A Canadian court has provided a “definitive victory” and cleared the way for the Trans Mountain pipeline across British Columbia, said Alberta Premier Rachel Notley.
Her assertion of a clear-cut triumph for the project followed a Federal Court of Appeal verdict rejecting the arguments of six First Nations, several environmental organizations and the cities of Vancouver and Burnaby.
The case centered around a National Energy Board hearing process and consultations held by the project proponent Kinder Morgan with groups potentially affected by the project to triple capacity on the Trans Mountain system to 890,000 barrels per day of diluted bitumen.
Based on an NEB recommendation, the Canadian government approved the C$7.4 billion plan in 2016, triggering widespread opposition in B.C., where almost 200 people have been charged with breaching the terms of a court injunction against protesters at the construction site.
The federal court also ordered British Columbia to pay the legal costs of the appeal.
Notley said the verdict was “another victory for our economy, another victory for our climate plan, (and) another victory for the pipeline.”
Opposition viewAlberta opposition leader Jason Kenney, of the United Conservative Party, said Notley was too hasty to claim outright victory.
“I think her expectation that one court decision will result in oil flowing is a triumph of hope over experience,” he said.
The B.C. government wasted no time effectively endorsing Kenney’s view, with Environment Minister George Heyman declaring his New Democratic Party administration will “continue to explore other legal ways to defend the (environmental and First Nations) interests of British Columbia against this unnecessary project.”
B.C. Premier John Horgan had asked for a legal ruling that would affirm his province’s right to restrict increased volumes of crude from crossing the province and being shipped from the B.C. coast to Asia.
The City of Burnaby announced it will attempt to take its case to the Supreme Court of Canada, a tactic Notley said was “showboating” by Mayor Derek Corrigan.
“If I were a taxpayer in Burnaby, regardless of my position on the pipeline, I would be very irritated to see my mayor throwing good money after bad,” Notley said, speculating that Corrigan has likely been told by lawyers he has no hope of success.
There are a number of pending legal decisions on the pipeline, including a review by the Federal Court of Appeal of the federal cabinet decision to approve the pipeline and a review by the British Columbia court of appeal of the decision by the province’s former government to endorse the pipeline.
BottlenecksWhile the legal battles continue, the oil sands industry in Alberta is struggling with pipeline bottlenecks and a shortage of rail capacity at a time when Canada’s oil output is forecast to grow by 290,000 bpd this year to 4.95 million bpd.
Cenovus Energy, one of the leading producers, said it cut February output by 6 percent from January’s 378,000 bpd, while Syncrude Canada has trimmed its volumes and Canadian Natural Resources has delayed the ramp up of some heavy oil wells.
Cenovus Chief Executive Officer Alex Pourbaix said his company was “taking steps to respond to a critical shortage of export pipeline capacity in Western Canada that is beyond our control and is having a negative impact on our industry and the broader Canadian economy.”
Several analysts say the pipeline constraints and rail backlogs could also further weaken prices for Canada’s heavy crudes, which are expected to trail West Texas Intermediate prices by US$21.75 per barrel this year and US$19 in 2019.
However, relief is on the horizon, starting with Enbridge’s plan to replace its aging Line 3 pipeline from Alberta to Superior, Wisconsin, at a cost of C$8.2 billion and doubling capacity to 760,000 bpd. The project has a scheduled in-service date of late 2019.
Also plodding along after more than a decade of legal and political battles is TransCanada’s Keystone XL system to deliver 830,000 bpd of diluted bitumen to the U.S. Gulf Coast refinery hub. The company said it now has 500,000 bpd of shipping commitments, allowing it to start construction in 2019.
Despite the transportation and price setbacks, the Paris-based International Energy Agency said Canadian oil production has risen faster than most countries over the last three years, mostly from the commissioning of oil sands projects, setting Canada up to overhaul Iraq as the world’s fourth largest producer after the United States, Russia and Saudi Arabia.