May 19, 2016 / 8:50 PM / a year ago

UPDATE 3-Canada regulator approves Kinder Morgan pipeline with conditions

3 Min Read

(Adds opposition and challenges to the pipeline)

By Julie Gordon

VANCOUVER, May 19 (Reuters) - Canada's energy regulator on Thursday recommended the approval of Kinder Morgan Inc's plan to expand its Trans Mountain oil pipeline, subject to 157 conditions, clearing a major hurdle for the proposed trebling of capacity to serve lucrative Asian markets.

The National Energy Board (NEB) said it found the C$6.8 billion ($5.19 billion) project, which would boost capacity from 300,000 barrels per day to 890,000 bpd, would not cause significant harm to the environment.

The decision prompted immediate outcry from critics, who called on Canadian Prime Minister Justin Trudeau to block the twinning of the existing pipeline, which carries oil from Alberta to a port in Metro Vancouver.

Trudeau's cabinet has until December to review the NEB's 533-page report and make its final decision. If approved, legal experts say protests and a flood of lawsuits from aboriginal groups will likely follow.

Aboriginals in British Columbia never signed treaties and have been granted "consent" rights by the courts, sometimes interpreted as a veto. But Trudeau told Reuters on Thursday that while community consultation was vital, aboriginal groups do not have a veto over pipeline development.

Building new oil pipelines in Canada has proven difficult in recent years, even with approvals. Enbridge Inc's Northern Gateway pipeline was greenlighted in 2014, but fierce legal and social opposition has so far hindered construction.

That has weighed on Canada's oil sands producers, who are desperate for new lines to get their product to international markets, where it can fetch a higher price.

The NEB said it had determined the "considerable benefits" of the Trans Mountain expansion outweighed the "residual burdens." It also found that with mitigation measures and its conditions, the project "would not likely cause significant adverse environmental effects."

The agency did note that there would be significant effects related to the increase in oil tanker traffic, though marine shipping is not regulated by the NEB. The expansion would boost oil tanker and barge traffic on Vancouver's waters nearly five-fold.

Twinning the Trans Mountain pipeline will include the construction of nearly 1,000 km (621 miles) of new pipeline and the expansion of an existing marine terminal.

If approved by cabinet, the company said construction could start in 2017, with the first shipments in 2019.

A ministerial panel, named earlier this week, is now tasked with consulting with aboriginal groups and other communities on the proposal, with their report due in November.

$1 = 1.3090 Canadian dollars Additional reporting by Nia Williams in Calgary; editing by Richard Chang, Cynthia Osterman and Bernard Orr

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