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Court ruling halts Trans Mountain pipeline expansion

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Reuters have reported that a Canadian court has overturned approval of the Trans Mountain oil pipeline expansion, ruling that Ottawa failed to adequately consider aboriginal concerns, in a blow to Prime Minister Justin Trudeau’s efforts to balance environmental and economic issues.

Trudeau’s government agreed in May to buy the pipeline from Kinder Morgan Canada Ltd for CAN$4.5 billion (US$3.46 billion), betting it would win the court battle and expand Trans Mountain despite fierce political and environmental opposition.

The decision also hurts Canada’s oil producers, who say the expanded pipeline is needed to address bottlenecks that have sharply reduced prices for their crude. Shares fell on the decision.

The Federal Court of Appeal ruled that the National Energy Board (NEB) regulator wrongly narrowed its review of the project to exclude related tanker traffic. Additionally, the federal government failed to adequately consult First Nations, as required by law, it ruled.

“The big takeaway is the duty to consult (indigenous people) is still the most important step in any major project,” said Andrew Leach, Associate Professor of business economics at the University of Alberta.

Trudeau has portrayed himself as a friend to aboriginal people and tried to build national support for a carbon emissions reduction plan, even while backing Trans Mountain to support the oil industry.

“It’s quite a slap to the government by the court on the grounds of reconciliation with First Nations,” said Kathryn Harrison, a professor of political science at the University of British Columbia. “They’ve committed billions of dollars in taxpayers’ funds, doubling down on a project that the courts have just quashed.”

Trudeau’s Finance Minister, Bill Morneau, said the government remains “absolutely committed” to building the project, adding the sale could close as early as Friday 31 August.

“We know that we must diversify our economy and our markets for resources, and that’s why it was important” to buy the pipeline, Morneau told reporters in Toronto.

In a statement, Kinder Morgan Canada President, Ian Anderson, said:

“We are reviewing the decision with the Government of Canada and are taking the appropriate time to assess next steps. We remain committed to building this Project in consideration of communities and the environment, with meaningful consultation with Indigenous Peoples and for the benefit of Canadians. Trans Mountain is currently taking measures to suspend construction related activities on the Project in a safe and orderly manner. The court decision was not a condition of the transaction between KML and the federal government.”

Canada has the option to appeal the ruling to the Supreme Court but Morneau said the government had made no decisions and needs time to study the ruling.

“Thankfully, the court has stepped in where Canada has failed to protect and respect our rights and our water,” Coldwater Indian Band Chief Lee Spahan said in a statement. “Our members will be hugely relieved.”

The Trans Mountain expansion would nearly triple capacity on an existing line from Edmonton, Alberta, to a port in the Vancouver area for export. It was approved by the federal government in 2016.

Renewed doubts about Trans Mountain place greater importance for Canada’s oil industry on two other pipeline projects. Enbridge Inc. is rebuilding Line 3 from Alberta to a hub in Wisconsin, while TransCanada Corp is considering construction of Keystone XL from Alberta to Nebraska.

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