Major pipelines flowing forward: Trans Mountain Expansion and Keystone XL updates



Global Publication January 2017

Further to the updates we published in the fall of 2016 regarding the status of major pipelines and liquefied natural gas projects in BC and across Canada, January decisions concerning the Trans Mountain Expansion project and Keystone XL pipeline suggest that 2017 may continue to produce significant legal developments for Canadian export pipelines.

BC sets conditions for Trans Mountain Expansion project

On January 10, 2017, the British Columbia provincial government issued a revised environmental assessment certificate (EAC) for the Trans Mountain Expansion project, removing the final major legal obstacle from the project. While the regulatory risk has diminished, court challenges to the project have been filed and continued public protests can be expected at remaining permitting steps.

The need for a revised EAC arose from a January 2016 BC Supreme Court decision that the province could not simply rely on the National Energy Board’s environmental assessment certificate in place of issuing its own provincial EAC for the project.

The provincial government’s approval layers an additional 37 conditions for the project proponent on top of the existing federal conditions. The provincial conditions address an assortment of issues, including aboriginal consultation and engagement, wildlife impacts mitigation and monitoring, environmental offsetting, and marine spill preparedness. Regarding marine spills preparedness, the EAC contains eight detailed conditions that impose additional reporting and planning obligations on the proponent.

Importantly, the proponent and the province have also entered into a revenue-sharing arrangement under which the company will pay BC $25 to $50 million per year for 20 years. These revenues will be a source of funding for environmental projects such as marine preservation and environmental monitoring, remediation of contaminated sites, and restoring habitats.

British Columbia’s Premier Christy Clark subsequently announced that the provincial government’s longstanding five conditions for approving a pipeline have now been met. In time for the May election, the Premier concluded that the project:

  • has completed an environmental review process;

  • includes a world-leading marine oil-spill prevention, response, and recovery system;

  • uses world-leading practices for land oil-spill prevention, response, and recovery;

  • addresses legal requirements regarding aboriginal and treaty rights; and

  • ensures that BC receives a fair share of the fiscal and economic benefits of the project.

A number of aboriginal and environmental groups have announced forthcoming legal action and protests to the approval of the Trans Mountain Expansion project, while others have announced they will continue to negotiate with the government. If and when construction on the Trans Mountain Expansion project begins, protests and interference from local politicians, First Nations leaders, and environmental activists are expected.  Conversely, if and when the project begins operating (theoretically scheduled for 2019), discounts on Canadian oil are expected to decline, with commensurate economic benefits.

President Trump signs executive order respecting Keystone XL pipeline

On January 24, 2017, President Trump signed executive orders respecting the Keystone XL pipeline project as well as the Dakota Access pipeline. The Keystone XL pipeline was proposed by TransCanada Corporation as part of its Keystone pipeline system in order to better connect Canadian crude supply to US Gulf Coast refineries and achieve prices closer to world pricing. The project has long been approved in Canada, but after long delays before the State Department, was ultimately refused a presidential permit by President Obama in November of 2015. The presidential memorandum that accompanied President Trump’s executive order did not specifically approve the Keystone XL pipeline, but put in place procedures that would expedite the review process.

TransCanada was invited to promptly re-submit its application to the State Department for a presidential permit, and the Secretary of State was directed to facilitate an expedited review and reach a final decision, including a final decision on any permit conditions, within 60 days of the submission of TransCanada’s application. The State Department was also directed to utilize its previous environmental impact statement issued in January 2014. The presidential memorandum also directed the Department of the Army and Department of the Interior to expeditiously review all Keystone XL applications for related approvals and authorizations should a presidential permit be issued.

At the time the orders were signed, and consistent with his campaign messaging, President Trump stated that both pipeline projects would be subject to “re-negotiation,” noting that new projects should use US-made steel pipe. The requirement for US-made steel pipe was contained in a separate presidential memorandum that directed the Secretary of Commerce to develop a plan under which all new pipelines inside US borders, as well as retrofitted, repaired or expanded pipelines or portions of pipelines, use materials or equipment produced in the United States to the maximum extent possible.

How this separate order may affect Keystone XL is somewhat unclear. Press reports have suggested that much of the Keystone XL pipe has already been manufactured and delivered to various staging areas along the pipeline’s right of way and was produced by pipe mills in Canada, India, Italy and the United States. While TransCanada has said it will indeed re-submit its application, it remains to be seen what the commercial response of major producers will be towards multiple approved potential Canadian export pipelines.

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