April 9, 2018 / 7:18 PM / 13 days ago

Canada's options on pipeline as Kinder Morgan threatens to quit

OTTAWA (Reuters) - Canada’s Liberal government is under pressure to push through the expansion of Kinder Morgan Canada Ltd’s Trans Mountain pipeline from the Alberta oil sands to the Pacific province of British Columbia.

FILE PHOTO: A tanker docks at Westridge Terminal, the loading area for Kinder Morgan's Trans Mountain pipeline in Burnaby, British Columbia, Canada in a May 10, 2013 file photo. Kinder Morgan Canada/Handout/File Photo via REUTERS

But the company said it would scrap plans to nearly triple the Trans Mountain pipeline’s capacity unless various legal challenges could be resolved by May 31. Prime Minister Justin Trudeau’s federal government approved the project.

Why has this issue arisen?

The minority left-leaning New Democratic government in British Columbia, citing the risks of a major spill, opposes the project. This year it proposed new rules to temporarily block increased shipments of crude while it examined oil spill preparedness and response.

British Columbia is also asking the provincial courts to rule on whether it has the power to control oil shipments on environmental grounds.

Who has jurisdiction over pipelines?

While the federal government has the authority to grant permits for major pipelines, the 10 provinces have wide-ranging powers over natural resource development. Ottawa says British Columbia does not have the right to block the pipeline.

The provinces guard their jurisdictions and federal governments tend to think carefully before picking fights, preferring instead to rely on negotiations.

What has the federal government done so far?

Ottawa has taken a cautious line, insisting the project will be built while urging British Columbia to back down. Trudeau has spoken separately to British Columbia premier John Horgan and his Alberta counterpart, Rachel Notley, who backs the expansion and is threatening sanctions against British Columbia unless it reconsiders.

What can Trudeau do now?

Trudeau, asked what the government would do, told reporters on Monday that Ottawa is examining a range of options but gave no further details.

A possible step is for Trudeau to convene a meeting between Horgan and Notley to thrash out a compromise that would allow Kinder Morgan to restart work. However, Horgan insists he will not change his mind.

Warren Mabee, an environment and energy expert at Queen’s University in Kingston, Ontario, said Trudeau was unlikely to be too forceful, especially given that he does not want to harm the prospects of federal Liberal legislators in a national election set for October 2019.

“It runs the risk of alienating voters in British Columbia and I don’t think this government is prepared to do that,” he said by phone.

What more could the government do, in theory at least?

Ian Blue, a lawyer with Gardiner Roberts and an expert in energy and constitutional law, said Ottawa could warn British Columbia that if it took further actions under provincial laws to block the pipeline, the federal government would step in and disallow those laws. This provision in the Canadian constitution has not been used since the 1940s.

In an extreme situation, using an article in the criminal code, the government could deploy the Royal Canadian Mounted Police and troops to maintain a barrier between protestors and construction workers.

Ottawa last took such a move in 1990 when it sent in troops and police to help quell an aboriginal protest near Montreal.

“These things never end well, that’s the difficulty with them. The question is, how much do you want get the pipeline built and how much do you want to assert federal authority?” Blue said by phone.

What else could delay the project?

First Nations bands, environmental groups and local municipalities have launched a legal challenge against the project, saying Canada failed in its duty to consult them.

    Hearings at the Federal Court of Appeal ended in October and there is no firm deadline for a judgment. A decision in a similar case involving an Enbridge pipeline project took about eight months. Whichever side loses would most likely appeal to the Supreme Court, a move that would cause lengthy delays.

Reporting by David Ljunggren; editing by Diane Craft

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