Providing coverage of Alaska and northern Canada's oil and gas industry
February 2020

Vol. 25, No.07 Week of February 16, 2020

Celebrations fizzle out as Trans Mountain faces 70% cost overrun

Gary Park

for Petroleum News

Government leaders and the Alberta-based oil industry had little time to pop the champagne corks after what many viewed as the removal of the final legal barrier to the Trans Mountain pipeline expansion, TMX.

They were quick to start the celebrations on Feb. 3 when Canada’s Federal Court of Appeal issued a unanimous verdict emphatically rejecting four challenges from First Nations in British Columbia.

In a 95-page judgment, the court told First Nations that case law is clear that “although Indigenous peoples can assert their uncompromising opposition to a project, they cannot tactically use the consultation process as a means to try and veto it.

“Canada must act in good faith (in consulting with First Nations), but at the same time accommodation cannot be dictated by Indigenous groups.”

The three-person court, which halted work on TMX in 2018, citing at the time insufficient consultation between the Canadian government (which owns TMX) and Indigenous communities, said in its fresh judgment that the government’s latest attempt at reconciliation was “anything but a rubber-stamping exercise.”

Kenney lauds finding

The court’s finding was lauded by Alberta Premier Jason Kenney, whose government desperately needs the chance to ship 890,000 barrels per day of oil sands bitumen on TMX to Asia, as “historic and critical,” reinforcing a recent string of court and regulatory decisions that have supported major pipeline projects.

“It’s a great day for Canada because it demonstrates that the vast majority of Indigenous groups (the court estimated that 120 of 129 First Nations have endorsed TMX) will not have their voices ignored. It demonstrates that we do have a rule of law ... that big projects can be completed.”

Kenney said TMX will “result in billions of dollars of economic prosperity for Canada.”

British Columbia Premier John Horgan, once the most outspoken opponent of TMX, said “the courts have determined that the project is legitimate and should proceed.”

Canada’s Natural Resources Minister Seamus O’Reagan said the court decision was a result of the “most comprehensive consultation (between government and First Nations) ever undertaken for a major project in our history.”

Tim McMillan, president of the Canadian Association of Petroleum Producers, said the sudden series of court breakthroughs for pipeline projects are “really adding momentum collectively.”

Chris Bloomer, chief executive officer of the Canadian Energy Pipeline Association, said Canada’s pipelines saga has a pattern of “going three steps forward, two steps back, two steps forward, one step back. (The TMX ruling) is many steps forward.”

As the legal barriers have been lowered, after seven years of being dragged through litigation, construction has resumed on the pipeline, with more than 2,200 workers now involved in the project, raising some hopes that TMX can start delivering bitumen to the Port of Vancouver by late 2022, two years behind the original schedule.

Decision to be appealed

But, with the champagne going flat from the initial celebration, the proponents had to take a dose of reality.

The four First Nations have indicated they will apply for a hearing before the Supreme Court of Canada, while the Canada Energy Regulator (formerly the National Energy Board) is laying the groundwork for what could be a massive round of permit hearings to determine the unresolved 32% of the final pipeline route, which will include concerns of one First Nation about the possible impact on its aquifer.

Will George, a spokesman for the Tsleil-Waututh Nation, left no doubt his community and supporters across Canada will carry their fight to the limit.

“For the longest time, I’ve been under strict orders from my elders to (conduct this protest) in a peaceful way,” he said. “Personally, I’m fed up. If it has to get ugly, it will get ugly.”

Opposing projects

The Squamish Nation, just outside Metropolitan Vancouver, has put out a call for British Columbia residents willing to face arrest by staging protests against oil tankers in the Port of Vancouver that are expected to total about 54 a month if TMX is completed.

But critics note that the same nation has signed an agreement with partners in the Woodfibre LNG project north of Vancouver that is valued at C$1.1 million in cash and land, plus about 2,000 part-time and full-time jobs.

It took no time for opponents of TMX to send out a clear signal of their intentions, as supporters disrupted operations at Vancouver’s main seaport and brought all passenger and freight rail traffic to a halt in Canada’s major population triangle of Toronto, Montreal and Ottawa.

Meanwhile, at least 11 protesters were arrested by the Royal Canadian Mounted Police for ignoring an injunction against setting up blockades along the Coastal GasLink pipeline route, designed to ship natural gas to the LNG Canada liquefaction plant and tanker terminal at Kitimat, on the northern British Columbia coast.

“Our work is not done,” said Chief Leah George-Wilson of the Tseil-Waututh Nation, declaring that the TMX ruling “isn’t going to define us or stop us.”

New cost estimate

Compounding that threat was a startling announcement by Trans Mountain Corp., the federal agency that has control of TMX, that the expansion will cost C$12.6 billion (on top of the C$4.5 billion the government spent acquiring the existing Trans Mountain system), up 70% in the past two years.

However, Finance Minister Bill Morneau was adamant that TMX “continues to be a strong project” and is within the range of a “commercially viable” venture, noting that TMX has already contracted 80% of its capacity.

Ian Anderson, chief executive officer of Trans Mountain, said the corporation has a contingency of C$500 million to cover additional costs and delays, including protests and civil disobedience.

He blamed the surge in cost estimates on delays (with every addition of one year to the timetable adding C$1 billion to the total), plus higher prices for materials and changes to the project.


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