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Trans Mountain expansion, once under construction, likely to languish in 2019

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Trans Mountain expansion, once under construction, likely to languish in 2019

Prospects for a restart of construction on a project to almost triple the capacity of a Canadian government-owned oil pipeline seem less likely in 2019 than they did a year ago as regulatory and legal challenges that shut the project down show no sign of letting up.

Trans Mountain Pipelines Inc. will start 2019 in the midst of a National Energy Board rehearing of parts of its original process that resulted in approval of the line in 2016. A federal court in August ruled that parts of that approval were faulty and invalidated licenses to construct the line. The federal regulator is scheduled to provide a new determination of the project Feb. 22, 2019, to the federal cabinet, which with the court's approval may restart construction of the line.

While Prime Minister Justin Trudeau, who has the legislative authority to order construction of the project, has assured Canada's oil producers that the line will be built, opponents appear to already be planning a return to the courts.

The Wilderness Committee, a Vancouver, British Columbia-based activist organization, walked away from the rehearing process and turned down C$25,000 in funding from the board, known as the NEB, citing "the unreasonable timelines for its reconsideration of the Trans Mountain pipeline expansion." Peter McCartney, a climate campaigner for the organization, said the 22-week timeline for reconsideration was politically motivated. "There is simply no way the NEB can do a meaningful review in 22 weeks and get the evidence they need to make an informed decision," McCartney said in November.

While McCartney denied reports that the group abandoned its participation in the regulatory process to pursue a legal challenge, the Wilderness Committee did not rule out such action by others. "We're not the ones preparing a legal challenge against the feds," the group said on its Twitter feed. McCartney was "referring to the many allies that are discussing the possibility."

Trudeau's government agreed to buy the Trans Mountain network, which includes a 1950s-vintage pipeline with a capacity of 300,000 barrels per day, a marine terminal and a spur line to refineries in Washington, for C$4.5 billion after its owner, the Kinder Morgan Inc. unit Kinder Morgan Canada Ltd., threatened to walk away from the expansion project after years of regulatory uncertainty.

The 590,000-bbl/d expansion would see much of the pipe twinned and an expansion of loading facilities in Burnaby, British Columbia. The expansion would give Canadian oil sands producers access to markets other than the U.S., which Trudeau has deemed to be in the national interest. The start of construction in early 2018 sparked protests in British Columbia in which hundreds were arrested. The court ruling that ordered a halt to construction came one day before the federal government closed the deal for the pipeline.

SNL Image

Trans Mountain's Westridge Marine Terminal in British Columbia.
Source: Trans Mountain Pipelines Inc.

Trudeau's vow to build the pipeline has led many groups to believe that the outcome of the NEB process is a foregone conclusion, with the Wilderness Committee hinting that its timing was linked to a provincial election in Alberta in the first half of 2019.

Approval of the restart of the line could prove more of a liability than a benefit for the prime minister, who is also expected to call a national election later in the year. Pro-pipeline Alberta elected only four members of Trudeau's Liberal Party in 2015, compared with 17 from British Columbia. Most of the British Columbia members of Parliament represent constituencies in the province's populous Lower Mainland region, where opposition to the pipeline is greatest.

Another complication for the Trans Mountain expansion could be the uncertain future of the NEB, as the federal government is working to shut the regulator and replace it with separate environmental and energy regulation bodies. Producer groups and Alberta politicians have decried the change, claiming the new process would prevent the construction of any new pipeline out of Canada.

Trudeau disagrees. "We're going to work to make sure that we're creating a system where you don't have to pass a law to get a pipeline built, you don't have to buy an energy project in order to de-risk it," Trudeau told the Canadian Press in a Dec. 17 interview.

The future of the Trans Mountain expansion will remain unclear, even with a positive ruling from the NEB. The government will likely return to the Federal Court of Appeal, present its findings, and ask for the licenses to be reinstated. That could lead to a revived court action that could stretch beyond 2019.

The Wilderness Committee's McCartney said the NEB's flawed process is likely to lead to another flawed decision. "They're making all the same mistakes as before," he said. "Even Trudeau agreed the process was broken, yet here we are again with the government manipulating the review to get their preferred outcome."