National Energy Board warns of unmet Trans Mountain requirements

Before Kinder Morgan Canada Ltd. can begin construction of its controversial Trans Mountain pipeline expansion in September as planned, the National Energy Board says the company still has some hoops to jump through.

In an update sent to Federal Natural Resources Minister Jim Carr this week, the national energy regulator said the backers of the $7.4-billion Trans Mountain project have satisfied 27 of the 49 regulatory conditions necessary to begin construction at Burnaby's Westridge Marine Terminal – where oil is exported to foreign markets. Kinder Morgan wants to upgrade and expand the terminal to handle increased volumes of crude as the pipeline system's capacity is nearly tripled to the tune of 890,000 barrels a day.

"Additional compliance requirements must be met for the company to begin construction on any portion of the project," the NEB's letter to Ottawa notes.

Kinder Morgan has said construction on the project will begin in September, but this year's work will not involve actual pipeline construction. The work this fall will likely include terminal construction, clearing and site preparation.

The company said on a Friday in a statement it is "confident" it will meet the NEB's demands and begin construction next month.

"The Trans Mountain expansion project is in an ongoing process to meet the conditions required by the NEB to begin construction," said the statement attributed to Kinder Morgan spokesperson Ali Hounsell. "This process will continue in-step with our activities into the future, keeping in mind that the construction of the project is phased and condition compliance will be ongoing as construction is under way."

The NEB also said it has received 452 statements of opposition on the detailed routing of the pipeline expansion, including five from Indigenous groups, and 121 from landowners. A panel of NEB board members is reviewing the statements, and will set up hearings in the fall that will last several months.

In the letter to Mr. Carr, the NEB also noted that the results of a preconstruction audit of Trans Mountain's management systems will be made publicly available in the weeks ahead.

"The intent of the audit was to evaluate whether Trans Mountain had established the necessary oversight measures in the preconstruction phase to manage safety and environmental protection during construction of the project," it said.

B.C. Environment Minister George Heyman said in August that the province has not accepted all of the company's environmental-management plans.

Alberta and the federal government argue B.C. does not have the regulatory authority to block the pipeline because such national projects fall under Ottawa's jurisdiction.

Any delays to the Trans Mountain project would likely damage Alberta's financial future and the political fortunes of its New Democratic Party government, because the provincial budget is predicated on the Trans Mountain expansion operating by 2021 and Enbridge Inc.'s Line 3 replacement funnelling oil by 2020.

The government, in its March budget, predicted the price of oil produced in Alberta would climb $2 to $7 a barrel, assuming the two pipeline projects are completed according to the government's timeline. As a result, oil investments would rise by $10-billion between 2017 and 2022, the NDP said. This, the government said, would increase oil production, create 12,000 jobs, and boost GDP by 1.5 per cent, over the same time frame.

And the richer price and added production would increase royalty payments to the province by $3-billion to $9-billion between 2017 and 2022, the government said in the budget.

"The Enbridge Line 3 and Kinder Morgan Trans Mountain expansion projects, recently approved by the federal government, will play a critical role in easing pipeline constraints and supporting industry growth and royalties," the NDP said in the March budget.

Finance Minister Joe Ceci told reporters he was confident the two pipeline projects would meet their deadlines.

"I believe they will be completed on time," he said on March 16.

Enbridge and Kinder Morgan, when the budget was released in March, both expected their projects to be finished a year before Alberta's prediction. Alberta, in its first-quarter update this week, lowered its assumption for the benchmark price for oil in North America to $49 (U.S.) a barrel from $55 a barrel for fiscal 2017-2018. The province expects to run a $10.5-billion (Canadian) deficit this fiscal year.