Canada, U.S. stand firm on passage rights -- The Quoddy Tides, Eastport, Maine

Both the U.S. and Canada are standing firm in their resolve over the issue of the right of passage of liquefied natural gas (LNG) ships through Canadian waters to reach proposed terminals on the U.S. side of Passamaquoddy Bay.

Concerning the Canadian government's decision to not allow LNG ships through the passage, Greg Thompson, Member of Parliament for New Brunswick Southwest, says, "As a sovereign nation, we have every right to take that position." Noting the importance of the tourism and fishing industries in the Passamaquoddy Bay area, he adds, "It's our obligation to protect the environment, the citizens and the economy."

"We feel we are on very firm legal ground as a sovereign nation. That's why we were very deliberate in our choice of words to FERC," says Thompson of Canadian Ambassador Michael Wilson's letter to Joseph Kelliher, chairman of the Federal Energy Regulatory Commission (FERC). He comments that the ambassador, in his letter outlining the Canadian government's position, "used language that Harry Truman would have been pleased with -- very plain and straightforward."

The Canadian MP observes that many American citizens along the coast of Maine have also rejected LNG proposals. "It's not us versus them or the U.S. versus Canada," he comments. "We have always had and will continue to have great relations." Although the developers for the Passamaquoddy Bay LNG projects, Quoddy Bay LNG and Downeast LNG, have charged that the Canadian government is being hypocritical, since it has allowed LNG terminals in Saint John and Nova Scotia to proceed, Thompson points out that Canada is working on proposals, including the LNG projects, to supply the U.S. with energy. He says that the issue with the Passamaquoddy Bay proposals is safety of the location.

The Province of New Brunswick has requested that FERC suspend its review of the Quoddy Bay LNG and Downeast LNG applications, because LNG ships would not be able to reach the terminals, but Thompson says the Canadian government does not have any issues with the FERC process, which he describes as "very transparent." He points out that Canadian citizens, organizations and officials will be providing input during the process. "We will let that process unfold," he says, adding, "Our responsibility was to let the proponents know where we stood." The LNG developers "should take our view into consideration," he says. "They are challenging the right of a sovereign nation."

"We'll use every legal and diplomatic means to defend our position," he says, which could mean that the issue would end up before an international tribunal.

In equally forceful language, Jeffrey Bergner, assistant secretary for legislative affairs, U.S. Department of State, wrote in a March 8 letter to U.S. Senator Susan Collins that the department has informed Canadian officials "that it is our firm position that, though Canada may adopt laws and regulations in respect of the safety of navigation and the regulation of maritime traffic, all vessels enjoy a non-suspendable right of innocent passage into and out of Passamaquoddy Bay through Head Harbour Passage. This is guaranteed by the international law of the sea reflected in articles 21 and 45 of the Law of the Sea Convention." The department has also made clear to Canadian officials that "any potential attempts to short-circuit the FERC process are inappropriate."

On March 9 Senators Collins and Olympia Snowe, in a joint statement issued in response to the Department of State's letter, commented, "The State Department has rightly determined that the Canadian government's limitation of the right of free passage of American vessels through the international waters of Head Harbour Passage is not consistent with the international law of the sea." They added, "We believe that the right of innocent passage must be consistently maintained, and we urge Maine state officials to continue to make this case to their Canadian counterparts." Snowe and Collins had contacted the Department of State on February 1, 2007, at the request of Robbinston First Selectman Tom Moholland to voice their concern that Canadian officials were threatening to block passage of LNG ships through the passage.

Canadian position outlined

The basis for the two countries' arguments have not been completely outlined, but Canada is maintaining that the waters of Head Harbour Passage are internal Canadian waters. Janice Harvey, co-chair of Save Passamaquoddy Bay Canada, says the government of Canada has historically taken the position that both Head Harbour Passage and the Bay of Fundy are internal Canadian waters, and the U.S. government has opposed that position. "Ottawa is confident it has the legal grounds for claiming that," she says. The definition for internal waters depends on where one draws the baseline of the territorial sea and can also depend on defining an historic bay, under the United Nations' Law of the Sea Treaty. Canada's position is that the Bay of Fundy is an historic bay and not a territorial sea. As internal waters, the government of Canada has the full right to control what happens within the bay. With a territorial sea, there are conditions under which a sovereign country can restrict what occurs.

Thompson says that the government is considering a number of options to restrict LNG ships through the passage. "It could come up under the Department of Fisheries and Oceans, the Department of Environment, External Affairs, or the Department of Transport."

Harvey's opinion is that it would make the most sense for the government of Canada to use the Canada Shipping Act to restrict the passage of LNG ships through Head Harbour Passage. In 1982, the government restricted the amount of oil that could be carried on tankers through Head Harbour Passage under that act, in an effort to prevent the Pittston oil refinery in Eastport. "I'm assuming it would be the same route," Harvey says of the government's possible action, but she adds, "They have revealed very little of their actual strategy."

Save Passamaquoddy Bay Canada has proposed that since the United Nations' International Maritime Organization classifies LNG as a dangerous cargo, which is referenced in the Canada Shipping Act, and since navigational issues in Head Harbour Passage could make passage riskier than to other ports, Canada could use those grounds to regulate the passage of LNG ships.

LNG companies respond

Quoddy Bay LNG has submitted to FERC a document laying out the company's justification to use the waterway, and it asks FERC officially to deny New Brunswick Premier Shawn Graham's request to suspend the hearings. "We were thrilled to see that FERC Chairman Kelliher has sent a letter to Ambassador Wilson informing him that FERC will continue its review of our project," said Project Manager Brian Smith, in a prepared release. "We wanted to formally supply FERC with appropriate information in hopes that the commission will officially deny the premier's motion."

Tamara Young-Allen, spokesperson for FERC's Office of Energy Projects, says that, since the companies have not abandoned their applications, the commission will continue to process the proposals and will not make a decision on the province's motion to suspend the proceedings until it issues its determination on the two applications, following the issuance of the final Environmental Impact Statement.

Quoddy Bay's filing provides the company's argument for why the Government of Canada would violate international laws and treaties by attempting to disallow passage of LNG vessels. The document cites possible violations to the United Nations Convention on the Law of the Sea as well as breaches to the General Agreement on Tariffs and Trade and the North American Free Trade Agreement.

"We have put all of our cards on the table and everything is available for public record," said Smith. "We have already presented our justification for why this waterway is suitable to FERC, so now we are providing our justification that Canada's actions are in direct conflict with international law and that our ships will have a right to innocent passage."

Quoddy Bay argues that Canada's actions are discriminatory policies that are attempts to stifle U.S. LNG projects. Permits have been received and construction has begun on an LNG facility in Saint John that is being built by Repsol and Irving Oil. The Canaport facility is directed at the same market as Quoddy Bay's project.

Downeast LNG, in its filing with FERC, also requested that the province's motion be denied. The company argues that the issue of whether LNG vessels can reach the proposed terminal is outside the FERC project review and that the issue is a matter of international law not and not an issue upon which the commission will be deciding. In addition, the filing states, "Downeast LNG believes that the official position of the United States government and the clear weight of international law support its position that there exists a non-suspendable right of innocent passage to the Maine terminals through Passamaquoddy Bay and Head Harbour Passage."

The company argues that safety issues, including maritime and navigational risks, raised by the province and other Canadian intervenors will be addressed through the FERC review process. Finally, Downeast LNG argues that the Canadian government has a pro-LNG policy, since it has approved at least seven LNG terminals, and that policy undercuts the government's arguments about safety concerns.