Finance Minister Bill Morneau speaking to reporters at Thursday’s press conference

Responding to appeal court’s decision may be Trudeau Govt’s last chance to demonstrate compentence with pipeline file

The federal government has not changed its mind about Trans Mountain Expansion: the pipeline will be built. But Bill Morneau acknowledged that the Federal Court of Appeal’s quashing of the project’s approval means Ottawa must take some time to “make sure it moves ahead in the right way.” Over the next few months it’s imperative the finance minister ensure the project does not move in the wrong way.

The appelate justices ruled that the National Energy Board erred by not including the effect of marine shipping on the Southern resident killer whale population and the federal government’s engagement with indigenous communities did not meet the standards of the Crown’s “duty to consult” required by the Canadian Constitution.

The ruling is not fatal to the project. In fact, the court’s ruling notes that remedying the deficiencies should cause only a short delay to construction.

That said, at the moment it’s not clear what might constitute adequate measure to protect the endangered killer whale population from acoustic pollution and the threat of collision with a higher number of oil tankers plying their marine territory.

Nor is it clear how the federal government will square the circle of meaningful consultations with First Nations implacably opposed to Trans Mountain Expansion when it is buying the project and most of Kinder Morgan Canada’s assets, and just today repeated its determination to get the pipeline built.

“The courts asked us to reply promptly and in a meaningful way to today’s decision and has given us some good directions on next steps,” Finance Minister Bill Morneau said at a media conference.

“As a government, we take our responsiblities seriously. While we want to make sure the project proceeds, we also want to make sure it moves ahead in the right way.”

Morneau noted that today Kinder Morgan shareholders voted to endorse the Canadian government’s purchase of Trans Mountain Expansion and other assets for $4.5 billion. The company says the decision by the federal court was never a condition of the sale.

“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,” said Kinder Morgan Canada President Ian Anderson.

University of Saskatchewan law professor Dwight Newman Newman says Trans Mountain Expansion must be stopped pending the federal government meeting the requirements for a fresh decision by cabinet.

“The certificate of approval has, after all, been quashed.  After a new approval, construction could continue, even if there were a later court challenge that could affect that,” he said.

The company says it has already begun the process of halting construction so that it complies with the court rulling.

Newman thinks the court finding fault with the NEB’s decision to not include marine shipping’s effect on killer whales may be breaking new ground in Canadian constitutional law.

” So far as I know, I think it is breaking new ground.  There is a paragraph where they suggest the NEB should be considering any effects within the possible legislative authority of Parliament – that would be very broad and bear on a lot of other issues,” he said in an email.

“That said, the whole process might be getting changed by C-69, so the precedent might or might not have direct bearing.”

Asked if Ottawa is likely to appeal the decision to the Supreme Court of Canada, Newman said that government lawyers must first carefully analyze the decision to determine if there are errors of law, as well as consider the politics of pursuing an appeal.

Former pipeline executive Dennis McConaghy called the decision “an abomination” that revisits the fundamental scoping of the project while asserting jurisdiction beyond existing NEB authority.

“Worse, it panders to the claim of inadequate consultation, relying on intangible standards contained in past Supreme Court judgments,” he said in an email.

“This is the result of an accumulated failure of federal governments to clarify adequate consultation in a tangible, objective standard. Trudeau et. al. must decide to appeal or legislate away this decision. To remedy it as required by the court will take years, with untold value loss to Canada.”

Chris Bloomer, head of the Canadian Energy Pipelines Assocation, points out that the Trans Mountain Expansion proponent fulfilled its requirements and the problem appears to lie with government.

“It’s the Crown that’s not fulfilling its responsibilities. We’ve demonstrated we’re safe, we work with the communities, all that good stuff, so what more do we need to do as an industry?” he said in an interview with Energi News.

“We need to find solutions.”

The oil producers whose products would flow in the pipeline that starts in the Edmonton area and terminates at the Westridge Terminal in Burnaby aren’t happy with the increasing delays at a time when the Canadian pipeline system is already constrained and companies incur extra cost to ship by rail.

“We’re frustrated. Very frustrated that after the entire regulatory process, cabinet approval, government buying the project, the courts have again stepped in again to find the federal government’s consultation doesn’t meet the requirements,” Tim McMillan, CEO of the Canadian Association of Petroleum Producers, said in an interview.

Opponents of Trans Mountain Expansion were understandably pleased.

“This case has been led by First Nations asserting their rights. We joined the case to defend British Columbia’s interests, and to highlight the risks to the province’s environment and economy,” BC Premier John Horgan said in a statement.

“Many British Columbians have been saying that this project would create serious risks to our coast. Today, the court has validated those concerns.

Is there a silver lining to be found? Is it all doom and gloom?

Today’s decision illustrates why the Canadian government felt its only option was to buy Kinder Morgan Canada instread of amending the NEB Act or introducing legislation to clarify and assert federal jurisdiction over inter-provincial pipelines, as Prime Minister Justin Trudeau promised this spring.

As Morneau said, “as a government we can manage risks that in these particular circumstances would have been difficult for any private sector company to bear.”

The finance minister sounded confident that the two “errors” identified by the Federal Court of Appeal could be addressed in a reasonable time.

But what other risks are waiting in the wings?

More First Nation legal challenges? How will the government handle the large and potentially violent protests expected in BC?

Morneau claimed this morning that the Liberals inherited a “flawed environmental review process.”

Can the feds use their new status as both owner and regulation of Trans Mountain Expansion to ride out the risks created by that process, those it knows about and those that may pop up over the next year or two until construction is finished, while it fine-tunes Bill C69 that sets out the new environmental review process for big projects like pipelines?

Industry hates C69. Bloomer testified before Parliament that if passed, Canada would never build another pipeline.

After a promising start in 2016, the Trudeau Government has stumbled and stubbed its toe a number of times on the pipeline file over the past 15 months.

The Prime Minister needs to find someone experienced and competent to stickhandle Trans Mountain Expansion and C69 to completion in a way that satisfies Alberta’s need to get its production to market.

This is the number one issue facing oil producers today, which means it’s also Alberta’s number one issue.

That problem is hardly insurmountable. Expeditiously and competently fixing the issues with the killer whales impacts and indigenous consultation would go a long way to re-building confidence on the federal handling of this file leading up to final debate over C69.

Failure to compently handle those two issues will be a huge blow to Alberta and investor confidence in the Canadian regulatory system, which is already hanging by a thread, according to energy industry watchers.

The ball is in your court, Mr. Morneau. Don’t screw it up.