The federal government on Tuesday reapproved the Trans Mountain pipeline expansion, a crude-oil export project that has pitted Alberta against the British Columbia government and oil industry supporters against environmentalists and Indigenous opponents.
Prime Minister Justin Trudeau said the pipeline expansion, which Ottawa bought for $4.5-billion last year, is in the national interest because it will create jobs and provide access to new markets for Western Canadian oil producers who currently rely almost completely on U.S. customers.
The Prime Minister said Trans Mountain Corp. told him it expects to begin construction this summer, although government officials said it could take several months for the federally owned company to get the permits and contracts that are needed to begin installing the pipe. The officials were granted anonymity because they were not authorized to speak publicly on the issue.
The pipeline decision came less than 24 hours after the Liberal government approved a motion in the House of Commons declaring that the country is in a “national climate emergency” that requires deep cuts to greenhouse gas emissions to meet and exceed international commitments.
Mr. Trudeau said Tuesday that the expanded pipeline would provide a new market and cheaper transportation for crude that is already being produced in Western Canada, and fits within the government’s climate plan. Mr. Trudeau is facing a fall election campaign in which the environmental debate will likely figure prominently. He vowed that a Liberal government would ensure all its profits from the operation and sale of the government-owned pipeline would be used to develop and deploy low-carbon technology to reduce GHG emissions. Higher corporate income tax revenue from increased oil prices resulting from the expanded pipeline will also be included.
“You can’t have a real economic plan, a real jobs plan, in the 21st century unless you have a real climate-change plan,” he said. “We want good middle-class jobs now, and good middle-class jobs for our kids.”
Oil industry executives in Alberta welcomed the decision, but Premier Jason Kenney greeted it coolly, saying the federal government needs to speed up the pace of construction.
“This second approval of the Trans Mountain pipeline isn’t a victory to celebrate. It’s just another step in a process that has frankly taken too long,” Mr. Kenney said. “Approval was necessary but it isn’t sufficient. Our focus is on getting the pipeline built,” he added.
B.C. Premier John Horgan maintained the expansion threatens his province’s environment and economy, saying Ottawa has not filled the gaps in its marine oil-spill response regime. However, he promised B.C. would not obstruct the project.
Trans Mountain chief executive Ian Anderson said the company hopes it can speed up construction by persuading the National Energy Board to issue permits based on previous work done, rather than starting anew.
The Trans Mountain pipeline is a 65-year-old line that delivers 300,000 barrels a day (b/d) of crude from Alberta to Vancouver Harbour. The expansion will nearly triple that volume to 890,000 b/d. The project cost was previously estimated at $7.4-billion, but is expected to have increased substantially after a year’s delay due to a Federal Court of Appeal decision quashing the previous federal permit.
The original owner, Texas-based Kinder Morgan Inc., stopped work on it in April, 2018, citing political risks and eventually sold the pipeline to the federal government. It was halted again last August when the Court of Appeal ruled Ottawa had failed to adequately consider environmental effects from increased ship traffic and fell short of its constitutional obligation to consult and accommodate Indigenous communities affected by the project.
The federal government is starting a process to assess how Indigenous communities can benefit from the pipeline expansion, whether by taking an equity interest or receiving other financial and job-related benefits. Ottawa is keen to have Indigenous ownership in the project and Mr. Trudeau said the government would consider proposals that might range from a 25-per-cent stake to 100 per cent.
Finance Minister Bill Morneau said there has been preliminary interest from Indigenous-led consortiums, from corporations and from other investors, but that no sale will be completed until any further legal challenge or political risks are dealt with and the project is closer to completion.
Three First Nations that were at the centre of that legal challenge said Tuesday that Ottawa clearly intended to reapprove the project and failed to meaningfully consult them or obtain their consent to the project’s approval. They warned they will be considering a new court challenge to protect their rights.
“This decision is disappointing, but not a surprise,” Chief Leah George-Wilson of Tsleil-Waututh Nation said in a statement. “Tsleil-Waututh again engaged in consultation in good faith, but it was clear that the federal government had already made up their mind as the owners of the project.”
Mr. Trudeau and Natural Resources Minister Amarjeet Sohi defend the consultations that took place after the Court of Appeal decision. That process was overseen by Frank Iacobucci, former justice of the Supreme Court of Canada, and resulted in new conditions that will be enforced by the federal energy regulator and further accommodations that respond directly to community concerns about effects on salmon, killer whales and clean water.
While environmental groups are promising a summer of protest in British Columbia, oil executives and other business leaders cheered Tuesday’s announcement. Insufficient export capacity to handle growing oil sands production resulted last year in a glut of crude in Alberta and a steep discount that U.S. refiners paid for Canadian oil. As a result, the Alberta government ordered an across-the-board cut in production to defend prices, a curtailment that remains in effect.
The Trans Mountain expansion project “is critical infrastructure that will diversify markets for Canadian oil, create a stronger energy future and expand economic benefits for all Canadians,” the Canadian Association of Petroleum Producers (CAPP) said in a release. The industry needs construction to begin without further delay, said Alex Pourbaix, chief executive at Cenovus Energy Inc., one of the country’s largest oil producers.
SHAWN MCCARTHY, GLOBAL ENERGY REPORTER
OTTAWA AND CALGARY AND VICTORIA
The Globe and Mail, June 18, 2019