OTTAWA — The Federal Court of Appeal's Trans Mountain ruling Thursday should serve as a "wake-up call" for the government to simplify its pipeline regulatory system, Canada's energy sector says.
Construction related to the contentious oil pipeline expansion project will face further delays after an unanimous court decision found the National Energy Board erred in its environmental assessment. The court also concluded that the federal government failed in its duty to engage in meaningful consultations with Indigenous peoples.
"This decision is yet another example of how Canada's broken regulatory system is undermining Canadian competitiveness and driving away investment," said Canadian Chamber of Commerce president and CEO Perrin Beatty, in a statement.
Tim McMillan, president of the Canadian Association of Petroleum Producers, said he's confident the Trans Mountain pipeline expansion will get built, despite the legal setback. But today's court ruling, he said, doesn't help the government's future pitches to global investors to park their money in Canada.
"Or anyone external looking at Canada, they would be fairly safe to feel that Canada doesn't have their act together," McMillan said in an interview.
The additional delay will affirm what global investor have already been saying about Canada, he said, "that its regulatory system is unwieldy, unmanageable, and a place that they not want to invest in."
Every time construction related to major project such as Trans Mountain gets delayed, the costs get extended by "tens of billions of dollars," he said.
Morneau shows no buyer's remorse
The federal government is in a unique circumstance, after it offered to buy the existing pipeline and the assets related to its expansion from Kinder Morgan back in May.
The company was threatening to pull the plug on the project amid regulatory and provincial squabbling. The Grits, eager to build a pipeline to tidewater and get Canadian oil to Asia, offered to take on the risk. Thursday, Kinder Morgan's board officially agreed to sell the project to Ottawa.
The federal government must now decide to appeal the ruling, or, as the court suggested re-do consultations with Indigenous peoples to remedy the error the justices identified, or ditch the project altogether.
Finance Minister Bill Morneau showed no sign of buyer's remorse after the court issued its ruling.
Telling reporters in Toronto that the Trans Mountain pipeline expansion had inherent interprovincial risks that made the project a difficult undertaking for private sector actors, Morneau repeated the message that the business case supporting the construction of the project is still sound.
"We stepped in because we knew the project was in the national interest and there was a federal role in dealing with that," he said.
There is quite a formidable movement committed to resisting major new oil and coal infrastructure for climate reasons. George Hoberg
George Hoberg, a professor at the University of British Columbia's School of Public Policy and Global Affairs, said any major Canadian oil pipeline going through the regulatory process today will face to significant opposition. Still, he called Thursday's court decision an "utterly stunning" development.
"The best hope for getting one through would be to have it owned by First Nations and supported by First Nations along the route. But getting that kind of agreement will be very challenging given the environmental concerns of many First Nations," he said.
"There is quite a formidable movement committed to resisting major new oil and coal infrastructure for climate reasons. This court ruling is a major shot in the arm for that movement."
Thursday's ruling is a nod to the work of several B.C. First Nations and environmental groups and their years-long effort to stop the Alberta-B.C. pipeline.
One political expert told HuffPost Canada that the federal Liberals' credibility on climate and the Indigenous file will take a hit heading into next year's election.
Kathryn Harrison, professor of political science at the University of British Columbia, said the Trans Mountain court ruling doesn't mean all major oil pipeline projects are doomed to fail.
"This is not the only pipeline," she said. But it is the only pipeline the Liberals committed to building, after nixing the Northern Gateway project and watching TransCanada hit an indefinite pause button on the Energy East project.
With the prime minister identifying reconciliation as his top priority and the federal Liberals, the ruling is a "very big setback for Justin Trudeau's Agenda," Harrison said.
"I think what we know is that we haven't done it right yet," she said, referring to the regulatory process that major pipeline projects are subject to.
"And that the prime minister, despite the number of times he said this pipeline will be built, by virtue of his passion, doesn't have the authority to put shovels in the ground."
Learn more about the Trans Mountain pipeline:
Read our #TrackingTransMountain series.
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