The Trudeau government will intervene in the court battle over whether British Columbia has the authority to restrict bitumen shipments that cross its borders – a measure that threatens the future of the Trans Mountain pipeline expansion project.
Ottawa, represented by federal lawyers, will participate in the case to assert its jurisdiction over the movement of oil across the Alberta-B.C. border.
“We are confident in Parliament’s jurisdiction and will intervene on the question in order to defend our clear jurisdiction over interprovincial pipelines,” federal Justice Minister Jody Wilson-Raybould said in a statement on Thursday.
In April, the B.C. New Democratic Party government asked B.C.’s Court of Appeal for a ruling on whether the province has the power to regulate heavy oil transport by issuing permits. Premier John Horgan’s government put draft regulations before the court that he said are necessary to protect B.C.’s economy and environment.
Ottawa has deemed the pipeline project to be in the national interest and has vowed it will ensure it is built.
But if the court approves B.C.’s draft law, the province would create requirements for Kinder Morgan – or any other large shipper of heavy oil – to meet conditions set down by the province before they can increase the volume of shipments.
Kinder Morgan announced on April 8 that it was halting all non-essential work on the project because the legal uncertainty around it is an unacceptable risk to shareholders.
The company said it would move forward only if it could be assured by May 31 that it will not face further legal challenges, and if the government could remove the financial risk.
Both the federal and Alberta governments have entered into negotiations with the company to satisfy its concerns.
Finance Minister Bill Morneau has vowed that Ottawa will meet the deadline to provide a rescue plan for the pipeline expansion, including possible financial support.
And Alberta Premier Rachel Notley has said her province is considering an outright purchase of the pipeline, which would transport her province’s oil sands bitumen through Vancouver to new overseas markets.
But the company’s financial risk assessment will now include a new ruling from the National Energy Board (NEB) on how much cash on hand the company must maintain to address the risk of an oil spill.
In a recent decision, the NEB denied Kinder Morgan’s bid to shift financial responsibility for oil-spill risks related to the Trans Mountain pipeline to its Canadian subsidiary.
The ruling forces the Texas-based energy company to maintain $500-million in liability funds for the existing pipeline.
Although the NEB ruling is not related to the expansion project, it could influence those making the final decision on it on behalf of investors, economist Robyn Allan said in an interview on Thursday.
“Kinder Morgan wants to put all the financial and the environmental risk on the Canadian economy,” Ms. Allan said. “The cost and financial responsibilities for Kinder Morgan Inc. just went up, if they continue to advance the project.”
As an intervenor, Ms. Allan challenged Trans Mountain’s proposal to change its financial obligations.
Under federal rules introduced in 2014, companies operating major crude oil pipelines are required to have a minimum of $1-billion in financial capacity to respond to leaks, spills and ruptures.
Trans Mountain asked the NEB to remove the requirement for its parent company to maintain $500-million of the required funds, instead offering a credit plan carried by the Canadian subsidiary.
In a decision filed on April 12, the NEB ruled the proposal failed to adequately address what would happen to Trans Mountain’s financial obligations if its contingency funds were drawn down for other purposes.
In a statement, Trans Mountain said it welcomed the clarity provided in the ruling, but indicated it may submit a new proposal. “Our current arrangement complies with the NEB decision, and we will re-evaluate our proposal to amend this arrangement.”