Trudeau’s pipeline expansion gets boost from court ruling

Natalie Obiko Pearson May 24, 2019
Photo: Canada Prime Minister Justin Trudeau.

VANCOUVER (Bloomberg) -- Prime Minister Justin Trudeau's bid to complete the controversial Trans Mountain pipeline expansion has received a British Columbia top appeals court ruling that states that the province doesn’t have the jurisdiction to restrict shipments of oil-sands crude.

Premier John Horgan’s government is seeking to amend B.C.’s Environmental Management Act so that the Pacific Coast province has greater powers to regulate the transit of heavy oils like diluted bitumen from neighboring Alberta. The government had sought the opinion of the B.C. Court of Appeal on whether the proposed legislation falls within its powers under Canada’s constitution.

The court said Friday the proposed amendments appear to "cross the line" between general environmental laws and the regulation of federal undertakings.

"Even if it were not intended to 'single out' the TMX pipeline, it has the potential to affect (and indeed 'stop in its tracks') the entire operation of Trans Mountain as an inter-provincial carrier and exporter of oil," the judgment said. The matter can still be taken to the Supreme Court of Canada.

The Trans Mountain expansion project seeks to almost triple the capacity of an existing pipeline that runs from oil-rich Alberta to a terminal in Vancouver’s port. It’s seen by the federal government and the oil industry as critical to reducing Canada’s dependence on the U.S., which takes almost all the nation’s oil exports.

But the project faces staunch opposition in British Columbia, the birthplace of Greenpeace. Horgan’s government was elected in 2017 pledging to use “every tool” to try to block the project. The proposed legislation doesn’t specifically name Trans Mountain, but the proposed regulations would restrict the increase of diluted bitumen shipments through the province until the behavior of spilled bitumen can be better understood.

Usurps role

"Immediately upon coming into force, it would prohibit the operation of the expanded Trans Mountain pipeline in the province until such time as a provincially-appointed official decided otherwise," the judgment said. That alone "threatens to usurp" the role of the federal regulator, the National Energy Board, it said.

Kinder Morgan Inc., Trans Mountain’s original backer, abandoned the project last year due to protests and legal challenges in British Columbia. Trudeau’s government stepped in to buy it for about $3.1 billion (C$4.2 billion) and has pledged to decide by June 18 whether to proceed with it.

The expansion, which would add 590,000 bopd shipping capacity, would be a boon for Canadian oil drillers that have suffered from a lack of pipeline space that has weighed on local crude prices. The Trans Mountain expansion would be especially helpful to companies that are focused on production -- like Cenovus Energy Inc., MEG Energy Corp., and Athabasca Oil Corp. -- and have little to no refining capacity to cushion the blow from lower prices.

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