More hurdles await Trans Mountain pipeline, observers say

A pipeline is pictured at the Kinder Morgan Trans Mountain Expansion Project in Burnaby, B.C., on June 4, 2015. (Jonathan Hayward/THE CANADIAN PRESS)

CALGARY - Canada's national pipeline regulator has signed off on a proposal to triple the capacity of the Trans Mountain pipeline from Alberta's oilsands to the West Coast but neither opponents or supporters consider its construction a fait accompli.

The National Energy Board said Thursday that the controversial $6.8-billion project proposed by Kinder Morgan is in Canada's best interest, provided 157 conditions are met. It forwarded its recommendation to the federal cabinet for a decision expected by December.

Observers pointed out cabinet's decision will also be influenced by a newly required assessment of upstream greenhouse gases emitted as oil is produced before it gets to the pipeline. It will also consider a report expected in November from a three-member panel assigned this week to solicit feedback from communities and indigenous groups near the pipeline route.

"This is a positive but now it hits the real difficult test, which is the social licence test the federal government has," said financial analyst Dirk Lever of Calgary-based investment firm AltaCorp Capital.

He said approving the expansion to be built 90 per cent on ground already disturbed by the existing conduit, built in 1953, should be an easy decision but new hurdles imposed by the Liberal government make the ultimate outcome difficult to predict.

"(The pipeline) has been safely operating for 60 years and they've (the opponents) demonstrated no reason to believe otherwise," Lever said.

Environmentalists who oppose the pipeline said their battle isn't lost despite the NEB ruling.

"(Thursday's) decision does not mean the Kinder Morgan project will be built," said Adam Scott of Oil Change International in a statement. "We expect Prime Minister Trudeau to reject this environmentally irresponsible proposal."

Alan Ross, a partner with Calgary law firm Bordon Ladner Gervais who specializes in energy regulation, said he believes the NEB decision will be backed by the federal government but new conditions will probably be added.

"Now it goes up to the federal government and they can approve, deny or send back their own conditions," he said.

Trevor McLeod, director of the centre for natural resources policy at the Canada West Foundation, said the NEB's conditions appear reasonable and there's no reason to think they will change Kinder Morgan's commitment to build a project backed by firm shipping contracts. The project would nearly triple capacity.

"I think it will still make sense, there's no doubt. I think Kinder Morgan will be pleased with the decision," he said.

He pointed out the NEB's 157 conditions are fewer than the 209 conditions imposed when it approved the Northern Gateway pipeline in 2014. That project remains in limbo after the federal government vowed it intended to impose a moratorium on tanker traffic off B.C.'s north coast.

Steven Paget, an analyst with Calgary investment firm FirstEnergy Capital, said increased takeaway capacity is essential as long-planned oilsands projects continue to build production capacity in Alberta over the next few years.

"Our view is that we need the Line 3 replacement plus one other, according to the timelines they would be built, whether it's Energy East, or Trans Mountain or Gateway or (Keystone) XL," he said.

In April, the NEB approved the Canadian portion of an Enbridge Inc. project to replace the aging Line 3 pipeline between Hardisty, Alta., and Superior, Wisc. The new pipeline's capacity would double but it faces the same reviews as the Trans Mountain expansion. A federal cabinet decision is expected next fall.

Both the Canadian Association of Petroleum Producers and the Canadian Energy Pipeline Association say they welcome the NEB decision.

CAPP president Tim McMillan said in an interview he's confident in the regulatory process but stopped short of saying he's confident the Trans Mountain expansion will be approved by Ottawa.