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Trans Mountain pipeline faces a steep climb

19 Sep 2017, 6.32 pm GMT

Trans Mountain pipeline faces a steep climb

Houston, 19 September (Argus) — The political tide seems to be turning against Kinder Morgan's 590,000 b/d Trans Mountain crude pipeline expansion despite Canada's federal government touting it as a boon to the economy and vital connection to global markets.

The US midstream company is seeking to twin the existing 300,000 b/d Trans Mountain crude line from Edmonton, Alberta, increasing system capacity to 890,000 b/d. The project is facing new headwinds — a provincial government in British Columbia determined to stop the expansion, a growing anti-fossil fuel movement and more regulatory hurdles.

Trans Mountain is also facing a major court challenge from environmental groups and the cities of Vancouver and Burnaby, at the line's Pacific coast terminus.

Kinder Morgan has downplayed the issues, saying last week that it is committed to meeting goals and timelines for the expansion and "moving forward with all aspects of planning for construction" including obtaining permits and meeting various conditions. The pipeline giant has already hired six contractors and plans to start construction this month.

The has repeatedly said its project has faced "an unprecedented level of scrutiny and review" and is already subject to 157 conditions imposed by the National Energy Board (NEB) and 37 conditions attached to a BC environmental certificate that the previous provincial leadership granted.

The project faces strong opposition in BC, including from premier John Horgan of the New Democratic Party. Horgan in May reached a deal with Green Party leader Andrew Weaver to form a minority government, ousting the Liberal Party that had led since 2001.

The new government coalition has vowed to use every tool available to stop the Trans Mountain expansion and fired the first salvo last month, banning construction on public lands until Kinder Morgan engages in more discussions with aboriginal groups so BC can meet its "duty of meaningful consultation."

The province also hired an outside attorney to help it become involved in current legal challenges to the project and already scored a victory on that front. The Canadian Federal Court of Appeal on 29 August approved a request from BC to join a major lawsuit that challenges the federal approval of Trans Mountain, joining several First Nation groups as well as the cities of Vancouver and Burnaby. Burnaby has become the center of opposition to the project, where residents have clashed with Kinder Morgan over attempts to survey Burnaby Mountain, where tunneling for the expanded pipeline would take place.

But Justice David Strata set tight time restrictions for the province to participate and scolded BC, saying that some aspects of its motion were unsatisfactory and that the province "does not appear to understand the basic ground rules of the complex proceeding it is seeking to enter."

Kinder Morgan had opposed BCs participation in the lawsuit, raising "the specter of British Columbia advancing new, complex issues on the eve of the hearing, resulting in substantive and procedural unfairness," the court said.

Hearings in the case are planned for 2-13 October.

BC said it was exploring other tools to stop the expansion and provincial officials — including attorney general David Eby and environment and climate change strategy minister George Heyman — held a high-profile press conference on 10 August, stating that "a seven-fold increase in heavy oil tankers in the Vancouver harbor is not in BC's best interests."

BC's government could stall the project for months by using some of the tactics it has already employed, such as denying provincial permits and joining larger court challenges, legal experts said.

But ultimately it would be very difficult to stop the project legally as it was already approved by the federal government and by BC, University of Saskatchewan law professor Dwight Newman said.

But the campaign against Trans Mountain could lead to civil disobedience and protests that could cause major delays, much like the massive demonstrations that stalled the 525,000 b/d Dakota Access pipeline in the US midcontinent for months, Newman said.

Some of the tactics being used by BC were included in a "legal tool box" published in June by West Coast Environmental Law, an environmental group. It details legal approaches that BC could use to stop or slow the project, including using a provincial law to enable changes to Trans Mountain's existing environmental assessment.

The group also advises BC to establish a requirement, with reference to the UN Declaration on the Rights of Indigenous Peoples, that Kinder Morgan demonstrate that every First Nation whose territory is potentially affected by the project, including by the risks of spills from pipelines or tankers, has provided its free, prior and informed consent for the project.

Tougher sledding

Other large Canadian infrastructure projects are also facing a tougher regulatory framework and challenges from First Nations and environmental groups, raising concerns in the business sector and in particular, the energy industry.

Just last week, the BC government said that it will raise its carbon tax for the first time in six years in 2018.

The government will bump the tax up by C$5 to C$35/metric tonne ($28.81/t) on 1 April as part of an update to the province's budget for the next year. It will be the first increase since 2012 and makes good on a pledge by the province's new government to start raising the tax in conjunction with other efforts to reduce greenhouse gas emissions.

The tougher regulatory and political atmosphere in Canada is scaring away investment and the business community is alarmed, Calgary-based Eau Claire Energy Advisory principal consultant Ed Kallio said.

TransCanada recently put a pause on its 1.1mn b/d Energy East crude pipeline project to study recent changes to the NEB's scope of its inquiry and decide whether to proceed.

The agency on 8 September granted a request from TransCanada for a 30-day suspension of its Energy East application. TransCanada asked for the delay after the NEB announced that it would consider upstream and downstream greenhouse gas emissions when evaluating Energy East and the related Eastern Mainline project.

Earlier this year, Malaysia's state-owned oil and gas company Petronas halted development of the planned $36bn Pacific NorthWest LNG export terminal on Lelu Island, BC. Petronas, the majority owner of the project, said it was no longer competitive.

Another large project, Enbridge's 525,000 b/d Northern Gateway pipeline, was rejected last year by the administration of Canadian prime minister Justin Trudeau, who said that it was not in the interest of local communities. The project would have delivered diluted bitumen from Bruderheim, Alberta, to the port at Kitimat, British Columbia, and ship 193,000 b/d of condensate diluent on a parallel line in the other direction.

The latest headwinds facing Trans Mountain come as provinces in Canada have unprecedented influence on large energy projects, marking a clear departure from decades of federal control.

Kallio said the Trans Mountain expansion will be a test of Trudeau's leadership as opponents will try to slow the project as much as they can. "The power legally is with the federal government. You have to be prepared to use the big stick."

The NEB, which already had approved the Trans Mountain expansion in May 2016, has scheduled a series of detailed route hearings on the project in the coming months.

Hearings for the first two segments will take place in Spruce Grove, Edson and Hinton, Alberta, beginning in November and December and hearings on the remaining segments in BC are planned in 2018.

Kinder Morgan said the detailed route process, including hearings, is a typical and expected part of the regulatory proceedings. "Trans Mountain factored in the possibility of route hearings when developing our phased construction approach and timeline," the company said.

The majority of pipeline construction is expected to take place in 2018 and 2019, with terminal work beginning this year.

The NEB in April to July of this year received 452 statements of opposition to the proposed detailed route of Trans Mountain.


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