B.C. vote shouldn’t sink approval of pipeline
The first reaction to a minority government in B.C. might be panic among those who support oil pipelines to the West Coast, including the Alberta government.
After all, the balance of power in B.C. now appears to be held by the anti-pipeline Green party. Tuesday’s election gave Premier Christy Clark a narrow victory over the NDP, but she remained one seat short of forming a majority government.
Both NDP Leader John Horgan and the Green party’s Andrew Weaver oppose Kinder Morgan’s plan to triple the capacity of the Trans Mountain Pipeline, which moves Alberta oil to Burnaby.
With a minority government looming, has the project’s risk profile changed significantly? Legally, no. Politically, yes.
The reality is the federal government has approved the project. The National Energy Board ruled the development is in the national interest and B.C. approved the project’s environmental certificate. If a government in Victoria decides to oppose Trans Mountain, it can make life difficult for the development. But pipeline and legal experts say it couldn’t stop the project.
“The courts in Canada have established very clearly provincial or local authority cannot stop a federal undertaking from proceeding,” says Gaetan Caron, former chairman of the NEB.
But one doesn’t have to look back very far in history — at Enbridge’s Northern Gateway project — to see federal approval isn’t necessarily the end of the story.
In this case, Kinder Morgan has yet to make a final investment decision, although construction is expected to start in September.
Caron believes B.C. could make life difficult for Trans Mountain by delaying development permits.
On a legal front, there are other potholes that could sidetrack the $7.4-billion project. Several B.C. First Nations, environmental groups and municipalities have asked for a judicial review of the NEB’s approval. But legal experts say the merits of this case haven’t changed with the election.
University of Calgary law professor Martin Olszynski points out that it would be “very difficult” to undo the environmental assessment certificate the B.C. government granted to Trans Mountain in January.
“There’s nothing I’m aware of — no direct legal lever — on which the provincial government could prevent or preclude this project from being built.”
Across the energy sector, reaction was muted Wednesday as officials tried to understand what — and who — might be driving the bus on future oil and gas policy.
“It does increase the level of uncertainty. There’s no doubt about it,” says Gary Leach, president of the Explorers and Producers Association of Canada. “We do have another wild card that we didn’t have 24 hours ago.”
Part of the anxiety is tied to the long road it took to get a green light on the Trans Mountain expansion in the first place. The approval process took years to achieve and required a herculean effort in the face of pressure from all sides.
Kinder Morgan agreed to provide the B.C. government up to $1 billion to get the project going, paying $25 million to $50 million annually into an environmental community grant program over 20 years.
While the legal risks may not have changed, the political sands have shifted. If Weaver holds the balance of power, he would have a powerful role in future policy decisions.
“We don’t know what issues he will consider ‘deal breakers’ but he’s expressed strong opposition to LNG projects, Site C (hydro project) and Kinder Morgan’s Trans Mountain expansion,” George Hoberg, a UBC professor of environment and natural resource policy, said in an email. “Weaver would have enormous power. It really depends on which issues he chooses to use it.”
Finally, any decision to block already approved LNG project or pipelines could change the risk profile for Canadian energy developments, and that wouldn’t be welcome by Ottawa or Alberta.
A research report by Desjardins Capital Markets last week called the minority government one of the most challenging outcomes for Canada’s energy sector and said it could continue “driving funds flow from Canada to the U.S.” Producers say that’s already happening and would get worse if pipelines and LNG projects are stymied after going through the regulatory process.
And so the risk factor comes back to the political equation.
“Honestly, the biggest thing that could happen is the Trudeau government loses its will to move forward with (the pipeline) because there’s too much political pressure,” says Trevor McLeod, director of the Natural Resources Centre at the Canada West Foundation. “I just don’t see that happening.”
“Provincial or local authority cannot stop a federal undertaking from proceeding.” — GAETAN CARON FORMER NATIONAL ENERGY BOARD CHAIRMAN