Kinder Morgan readies for legal action in Trans Mountain pipeline feud

VICTORIA AND CALGARY

PUBLISHED FEBRUARY 7, 2018

Pipeline giant Kinder Morgan Inc. is mustering its legal team to combat the B.C. government's bid to block new oil shipments off the coast, saying investors are losing patience with delays to its $7.4-billion Trans Mountain pipeline expansion project.

The warning comes as Ottawa, Saskatchewan and Manitoba were all swept up this week in a trade war between British Columbia and Alberta, triggered by the B.C. NDP government's announcement on Jan. 30 of a temporary ban on the increase of oil exports until it can consult about whether a heavy oil spill can be effectively cleaned up.

Alberta Premier Rachel Notley responded this week by banning the sale of B.C. wine products in her province in an effort to goad Ottawa into action in the dispute. B.C. Premier John Horgan said Wednesday that he did not plan to retaliate.

Weigh Anchor: A tanker with oil from the Kinder Morgan pipeline plies the waters off B.C.

Kinder Morgan Canada waded into the dispute on Wednesday, as company president Ian Anderson said the pipeline could become untenable the longer it takes to obtain needed permits, but he stopped short of saying the company is close to abandoning the major expansion.

B.C. has said it will provide more detail around the proposed regulations by the end of the month. That will dictate Kinder Morgan's next steps, Mr. Anderson said.

"If they intend to reach beyond that to matters that are jurisdictional in nature and challenge the authority of this national project, then we're going to have a problem," he said in an interview.

In a letter to Mr. Horgan this week, Mr. Anderson said B.C.'s proposed restrictions around oil exports are unnecessary and must not be used as a tool "to frustrate or delay our project."

He wrote: "We have initiated a technical and legal review of whether the suggested provincial initiatives could apply lawfully to a federally regulated project."

Mr. Anderson said he wrote Mr. Horgan in July, shortly after the NDP took power, asking for a meeting. He noted in his Feb. 6 letter to Mr. Horgan that his request to meet has been rebuffed.

Mr. Horgan told reporters on Wednesday there is no point meeting with Mr. Anderson directly, as the province is in court fighting the pipeline. The company has already slowed spending on the pipeline and said oil shipments won't start before December, 2020, at the earliest, one year later than planned. The expansion also faces numerous court challenges.

In the meantime, Ms. Notley defended her government's attempts to punish B.C., first by suspending talks about electricity sales and then with the wine ban, saying it's time for Ottawa to intervene.

"No one wants a trade fight between two provinces. … Our country can't work like this," Ms. Notley said in a video posted on social media on Wednesday. "But if it takes this kind of action to get Ottawa to act, then I'm afraid we have no choice but to stand up and defend Alberta's interest."

Speaking to reporters in Victoria, the B.C. Premier said he does not intend to escalate the trade dispute: "I don't think it is in anyone's interest to have duelling Premiers," Mr. Horgan told reporters. "Talking about our intention to consult with British Columbians is not provocative, it's not starting anything. The Premier of Alberta has taken a course, but I'm not going to be distracted by that."

Mr. Horgan maintains that B.C. is within its rights to protect the coast from potential oil spills, and his officials will sit down on Thursday with federal bureaucrats to lay out those jurisdictional arguments.

Prime Minister Justin Trudeau told reporters on Wednesday on Parliament Hill that his government is working behind the scenes to calm the dispute. "We're continuing to discuss and engage with the B.C. government, with the Alberta government. We're making sure that we come to the right place that's in the national interest for Canada," he said.

Conservative Leader Andrew Scheer, however, called the interprovincial feud a "crisis" that requires the Prime Minister to cancel his planned trip this week to the United States. "He needs to come back to Canada very quickly to deal with this," Mr. Scheer told reporters. "This is a crisis that is escalating and the Canadian economy will suffer."

As Alberta threatened further trade action, her counterparts in Saskatchewan and Manitoba urged calm. "Saskatchewan has no plans to participate in retaliatory measures that would be in contravention of our trade commitments," Saskatchewan Premier Scott Moe said in a statement Tuesday. "We do not believe this matter will be resolved by trade measures that will primarily impact consumers and private businesses."

Manitoba Premier Brian Pallister echoed the sentiment: "I am particularly concerned by this developing controversy within the energy sector, which has resulted in provocation and threats at the provincial level," he said in a statement. "This uncertainty is decidedly unhelpful to economic development in Western Canada and for the general well-being of the Canadian federation."

However, an interprovincial trade agreement between Canada's western provinces is proving to have little teeth in the dispute. The New West Partnership is supposed to eliminate trade barriers between the provinces, creating a single economic region encompassing British Columbia, Alberta, Saskatchewan, and Manitoba.

The deal includes a dispute mechanism, but it also allows for penalties of up to $5-million for provinces that run afoul of the agreement. Ms. Notley said that's a penalty she's willing to bear: "The cost of not going ahead with the Kinder Morgan pipeline is roughly $1.5-billion a year just to the Alberta treasury. So, yep."

With a report from Bill Curry in Ottawa