Canada orders new regulatory review of Trans Mountain oil pipeline

WINNIPEG, Manitoba (Reuters) - The Canadian government on Friday directed its National Energy Board (NEB) regulator to conduct a new review of its application to nearly triple the capacity of the Trans Mountain oil pipeline, taking into account the impact of additional marine traffic.

FILE PHOTO: A workman walks past steel pipe to be used in the oil pipeline construction of Kinder Morgan Canada's Trans Mountain Expansion Project at a stockpile site in Kamloops, British Columbia, Canada May 29, 2018. REUTERS/Dennis Owen/File Photo

Expansion of the pipeline, which the government bought last month from Kinder Morgan Canada Ltd, has become a political liability for Prime Minister Justin Trudeau and Alberta Premier Rachel Notley, ahead of federal and provincial elections next year. Delays have frustrated Albertans, prompting Notley to withdraw from Trudeau’s national plan to curb carbon emissions.

The NEB must report to cabinet within 22 weeks, Natural Resources Minister Amarjeet Sohi said in Halifax, Nova Scotia. Canada’s Federal Court of Appeal last month overturned the Liberal government’s 2016 approval for expanding the pipeline, which runs from Alberta’s oil heartland to the British Columbia coast.

The timeline for the review, stretching to late February 2019, allows the government to potentially restart construction before the expected spring election in Alberta.

Sohi declined to say when construction could resume.

“We are not focused on election cycles. We are focused on what needs to be done right,” he said.

Trans Mountain expansion faces opposition from the British Columbia government, environmental groups and some municipalities and aboriginal communities, who fear the impact of spills and expanding oil production.

Canada’s oil producers say the expanded pipeline is critical to addressing bottlenecks that have led to steeply discounted prices for their crude.

Sohi said the government would appoint a marine adviser to the NEB, and will ask the regulator to consider its actions to protect killer whales. The government will announce shortly whether it will appeal the appellate court’s decision to Canada’s Supreme Court, and how it will consult indigenous people, he said.

The appellate court ruled in August that the NEB wrongly narrowed its review to exclude the impact of additional tanker traffic on marine life. Additionally, Ottawa failed to adequately consult indigenous people as required by law, it ruled.

The Trudeau government appears to be conducting a “box-checking exercise,” given statements by senior government leaders that the project will be built, said Keith Stewart, senior energy strategist at Greenpeace Canada.

Delays in expanding the pipeline are harming Canada’s investment reputation, said Shannon Stubbs, a Conservative member of Parliament.

The Trans Mountain pipeline runs from Edmonton, Alberta, to an export terminal in the Vancouver area.

Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Steve Orlofsky