Trudeau Pipeline Wins in Court, Boosting Canadian Oil Sector
(Bloomberg) -- The Canadian government’s plan to expand a major oil pipeline cleared a key legal hurdle, providing optimism the project will proceed and sending a lifeline to the country’s ailing energy industry.
The Federal Court of Appeals ruled Tuesday in Ottawa that Prime Minister Justin Trudeau’s government adequately consulted with indigenous communities along the line’s route and that the regulatory review of the project included all necessary elements.
The ruling signals one of the final remaining legal challenges to the project may be overcome, which would help keep construction from being interrupted and allow the expanded line to start shipping oil by its 2022 target. However, the ruling is almost certain to be appealed to Canada’s Supreme Court, according to David Austin, an energy lawyer at Stirling LLP in Vancouver.
“People should take a deep breath and wait for the outcome of an appeal,” Austin said in an interview before the ruling was released. “The final judicial review rests at the Supreme Court of Canada level, and until it’s weighed in, the process is not over.”
The Trans Mountain project has been highly anticipated by Canada’s oil producers, which have suffered from a lack of pipeline capacity that has weighed on local crude prices and stymied plans to expand output. The project would boost daily shipping capacity by 590,000 barrels, to a total of 890,000 barrels. Expanding the line, which runs from Edmonton to a shipping terminal near Vancouver, also would open the possibility of developing new markets for Canadian crude in Asia and reducing dependence on U.S. refiners.
Purchase from Kinder
The Trans Mountain expansion has had a long and troubled history. Amid mounting opposition, original owner Kinder Morgan Inc. threatened to walk away from the project, prompting Trudeau’s government to agree to buy the existing line for about C$4.5 billion ($3.4 billion) in 2018 to salvage the project.
Before that deal had even closed, the appeals court nullified the Trans Mountain expansion’s approval in August 2018, ruling that the project’s regulatory review was flawed because it didn’t examine the effects of additional tanker traffic. The court also said Trudeau’s government hadn’t consulted enough with First Nations along the route.
Trudeau’s government then conducted months of additional consultations, and the country’s top energy regulator in February 2019 recommended approving the project again after bulking up its review of the expansion.
On Tuesday, the Federal Court of Appeals ruled that the government’s additional consultation was “a genuine effort in ascertaining and taking into account the key concerns of the applicants, considering them, engaging in two-way communication, and considering and sometimes agreeing to accommodations.”
“This was anything but a rubber-stamping exercise,” the court said in the decision. “The end result was not a ratification of the earlier approval, but an approval with amended conditions flowing directly from the renewed consultation.”
Trudeau’s government hailed the ruling as a vindication of its efforts to consult with First Nations and a positive sign for investors considering ventures in Canada.
“To anyone who says you can’t get major projects built in Canada: You can,” Natural Resources Minister Seamus O’Regan told reporters outside the legislature. “If you roll up your sleeves and you do the work.”
It’s difficult to say whether the Supreme Court will agree to hear an appeal of Tuesday’s decision, Austin said. The ruling is mainly a reiteration of existing concepts and doesn’t include any “groundbreaking” ideas. “The Supreme Court of Canada will have to determine whether it has anything additional to say with respect to the concepts of reasonableness, consultation and accommodation,” he said.
The appeals court’s decision may help future energy projects by clarifying how proponents need to engage with First Nations affected by their operations, said Vivek Warrier, the co-head of the energy industry team at Bennett Jones LLP in Calgary.
“It will put down a marker, from a long-term perspective, as to what consultation needs to look like,” Warrier said in an interview before the ruling was released. “From a legal perspective, we’d love to have a bright line drawn by the Federal Court of Appeal saying what is required and if you’ve met that threshold, then you’ve undertaken adequate consultation.”
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