VANCOUVER (miningweekly.com) – Pipeline operator Kinder Morgan Canada (KMC) has placed non-essential activities and related spending to twin an existing crude oil pipeline between Alberta and British Columbia on ice, as opposition to the project in British Columbia intensifies.

The C$7.4-billion project, which was previously given the green light to proceed by the federal government and the previous Liberal British Columbia government, had run into trouble when the incoming minority British Columbia government took power nearly a year ago and vowed to use every tool available to move the goal posts further and thwart the company’s development plans.

KMC said in a statement on Sunday that it will not commit any further shareholder resources to the project, but will continue to consult with various stakeholders to reach agreement by May 31 to seek a way forward. The discussions will serve to gain clarity on the path forward, particularly regarding construction through British Columbia, and to ensure shareholder protection.

The pipeline is seen as critical infrastructure needed to allow Canada, which holds the world's third-largest oil reserves, to reach new markets across the Pacific Ocean in the Far East. The existing pipeline has been operating to world-leading standards for about 50 years, and a tripling of capacity is required in order to wean Canada’s reliance on the US as its biggest crude customer, while the US ramps up output to become the world’s largest oil producer by 2023, according to the International Energy Agency.

The project has the support of the federal government and the provinces of Alberta and Saskatchewan but faces continued active opposition from the government of British Columbia.

"A company cannot resolve differences between governments. While we have succeeded in all legal challenges to date, a company cannot litigate its way to an in-service pipeline amidst jurisdictional differences between governments," KMC president and CEO Steve Kean said.

The expansion will create a twin pipeline that will increase the nominal capacity of the system from 300 000 bbl/d to 890 000 bbl/d. The existing line will carry refined products and synthetic and light crude oils, with capability to carry heavy crude oils.

About 73% of the proposed route will use the existing right of way; 16% will follow other linear infrastructure, such as TELUS, hydro or highways; and 11% will be new right-of-way infrastructure.

The project includes the reactivation of 193 km of pipeline; the construction of 12 new pump stations; the addition of 20 new tanks to the existing storage terminals in Burnaby (14), Sumas (1) and Edmonton (5); and the expansion of the Westridge marine terminal by three berths.

‘UNQUANTIFIABLE RISK'
KMC advised that it had taken a ‘primarily permitting’ approach to its activities during the first half of this year, focused on advancing the permitting process, rather than spending at full construction levels, until it obtained greater clarity on outstanding permits, approvals and judicial reviews. To date, Trans Mountain had spent about C$1.1-billion to develop the project.

However, rather than achieving greater clarity, the project is now facing “unquantifiable risk”, the company stated.

According to KMC, opposition by British Columbia was manifesting itself mainly through the province’s participation in an ongoing judicial review. “Unfortunately, British Columbia has now been asserting broad jurisdiction and reiterating its intention to use that jurisdiction to stop the project. 

“British Columbia's intention in that regard has been neither validated nor quashed, and the province has continued to threaten unspecified additional actions to prevent project success. Those actions have created even greater, and growing, uncertainty with respect to the regulatory landscape facing the project,” Kean stated.

He added that while the parties still await judicial decisions on challenges to the original Order in Council and the British Columbia Environmental Assessment Certificate approving the project, these items, combined with the impending approach of critical construction windows, the lead-time required to ramp up spending, and the imperative that the company avoid incurring significant debt, while lacking the necessary clarity, have brought KMC to its decision point.

“The uncertainty created by British Columbia has not been resolved but instead has escalated into an intergovernmental dispute,” Kean said.

KMC said that if it cannot reach agreement by May 31, “it is difficult to conceive of any scenario in which we would proceed with the project”. 

“The time period for reaching a potential resolution is short, but necessarily so because of approaching construction windows, the time required to mobilise contractors and the need to commit materials orders, among many other imperatives associated with such a large project,” Kean said.

POLITICAL FRACAS
The politically volatile situation has solicited reaction from nearly every camp of the political spectrum.

“The federal process failed to consider British Columbia’s interests and the risk to our province. We joined the federal challenge, started by others, to make that point,” British Columbia Premier John Horgan said in a statement.

“We believe we need to grow the economy, while protecting the environment. We want to work to address these challenges together. But we will always stand up for British Columbians, our environment and the thousands of jobs that depend on our coast,” the minority leader said.

Alberta Premier Rachel Notley stood in stark contrast to her fellow New Democratic Party (NDP) comrade at the helm of British Columbia, as she seeks to access new markets for the province’s wealth of oil reserves, while British Columbia seeks to block it by all means.

“We are calling on the federal government to act in the defence of Alberta and working people in Western Canada in the way they have in the past for other parts of this country. A federal approval of a project must be worth more than the paper it’s written on,” Notley said in a storm of tweets on Twitter.

She vowed to bring forward legislation giving the Alberta government powers “it needs to impose serious economic consequences on British Columbia if its government continues on its present course. Let me be absolutely clear, they cannot mess with Alberta.”

“Alberta is prepared to be an investor in the pipeline. This pipeline will be built.”

Federal Conservative leader Andrew Scheer also took to social media to vent frustration at the project impasse, pointing the finger at Prime Minister Justin Trudeau to take action to ensure that the pipeline gets built.

“Not only has the Prime Minister failed to champion important projects like Trans Mountain, he is actually making matters worse by imposing policies that harm the Canadian energy sector, like the carbon tax and new regulations that penalise Canadian oil exports,” Scheer said.

Trudeau clapped back, saying: “Canada is a country of the rule of law, and the federal government will act in the national interest. Access to world markets for Canadian resources is a core national interest. The Trans Mountain expansion will be built,” he stressed in a tweet.

Natural Resource Canada issued a statement calling on Horgan and the British Columbia government to end all threats of delay to the Trans Mountain expansion. “His government's actions stand to harm the entire Canadian economy. At a time of great global trade uncertainty, the importance of Canada's role in the global energy market is bigger than individual projects and provinces.

“We will act in Canada's national interest to see that this project is built. Our government stands behind this project and has the jurisdiction in this matter. Under Canadian constitutional law, this is well-established and clear and has been reaffirmed by multiple courts, including the Supreme Court of Canada,” Minister Jim Carr said in a statement.

Greenpeace Canada hailed the development as an environmental victory.

"The writing is on the wall, and even Kinder Morgan can read it. Investors should note that the opposition to this project is strong, deep and gets bigger by the day. This announcement shows that this widespread opposition has reached critical mass,” Climate & Energy campaigner Mike Hudema said in a statement. “We encourage Kinder Morgan to shelve this project before the litany of lawsuits, crumbling economics and growing resistance against the pipeline does it for them."

The nongovernmental organisation has been instrumental in arranging protest action at the Burnaby construction site, that has seen more than 200 people arrested for illegal blockading of construction in British Columbia, including political figures such as federal Green Party leader Elizabeth May. On March 10, as many as 10 000 people marched in support of Indigenous Peoples’ resistance against the pipeline.