Prime Minister Justin Trudeau has made good on his election promise to kill the $7.9 billion Enbridge Inc. (TSX:ENB) Northern Gateway pipeline project and has approved the $6.8 billion Trans Mountain pipeline expansion.
Trudeau also approved Enbridge's Line 3 pipeline replacement project, which runs from Alberta to Wisconsin.
Within minutes of the announcement, environmental groups were sending out press releases essentially declaring war.
In defending his decision at a November 29 press conference in Ottawa, Trudeau said no country in the world with Canada's oil reserves would leave it in the ground. He said his government was committed to creating jobs and economic growth, while protecting the environment. He said the decision was based on science, not politics.
"This project will get built because it's in the national interest of Canadians," he said of the Trans Mountain expansion. He also said "it meets the strictest environmental standards."
Trudeau added that oilsands production will continue to grow and that modern pipelines are safer and less emissions intensive than moving oil by rail.
"This project will get built because it is in the national interest of Canadians," he said, in response to questions about the opposition to Trans Mountain in British Columbia.
In announcing that it would not continue with the Northern Gateway project, Trudeau also announced a moratorium on oil tanker traffic on the North Coast of B.C.
Art Sterritt, a spokesman for the Gitga'at First Nation, which led the legal battle against Northern Gateway, said he was thrilled both with the decision to reject Northern Gateway and the decision to implement a moratorium on all oil tanker traffic on the north coast.
“We were concerned that it would have been just a moratorium on bitumen, but all crude oil, whether processed or not, is now going to be officially banned from that region,” Sterritt said. “That’s a big deal for us.”
He added it’s not just a relief for the Gitga’at, but should be a relief for the B.C. government as well.
“The province will be very happy because they don’t have to make a decision,” he said. “The federal government has made the decision for them.”
He referred to the fact that the BC Supreme Court ruled that the B.C. government could not abrogate its responsibilities to federal regulators. The court ruled that the B.C. government would need to issue its own environmental certificate for the Northern Gateway project, which would have meant consultation with the affected First Nations.
The decision to kill the Northern Gateway pipeline project was not unexpected. In fact, many observers considered it as a move necessary to set the stage to approve the Trans Mountain pipeline. Other set pieces include a national carbon pricing scheme and the recently announced $1.5 billion in funding to improve Canada's oil spill prevention and response capabilities.
Trudeau had been telegraphing his intent to kill Northern Gateway even before the election, when he said the Great Bear Rain Forest was no place for a pipeline (meaning Northern Gateway) but generally supported other pipeline projects, like the Keystone XL, which could now be resurrected under a Donald Trump White House.
Reacting to Tuesday's announcement, Todd Nogier, manager of enterprise corporate communications for Enbridge, said the company was "pleased" with the approval of the Line 3 project, but disappointed with the decision on Northern Gateway.
He noted that the decision affects not just Enbridge, but 31 aboriginal partners along the pipeline corridor, who had partial ownership in the project and now stand to lose out on $2 billion worth of economic benefits.
"In advancing Northern Gateway, we relied on a process that saw the federal government approve the project," Nogier said. "The Federal Court of Appeal then found that the federal government failed to properly consult Indigenous communities, but affirmed our engagement on the project.
"Given today’s decision, we’ll need to assess our alternatives which we’ll do in consultation with our partners, including our Aboriginal Equity Partners."
Ian Anderson, president of Kinder Morgan Canada, said the decision to approve Trans Mountain was "a defining moment for our project and Canada’s energy industry."
“This decision follows many years of engagement and the presentation of the very best scientific, technical and economic information. We are excited to move forward and get this project built, for the benefit of our customers, communities and all Canadians.”
Although it was in the works long before the Trans Mountain expansion project, as a greenfield project that would require building a new pipeline across mountain ranges to Kitimat, Northern Gateway was fraught with environmental and First Nations opposition from the get-go. Even the B.C. government opposed it, despite its promise of 3,000 construction jobs and 560 permanent jobs.
The Joint Review process for Northern Gateway began in January 2012. The project was approved, with 209 conditions, under the Stephen Harper government in 2014.
But First Nations were successful in a court challenge, when the Federal Court of Appeal ruled that federal officials had not properly consulted several First Nations along the line, and quashed an Order in Council approving it.
That meant the federal government would have to do further consultations with the First Nations affected by the pipeline – something Trudeau announced Tuesday it was not prepared to do.
It’s been reported that Enbridge has spent $500 million just trying to get Northern Gateway approved.
Given that it was approved by federal regulators, and given that the failure to consult with First Nations was a failing of the government, not Enbridge, the government’s decision to kill the project raises the question of whether the company could now sue the federal government for killing a project that had been approved by the proper regulatory organizations.
Ironically, that might be more of an option under international trade treaties like NAFTA, if it weren’t for the fact that Enbridge is a Canadian company, according to Robert Wisner, a partner at McMillan LLP who specializes in international arbitration.
“Enbridge is a Canadian company and therefore can't sue Canada under NAFTA,” he said. “It's possible that American shareholders of Enbridge could sue, but they would need to show that Northern Gateway was directly linked to the success of their investments in Enbridge.”
The Trans Mountain pipeline has met with pushback in B.C. from First Nations, environmentalists and municipal politicians, including Vancouver Mayor Gregor Robertson and Burnaby Mayor Derek Corrigan. Corrigan has even said he would risk arrest to protest the expansion.
Asked how he could approve the Trans Mountain in the face of such strong opposition, Trudeau said his government would not be swayed by political arguments, including by some of his Liberal government's own MPs, some of whom have spoken against the Trans Mountain pipeline – including Terry Beech, Liberal MP for Burnaby-North Seymour.
"We have not been and will not be swayed by political arguments, be they local, regional or national," Trudeau said.