The law of the sea and LNG: cross-border law and politics over head harbor passage.

• Author: Kraska, James
• Position: Liquefied natural gas

1. INTRODUCTION

   1. The Political Context

      The United States and Canada are at an impasse over plans by American developers to introduce a new supply of liquefied natural gas ("LNG") into the United States through proposed port terminals along the Saint Croix River, which runs between the Province of New Brunswick and the State of Maine. The disagreement implicates the law and politics surrounding a new source of clean energy for the region, maritime security, Native American tribal sovereignty, marine environmental protection in the unique Bay of Fundy, bilateral economic relations, and high-level diplomacy between Ottawa and Washington. Ships, including LNG tankers, bound for United States ports on the Maine side of the fiver may reach port only via transit through Canadian waters. Thus, without the cooperation or at least acquiescence of Canada, the terminals and ports of Maine along Passamaquoddy Bay, are entirely zone-locked--meaning that without access to the Canadian territorial sea of Passamaquoddy Bay, the ports are locked to maritime traffic.

      The controversy comes at a time when bilateral relations generally are quite good. United States-Canadian foreign relations have been unusually warm in recent years, despite the persistent annoyance of a handful of irritating issues. The United States has worried Canadian corporations doing business in the United States with the "Buy American" legislation, while Canada has frustrated United States officials who say their northern neighbor is a haven for illegitimate file-sharing websites that violate intellectual property laws. (1) New emissions regulations in Quebec impose costs on Canadian consumers that are not synchronized with the United States approach, raising costs for Canadian consumers who flee across the border for bargains. But the two nations also share numerous responsibilities for continental security, with the North American Defense Command having served as a cornerstone of strategic stability for half a century. Finally, Canada has been a strong partner in the war against al-Qaeda and Islamic extremism, sending forces to support NATO operations in Afghanistan.

      But the dispute over transit rights through Passamaquoddy Bay is just one of a handful of disagreements between Canada and the United States. The two neighbors also remain at odds over the legal status of the waters of the Northwest Passage and economic jurisdiction over a 6,000 square mile pie slice-shaped segment of the Beaufort Sea. But the ability of foreign-flagged shipping to routinely utilize the Northwest Passage could be decades away. Similarly, in 2009 Canada updated its Arctic Waters Pollution Prevention Act to tighten its regulatory grip over the waters of the Canadian Arctic out to 200 nautical miles from shore, but for now there is little practical effect. Perhaps a more pressing concern is the disagreement over the proposed development of LNG terminals on the shore of Maine, which comes at a time when oil is rising in price and the attraction of clean-burning natural gas is becoming more apparent.

      The vessel transits for the LNG terminals would require LNG tankers sailing through Head Harbor Passage, which provides the only connection for large ships between the Atlantic Ocean and the east coast of Washington County, Maine. As such, the Canadian passage is important to Maine ports and the greater Maine economy. Although the ports would be conduits for comparatively clean and efficient natural gas for Maine residents, the mostly Canadian opposition rejects the plans purportedly out of concern for the fragile nature of the marine environment. Much of the objection, however, has nothing to do with concern over the environment and centers on a sort of reactionary nostalgia and resistance to change. Thus, one of the most challenging dilemmas between satisfying the energy needs of homes and industries is juxtaposed against difficult trade-offs with preserving the natural environment, or merely preserving a rural sensibility.

      Two United States ventures have plans to locate LNG terminals on the American side. Downeast LNG ("DELNG") seeks to develop a terminal at Robbinston, Maine and North East Energy Development Company LLC seeks to place a terminal at Red Beach in Calias, Maine. Both developments would be situated on the Maine side of the Saint Croix River separating the two nations. The terminals would be supplied by three hundred meter long LNG tanker vessels that would be required to snake through Canadian waters and thread Head Harbor passage before landing at terminals in United States waters. Head Harbor Passage lies between the Canadian islands of Campobello and Deer Island. Inexplicably, a similar LNG terminal planned for Providence, Rhode Island was withdrawn after opposition groups along Narragansett Bay defeated the plan in the state legislature. (2) (Thus, the nation's smallest state, with one of the highest unemployment rate in the country, shot down a promising LNG development in favor of continued reliance on dirty heating oil from overseas).

      Against this backdrop, Canada is pressing ahead with the Canaport LNG terminal, owned by Irving Oil, Ltd., a Canadian family-owned company, in nearby Saint John, New Brunswick. Canaport will market natural gas across the border to the same people in Maine that would benefit from the United States LNG terminals. The Canadian initiative strikes some Americans as an exercise in economic nationalism and cross-border rent seeking at the expense of Maine consumers. Many Canadians object to that characterization because they say the Canaport terminal, thirty miles away from the border area, is more easily accessible by large shipping and is located farther from the fragile Passamaquoddy Bay ecosystem. Furthermore, the United States terminals, Canada suggests, would impose environmental, economic, and security costs on New Brunswick, whereas all of the benefits of the facilities and shipping would inure to the State of Maine. The complex horizontal and vertical interaction among the political players in the disagreement, which include businesses as well as local, state and provincial, and national governments, color the debate.

      Shipping carriers bound for the proposed LNG terminal on the coast of Maine first would have to transit Canadian national waters before entering United States waters at the confluence of Friar Road, and then proceed into the Saint Croix River. There may be some good faith disagreement over the legal status of the Canadian waters. The waters are either Canadian territorial waters--that is, territorial seas--or Canadian internal waters. The idea has gained traction in Canada that if Canada can make a claim that the waters are historic internal waters, then foreign-flagged ships could be banned from transiting them. This is analogous to some faulty arguments made by Canada in order to control foreign-flagged shipping throughout the Northwest Passage, and it is not persuasive in either context. The question is not dispositive, or even necessarily relevant, however, to solving the legal questions concerning rights of transit by United States-bound shipping. Regardless of whether the Canadian waters are territorial seas or internal waters, there is no question that Canada exercises sovereignty over them.

      Since the critical legal issue is whether tanker ships bound to or departing from United States ports in Maine may transit Canadian waters, most debate has focused on the characterization of the waters of Head Harbor Passage. Although the legal character of the waters is important in some analysis because different rules apply to foreign-flagged vessels in each case, for purposes of this study the character of legal ownership, or even extent of Canadian regulatory competence over the waters, is less materially relevant. Whether the waters are internal waters or territorial seas does not obviate the right of foreign-flagged ships to transit them, it merely changes the navigational regime that applies to such ships.

      The United States has asserted that Head Harbor Passage is a strait used for international navigation and that the navigational regime of nonsuspendable innocent passage applies in the strait. The United States position is legally correct, and the navigational regime that applies is one of innocent passage:

      Under article 45(1)(b) [of the 1982 United Nations Convention on the Law of the Sea], the regime of innocent passage, ... applies in straits used for international navigation that connect a part of the high seas or an exclusive economic zone ("EEZ") with the territorial sea of a coastal State.... These so-called "dead-end" straits include Head Harbor Passage leading through Canadian territorial sea to the United States' Passamaquoddy Bay. (3) The Canadian government has obliquely indicated acceptance but officially it considers the area of the Bay of Fundy, and presumably Passamaquoddy Bay and the associated waterway of Head Harbor Passage, to be within the internal waters of Canada. (4) Canada also has tended to declare that the waters constitute "Canadian waters," perhaps purposefully obfuscating which specie of national (Canadian) waters it refers--internal waters or territorial seas. Some possess the false sense that the issue is important under the theory that if the waters of Head Harbor Passage constitute internal waters, then it follows that the international right of innocent passage does not apply. Although this study concludes that the waterway of Head Harbor Passage is most accurately characterized as territorial seas (overlapped by the navigational regime appurtenant to a dead-end strait--innocent passage that may not be suspended by the coastal state), it also makes the case that the legal character of the water as either internal water or territorial sea is immaterial to the conclusion that the passage constitutes a dead-end strait.

      The Canada-United States dispute is a case...