Canada Won’t Appeal Pipeline Ruling
The government says it will commit to extensive consultations with indigenous groups affected by the pipeline expansion
Wall St Journal 4 Oct 2018
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Canada’s Federal Court of Appeal ruled in August that the government didn’t adequately carry out its constitutional duty to consult with affected indigenous communities. Above, protesters in British Columbia in March. Photo: jason redmond/Agence France-Presse/Getty Images
OTTAWA—Canada said Wednesday it would waive its right to appeal a court ruling that blocked work to expand the existing Trans Mountain pipeline, arguing it would unnecessarily delay government efforts to complete the energy project.
The Liberal government also unveiled plans to kick-start a new round of consultations with indigenous groups, whose lawsuits led to the latest setback to Canada’s efforts to add to limited pipeline capacity.
The difficulty domestic producers face to move their crude to the U.S. and other foreign markets is weighing on the price of western Canadian crude, which now trades at a significant discount compared with global benchmarks such as Brent and West Texas Intermediate.
In August, Canada’s Federal Court of Appeal annulled regulatory approval for the pipeline project, which envisages nearly tripling the amount of landlocked crude oil that can be moved from the province of Alberta to a Pacific coast port, where it can be loaded on tankers and transported to faster-growing economies in Asia.
In the ruling, the appeal court said the government didn’t adequately carry out its constitutional duty to consult with affected indigenous communities, and the energy regulator relied on a study that didn’t fully consider the impact of increased oil-tanker traffic on the environment.
Wednesday’s decision to waive its right to appeal and restart such consultations is the latest move by the Liberal government to get construction going on the project following the court judgment. Last month, the government instructed the country’s energy regulator to conduct another review in the span of 22 weeks, or 5½ months, with a focus on the impact of increased oil-tanker traffic on the Pacific coast.
Prior to a Wednesday morning Liberal Party caucus meeting, Canadian Prime Minister Justin Trudeau said an appeal “would take another few years” before construction could start. He said a blueprint laid out in the court ruling on how Ottawa should proceed with Trans Mountain “will allow us to get things done quicker and get our resources to new markets other than the U.S. in a more rapid fashion.”
The Liberal government purchased the Trans Mountain pipeline project in May for 4.5 billion Canadian dollars ($3.51 billion) after Kinder Morgan Inc., the original owner, threatened to abandon expansion plans due to political and legal uncertainty. At the time of the acquisition, Canada said completing the pipeline expansion was in the national interest, while adding it didn’t intend to be a long-term owner of the asset.
Construction on the pipeline expansion was immediately halted following the appeal-court ruling.
The initiatives to date from Canada demonstrate “tangible and substantial ways that our government will follow on our duty to consult on the Trans Mountain pipeline in the right way” in the aftermath of the appeal court ruling, Amarjeet Sohi, Canada’s natural resources minister, said at a news conference in the nation’s capital.
“We are not going to presuppose what we are going to hear from indigenous communities. We are going to listen very carefully,” Mr. Sohi said. “And if there are appropriate accommodations to emerge, those will be considered.”
Mr. Sohi declined to put a timeline on how long consultations with the affected 117 indigenous groups would take. He acknowledged some indigenous communities would likely remain opposed to the project following talks, due to the threat the pipeline project poses to their livelihood, which involves fishing off the coastline in British Columbia, Canada’s westernmost province.
Canada’s record on getting major energy infrastructure projects like pipelines completed is fraught with setbacks. Two pipeline projects, championed by Enbridge Inc. and TransCanada Corp. , were scrapped this decade due to local opposition in affected regions. Economists at Bank of Nova Scotia have estimated Canada’s insufficient pipeline capacity costs the economy nearly C$16 billion a year, or 0.75% of economic output.
The lack of pipeline capacity is prompting producers to rely heavily on rail to ship their crude. Last week, Cenovus Energy Inc. announced it signed deals with Canada’s main railway operators that will see the amount of crude oil exported by rail rise substantially, to 100,000 barrels a day, in the coming months.