What B.C. can and cannot do to stop the Kinder Morgan pipeline

New B.C. government would have a few tools to slow down construction of new oil export pipeline

[For videos see original]

Kinder Morgan is signing contracts with construction companies and plans to start building its new $7.4-billion pipeline in September. At the same time, a new NDP-Green party partnership could form government in B.C. and start acting on election campaign promises to kill the project.

Both the company and the politicians made announcements on Tuesday making it clear they are not backing down in this fight.

"This is an exciting day," said Ian Anderson, the head of Kinder Morgan Canada, in a news release announcing that the company had completed its Initial Public Offering and had made the final investment decision on the project. No matter that the shares fell as the market opened and no mention of the possible change in government.

In the afternoon, B.C. Green Party leader Andrew Weaver and John Horgan of the NDP said their alliance dictates that once in government, they will immediately employ every tool to stop the expansion of the Kinder Morgan pipeline. 

The fate of the pipeline, which would stretch from Edmonton to Burnaby, B.C., could be a battle of the wills between a big energy company with billions of dollars on the line versus an upstart political duo that may take a slim hold on power and have something to prove. Prime Minister Justin Trudeau and the premier of Alberta are doubling down on their support for the project, while opposing forces in B.C. like federal Green Party leader Elizabeth May, consider the project dead.

It could be quite the clash this summer. 

'Mark my words, that pipeline will be built'

The war of words is intensifying, even from those not directly involved in the project. Alberta Premier Rachel Notley said, "Mark my words, that pipeline will be built."

If you look at the value of the shares on the market yesterday, investors seem to agree with Notley. Kinder Morgan Canada's shares were down by 75 cents or five per cent, but Rafi Tahmazian, a portfolio manager with Canoe Financial estimates that between two and three dollars of Kinder Morgan Canada's share price is associated with the value of the Trans Mountain expansion. So the market believes there is still hope.

"This is a company that has clearly calculated a budget of what they are willing to spend and potentially lose," said Tahmazian. "That has all been calculated in their capital budget to the dollar, so there's a certain degree of spending they will do to move this forward, but at some point they're going to have to decide if this drags on too long." 

Legally, Ottawa holds the power

Large export pipelines fall under federal jurisdiction and that's why legally, B.C. has its hands tied. Kinder Morgan already has federal government approval and an environmental certificate from B.C.

"It would very difficult to do anything to withdraw the previous approvals," said James Coleman, an energy law professor at Southern Methodist University, who previously worked at the University of Calgary. "There's probably very little they can do on that front."

However, a new B.C. government could take some steps to make it more difficult for the company.

Large infrastructure projects require countless permits for construction such as accessing roads, using heavy equipment and docking at a port. In some cases, governments have denied permits for energy projects across North America to slow down development. For instance, two years ago a Shell drilling rig was held up at a Seattle port because local authorities said proper permits were not in place and protestors faced little resistance to their demonstrations.

"The whole game will be — can they make it difficult enough for Kinder Morgan that they don't actually want to go through with the project," said Coleman. 

Stick it to Big Oil

Another tactic could be to insist on a new environmental assessment. If that fails, the B.C. government could decide that Kinder Morgan hasn't fulfilled the 37 conditions attached to the provincial environmental certificate granted in January.

"Even with the existing certificate that has been granted, there are a number of conditions that have been set out that will require the province to give its consent before construction can start," said Chris Tollefson, a University of Victoria law professor and director of the Pacific Centre for Environmental Law & Litigation.

"Whether this project can start in September is really a matter that will be determined by provincial regulators," he said. 

A legal grey area

The courts have made it clear that projects like the Trans Mountain Expansion are federal jurisdiction. The municipality of Burnaby tried to obstruct some of Kinder Morgan's testing in 2015 and lost the legal challenge. Burnaby could not interfere in a project under federal oversight.

However, one court case shows B.C. may have some clout to protect its environment. Last year, the B.C. Supreme Court sided with Coastal First Nations in a case involving Enbridge's proposed Northern Gateway project. The judge's message was that a provincial government can't rely on the federal government, but instead should do its own environmental assessment and consult with First Nations and other local stakeholders.

All this means that there seems to be shift in our understanding of where the power lies in projects such as Trans Mountain, said Fenner Stewart, an energy law expert at the University of Calgary. The law is clear, but politics muddy the water.

"The real question I would say, isn't whether or not the federal government has a legal capacity to push this decision forward," said Stewart. "It's whether or not the federal government is willing to spend the political capital and social capital to do so."