB?
The National Energy Board is an independent regulator that oversees the pipeline industry in Canada. It has jurisdiction mainly over interprovincial pipelines as well as electric transmission projects. The NEB also has a mandate to produce research on the energy industry for the government.
Under Canadian law, the NEB has full powers of investigation as a law enforcement agency. It can also hear matters and make decisions that carry the weight of a federal court. Because of these extraordinary powers, the Board is obliged to be fair, open and transparent.
Its funding comes from taxpayers, but it recovers more than 90 per cent of its costs from industry through a secret formula.
What is the Charest affair and how was it brought to light?
The Charest affair was uncovered through documents released to National Observer under access to information legislation about new regional NEB offices in Montreal and Vancouver. The National Energy Board created these offices to improve outreach and public relations work in the communities where it operates and provides oversight for pipeline and electric transmission routes.
The original documents that tipped us off about the controversy revealed that the NEB had met privately with former Quebec premier Jean Charest, business leaders, and local elected officials when it announced it would open the office in Montreal in January 2015.
Given that there had been recent news reports in 2016 that revealed Charest was on the payroll of TransCanada to promote the pipeline, we decided to do some digging to see whether there was a link between his contract with TransCanada and the meeting with the NEB.
The NEB initially denied it had done anything wrong and that it was not aware, at the time of the meeting, of Charest’s relationship with TransCanada. It also denied that it had discussed the Energy East project — a conversation that would have been prohibited under NEB rules.
But it later apologized when it realized that it was being forced to release other documents, also requested through access to information legislation, that contradicted its earlier statements.
Who was in the room?
The meetings were part of a communications and outreach plan approved by the highest-ranking officials at the National Energy Board. The top bureaucrat and chief operating officer Josée Touchette was in on this strategy, along with Lyne Mercier, the vice chairwoman of the Board and Tom Neufeld, the vice president of communications.
The plan was designed to build public trust and raise awareness about the NEB “in regions with significant pipeline infrastructure.” The plan also said that the Board wanted to “approach regional, credible third parties to promote our regional offices.”
For the meetings themselves, there were five federal representatives in the room: The NEB’s president and chief executive Peter Watson, vice-chairwoman Mercier, Board member Jacques Gauthier, VP Neufeld, and the director (at that time) of the NEB’s Montreal office, Jean-Denis Charlebois.
Board members Gauthier and Mercier were also assigned to be on the three-member review panel, with fellow board member Roland George, for the Energy East pipeline. Their job is to objectively evaluate the arguments in favour of and against the pipeline and determine whether it’s in the public interest to approve the project.
If they spoke about ways to promote pipelines in private meetings with prominent stakeholders — or with a lobbyist from the company — "it sends a bit of a bizarre message about the process," Montreal Mayor Denis Coderre said on Thursday.
Was Jean Charest trying to lobby the NEB?
Former Quebec premier Jean Charest now works as a lawyer for McCarthy Tétrault - a law firm. He left politics a while ago, but still pops up on radio and TV news from time to time as a political commentator.
Charest has a legacy as a green politician. He represented Canada as its environment minister at the historic Rio Earth Summit in 1992, which created important international treaties on climate change and biodiversity.
But when he met for a private meeting with National Energy Board officials on January 15, 2015, he placed all of the federal officials in the room in a compromising position. As Ecojustice, an environmental law firm, put it in a recent motion submitted to the NEB, Charest was “an agent" of TransCanada in that meeting. He was being paid at that time to promote the pipeline.
The officials Charest met with from the National Energy Board were in the process of beginning what was supposed to be an open, fair and transparent review. The official process requires the Board to keep records of all evidence, submissions and testimony that it reviews. It must also conduct all of these proceedings in public and on the record.
But this didn’t occur during the meeting that NEB officials had with Charest and other stakeholders in Montreal on Jan 15 and 16, 2015. Instead, these officials got political advice about how they could convince the people of Quebec to embrace new pipelines for the oil and gas industry.
Charest has denied lobbying on behalf of TransCanada. Earlier this year, Prime Minister Justin Trudeau’s office asked federal lobbying commissioner, Karen Shepherd, to investigate Charest after he allegedly tried to arrange a meeting for the PMO with TransCanada at some point in 2016. The allegations prompted TransCanada to admit that it had hired Charest as a consultant, but that this contract had ended by the fall of 2015.
Shepherd’s investigation later cleared Charest, concluding that he hadn’t broken any lobbying rules.
But after details of the January 2015 meeting with the NEB surfaced, New Democratic Party ethics critic Alexandre Boulerice sent two letters to the lobbying commissioner, asking her to investigate the new revelations.
Shepherd’s office has said it takes all allegations seriously, but that it must conduct investigations in private.
Who said the NEB was the top dog?
During the Charest meeting, the participants discussed putting out a message that the NEB was the “top dog.” So if other jurisdictions, such as cities or the province’s environmental hearings board were skeptical about the pipeline and attempted to impose extra safety conditions on the company, the participants at the meeting discussed how the NEB needed to show everyone that it was calling the shots.
The participants also discussed how there were “concerns about not being able to do the project” but that “the economy needs investments.” Another idea raised in the meeting was whether there would be “benefits” for Quebec if Energy East were given the green light.
At one point in this meeting, the Lac-Mégantic runaway railway disaster came up.
“Pipelines safer,” wrote Neufeld in his notes.
The participants in the Charest meeting also discussed media and communications and whether there was a need for “external help.”
Does this mean that Charest also offered his services to communicate on behalf of the NEB to help them promote the Energy East project?
Only the people who were in the room would be able to answer that question.
So, they met with Charest. What’s the big deal?
The NEB, through an invitation from Board member Jacques Gauthier, invited Charest to chat with the regulator about Energy East in private, even though they have rules that require those discussions to be public and on the record.
Meeting secretly with one side of a debate during a formal legal review will either give that side an advantage and or create an appearance of bias. And whether the bias exists or not, the mere appearance of this type of conflict can delegitimize formal hearings of a tribunal, opening it up to a legal challenge that could quash any decisions made.
This would force officials to start an entire review from scratch with a brand new tribunal.
This type of situation has actually happened before in the 1970s involving hearings on a pipeline that was supposed to send natural gas from the Northwest Territories to the south and a review that was also led by the NEB. A similar complaint about the appearance of bias was enough to halt the proceedings. To this day, that proposed pipeline, now known as the Mackenzie Valley, has been stalled and unable to move forward.
The other unusual factor was that NEB emails showed that Gauthier had received one of the emails on what appears to be a personal email account. This has prompted environmental lawyers at Ecojustice to question whether he was conducting official Board business on a personal account, another apparent violation of the rules.
What's wrong with asking an experienced politician for advice?
During their January 2015 trip to Montreal, NEB officials also met with business leaders from local chambers of commerce for Montreal and Quebec.
They met first with Michel Leblanc, the president of the Board of Trade of Metropolitan Montreal. And in this private meeting, they also sought advice and discussed strategies to approve a pipeline.
Meeting notes show that they spoke about whether the project could move forward if it didn’t have the support of Gaz Metro, a natural gas utility company in Quebec. They also discussed the “pecking order” of energy discussions for people in Quebec. In the province, the NEB was not well-known. Hydro electricity and natural gas were at the top of the conversation, followed by oil and oilsands or “tar sands.”
There would be a discussion in a debate about “what’s in it for us?” Also, the participants suggested leading a conversation focused on “safety”, a “mix of energy”, and “impact on community.”
The Leblanc meeting also included a conversation about how people “should benefit from cheap gas” and impacts on gasoline prices at the pump, but that there was “increased” tensions over Energy East and a “trust issue” with the private sector.
There’s a “need to build trust: Quebecers won’t support (something) that is not trustworthy,” said notes taken during the Leblanc meeting by Tom Neufeld, the NEB’s vice-president of communications.
Leblanc also encouraged the NEB to meet with and engage with Steven Guilbeault, a prominent Quebec environmentalist and founding member of Équiterre. (The NEB met with Guilbeault and two other representatives of Équiterre later that winter as part of chief executive Peter Watson's national outreach tour.)
The Board of Trade supports Energy East and is one of more than 300 intervenors in the hearings and a supporter of the pipeline project. As an intervenor, it can present evidence and ask questions to any of the other participants.
Leblanc was part of a news conference this week with some Quebec union leaders who also support the project.
He told reporters that group doesn’t want to give the pipeline a “free pass” and that it still needs to get regulatory approval. But in private, Leblanc appeared to offer the NEB support to help it get the green light.
“We are open to hear and pass info along,” National Energy Board director Jean-Denis Charlebois, wrote in his notes about the meeting with Leblanc.
Leblanc declined an interview request with National Observer, but sent the following statement:
“Indeed, representatives of the Board of Trade of Metropolitan Montreal met with executives of the National Energy Board in January 2015 at their (the NEB’s) request. This meeting was aiming to learn more about the federal regulator and its review process. The representatives of the NEB also wanted to get a better understanding of how it is perceived by the Montreal business community. As a result of the intense debates regarding the Energy East pipeline project and the lack of notoriety of the NEB in Quebec, the Board of Trade representatives discussed the importance for the NEB to adequately explain its role and its expertise before starting its (review) process.”
After this article was published, a spokesman from the Board of Trade sent National Observer an email confirming that the business lobby group now supports the pipeline, but noting that it had not yet taken any position at the time of its meeting with Board members in January 2015.
A separate meeting with the Fédération des chambres de commerce du Québec, an organization that represents chambers of commerce across the province, consisted of a similar discussion.
Internal notes from this meeting show that TransCanada was raised, followed by a discussion about the NEB communicating in media and regional newspapers. The NEB was also engaged in a national charm offensive tour, led by its chief executive, Peter Watson at the time. And the discussion with the federation said he should “listen but don’t talk about the process” while telling people what they “need (to hear) to feel safe. Be consistent.”
Were the business leaders in the meetings offering to help the NEB get approval for Energy East? This question hasn't been answered yet.
Didn't the NEB also meet with municipal officials? What’s wrong with that?
The NEB’s controversial Montreal meetings in January 2015 also included private discussions with the Union des municipalités du Québec — a coalition that represents cities across the province) — about Energy East. Based on the NEB’s rules, these discussions should have been on the record for the public, but were only brought to light in response to requests made by National Observer under Canada’s Access to Information Act.
During this meeting, there was a whole section of notes about Energy East, stating that there was a need for up-to-date documents about the project and that someone felt TransCanada needed “to be proactive” about sharing information on the project.
Notes from a meeting that the NEB held with Montreal Mayor Denis Coderre also foreshadowed the problem that the regulator is running into today.
At that meeting, the notes suggest that the participants discussed how it was “very important” for the NEB to not be “perceived as biased.” And that if they did their jobs properly, it could create a “new relationship” between the West and East with a “strong opportunity to bring people together.”
The NEB was also praised and thanked for showing leadership at the meeting, the notes show.
Where does this leave us now?
Dominique Neuman, a lawyer for Stratégies Énergétiques and the Association de lutte contre la pollution atmosphérique du Québec, has written a letter to the NEB that suggests the panelists and executives who were involved in this process are compromised and should be reassigned.
It’s notable that the NEB’s president and chief executive, Peter Watson, was present for all of these meetings, and lawyers for the Ontario and Quebec environmental groups note that there is no evidence from the meeting notes to suggest that he or anyone else tried to stop inappropriate discussions from taking place.
The NEB says it was all an innocent effort to learn about the people of Quebec and engage with them.
But Montreal mayor Denis Coderre is probably right when he says that the process has led people to focus on the process and not say very much about the potential benefits or risks of building this massive pipeline across the country.
Coderre has made a point of defending Watson, saying he supports the NEB chief's leadership and vision after the two were able to agree on cracking down on safety concerns regarding another controversial pipeline project in Montreal, the Enbridge Inc. Line 9 reversal.
Where can I read more about the Charest affair?
As mentioned earlier, National Observer has published 14 unique stories about the Charest affair.
As of Aug. 29, here is the full list:
- Quebec's Jean Charest had private meeting with with pipeline watchdog after TransCanada hired him
- NDP calls for new lobbying investigation as TransCanada pushes pipeline charm offensive
- Canada pipeline panel apologizes, releases records on meeting with Charest
- Not only Charest. Energy East panel held private meetings with Quebec business leaders
- Charest pipeline controversy flares as May calls for resignation from federal panel
- NDP calls on lobbying czar to expand Charest pipeline probe
- Lawyer demands public inquiry, reassignment of NEB management over Charest affair
- NEB considers probing conduct of senior management in Charest affair
- Three dozen groups call for suspension of Energy East hearings, independent inquiry
- New allegations of bias over Charest affair shake TransCanada pipeline hearings
- NEB bans critics from speaking out about bias at Montreal hearings
- Lawyer urges pipeline regulator to stop excuses remove bias panelists
- Montreal mayor calls for suspension of Energy East hearings over Charest affair
- Charest affair: How the NEB tried to use Montreal's mayor as a pipeline prop
Editor's note: This article was updated on September 5, 2016 with a new statement from the Board of Trade of Metropolitan Montreal