Canada approved construction of a contentious pipeline project on Tuesday that is expected to help the country’s struggling energy sector but is drawing attacks from environmentalists and indigenous leaders and could hurt Prime Minister Justin Trudeau when he heads to the polls in four months. If built, the Trans Mountain pipeline expansion will run alongside an existing pipeline from the oil sands in Alberta to just outside Vancouver, British Columbia, and will carry an additional 590,000 barrels a day of diluted oil sands bitumen, bringing the total daily flow along that route to nearly 1m barrels. “The plan is to have shovels in the ground this summer,” said Mr Trudeau.
The Trudeau government has a lot riding on the project, not the least of which is C$4.5bn it spent in May 2018 to acquire it from Kinder Morgan amid investor uncertainty over repeated delays. Shortly after that takeover deal was announced, a federal court of appeal overturned the Trudeau government’s earlier approval of Trans Mountain, ruling there had been insufficient consultation with indigenous communities along the pipeline route and that environmental approvals were lacking.
Since then the project has been in limbo as the government dispatched a retired Supreme Court of Canada judge to lead renewed talks with indigenous groups. Canada’s oil patch is desperate for ways to get its product to global markets.
Alack of new pipeline construction has led to worsening bottlenecks that have forced Canadian oil producers to accept at times massive discounts compared to world oil prices. Last autumn, amid a glut of Canadian crude, the price differential between Western Canadian Select and West Texas Intermediate exceeded $52 per barrel.
Mr Trudeau said the pipeline expansion was needed because Canada’s oil producers were “prisoners to the American market alone”. Right-leaning provincial premiers, led by Alberta’s Jason Kenney , have accused Mr Trudeau of crippling Canada ‘s oil industry through carbon taxes and the threat of stricter environmental reviews, and a ban on tanker traffic on British Columbia’s north-west coast. In a letter the premiers sent to Mr Trudeau last week, they warned that his environmental measures “will have detrimental effects on national unity and for the Canadian economy as a whole”.