Does John Horgan still have a legal right for a constitutional fight?
British Columbia insists the sale of Kinder Morgan Inc.’s pipeline to Canada’s federal government won’t sway its opposition to a project seen as a lifeline to the nation’s oil industry.
But it may mean the Pacific Coast province is now powerless to stop it.
In an extraordinary development early Tuesday, the federal government announced it would buy the Trans Mountain pipeline system and its planned expansion project for $4.5 billion to ensure it gets built. The move ended weeks of speculation sparked by Kinder Morgan’s threat to abandon a project facing “unquantifiable risk” as the British Columbia government vowed to use every tool to block it.
“Does this change anything? It might,” said David Austin, a lawyer at Clark Wilson LLP in Vancouver who has appeared before regulatory tribunals and advised on energy project development. “A senior government being subject to a regulation by junior government -- typically that just doesn’t happen.”
British Columbia, the birthplace of Greenpeace, provides critical ocean access to get Canada’s landlocked exports out of oil-rich Alberta to new buyers. But the provincial government -- elected last year on a pledge to block the project -- filed a legal case seeking jurisdiction to impose additional marine protection measures, such as capping future bitumen shipments, that would effectively derail the project.
B.C. DIGS IN
The federal government’s acquisition of the project “has not changed the course of the government of British Columbia” and the province has “no intention” of withdrawing its legal reference case, Premier John Horgan told reporters Tuesday in Victoria.
But he also acknowledged: “It will be a federally owned project and that has some difference in terms of the paramountcy of the federal government.”
Prime Minister Justin Trudeau emphasized those differences in his first public comment since his government’s announcement. “A lot of the legal barriers and a lot of the challenge points actually disappear,” Trudeau said Tuesday afternoon at a Bloomberg event in Toronto.
Among the reasons the company cited when it threatened to walk away in April was inordinate permit delays by the city of Burnaby, where the pipeline ends. That would no longer be a concern -- the federal government could simply choose to carry on without them if it owns the project, according to Austin.
“If the province of British Columbia tries to get an injunction to stop the federal government from going ahead with the pipeline, it is highly unlikely it will get very far in a Canadian court,” Austin added.
Alberta Premier Rachel Notley, who’s been locked in an escalating battle with Horgan over his opposition and has passed a bill threatening to cut off oil and gas shipments to British Columbia, struck a triumphant tone at a press conference in Edmonton.
“By purchasing the project, the federal government now has the power to make sure that it goes ahead,” she said. “They have a form of Crown immunity, which actually limits the degree to which provincial laws would apply to the project.”
Notley added: “This is the most certainty this project has ever had.”
That said, if it takes federal ownership to construct a project that Kinder Morgan was unable to do, that may be sign of a broader failure in Canada -- not a win.
“Our regulatory processes are fundamentally broken,” the Business Council of British Columbia said in a statement. “The need for federal tax payers to purchase this project have exposed fundamental flaws in the regulatory systems at all levels of government.”
As Royal Dutch Shell nears a final investment decision on a proposed C$40 billion liquefied natural gas project in northern British Columbia, hopes this may signal an easier path ahead for major energy projects in Canada may be misplaced.
“We view the announcement as negative for entities considering large resource-focused capital investments in Canada such as LNG, pipelines or oilsands projects, given the inability for the rule of law and regulatory approvals to allow projects to move forward,” GMP Securities analysts led by Robert Fitzmartyn said in a note to clients. “We are left questioning why any company would pursue large capital investment in Canada.”
--With assistance from Kevin Orland, Greg Quinn, Kristine Owram, Michael Bellusci and Josh Wingrove.