Canada’s options on pipeline as Kinder Morgan threatens to quit

Canada's Liberal government isunder pressure to push through the expansion of Kinder MorganCanada Ltd's Trans Mountain pipeline from the Albertaoil sands to the Pacific province of British Columbia.

But the company said it would scrap plans to nearly triplethe Trans Mountain pipeline's capacity unless various legalchallenges could be resolved by May 31. Prime Minister JustinTrudeau's federal government approved the project.

Why has this issue arisen?

The minority left-leaning New Democratic government inBritish Columbia, citing the risks of a major spill, opposes theproject. This year it proposed new rules to temporarily blockincreased shipments of crude while it examined oil spillpreparedness and response.

British Columbia is also asking the provincial courts torule on whether it has the power to control oil shipments onenvironmental grounds.

Who has jurisdiction over pipelines?

While the federal government has the authority to grantpermits for major pipelines, the 10 provinces have wide-rangingpowers over natural resource development. Ottawa says BritishColumbia does not have the right to block the pipeline.

The provinces guard their jurisdictions and federalgovernments tend to think carefully before picking fights,preferring instead to rely on negotiations.

What has the federal government done so far?

Ottawa has taken a cautious line, insisting the project willbe built while urging British Columbia to back down. Trudeau hasspoken separately to British Columbia premier John Horgan andhis Alberta counterpart, Rachel Notley, who backs the expansionand is threatening sanctions against British Columbia unless itreconsiders.

What can Trudeau do now?

Trudeau, asked what the government would do, told reporterson Monday that Ottawa is examining a range of options but gaveno further details.

A possible step is for Trudeau to convene a meeting betweenHorgan and Notley to thrash out a compromise that would allowKinder Morgan to restart work. However, Horgan insists he willnot change his mind.

Warren Mabee, an environment and energy expert at Queen'sUniversity in Kingston, Ontario, said Trudeau was unlikely to betoo forceful, especially given that he does not want to harm theprospects of federal Liberal legislators in a national electionset for October 2019.

"It runs the risk of alienating voters in British Columbiaand I don't think this government is prepared to do that," hesaid by phone.

What more could the government do, in theory at least?

Ian Blue, a lawyer with Gardiner Roberts and an expert inenergy and constitutional law, said Ottawa could warn BritishColumbia that if it took further actions under provincial lawsto block the pipeline, the federal government would step in anddisallow those laws. This provision in the Canadian constitutionhas not been used since the 1940s.

In an extreme situation, using an article in the criminalcode, the government could deploy the Royal Canadian MountedPolice and troops to maintain a barrier between protestors andconstruction workers.

Ottawa last took such a move in 1990 when it sent in troopsand police to help quell an aboriginal protest near Montreal.

"These things never end well, that's the difficulty withthem. The question is, how much do you want get the pipelinebuilt and how much do you want to assert federal authority?"Blue said by phone.

What else could delay the project?

First Nations bands, environmental groups and localmunicipalities have launched a legal challenge against theproject, saying Canada failed in its duty to consult them.

Hearings at the Federal Court of Appeal ended in October andthere is no firm deadline for a judgment. A decision in asimilar case involving an Enbridge pipeline project took abouteight months. Whichever side loses would most likely appeal tothe Supreme Court, a move that would cause lengthy delays.

(Reporting by David Ljunggren; editing by Diane Craft)