B.C. takes pipeline fight to court, asking for power to restrict oil shipments

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The B.C. government has tipped its hand on how it would restrict diluted-bitumen shipments within its boundaries by asking the highest court in the province whether it has the authority to regulate heavy oil transport by issuing permits.

B.C. Premier John Horgan said the proposed regulations put before the court for review would give British Columbia the tools to protect its economy and environment. However, Alberta Premier Rachel Notley decried it as creating economic gridlock.

Kinder Morgan Inc. has said the B.C. government’s bid to regulate the flow of oil has caused “unquantifiable risk” to its Trans Mountain project. It has halted non-essential construction and set a May 31 deadline to decide whether it will proceed with the pipeline expansion, which the Trudeau government has ruled to be in the national interest.

“We believe the province of British Columbia has every right to protect its citizens, to protect its environment and to protect its economy,” Mr. Horgan told reporters after releasing the specific questions that his government has filed to the court.

Related: McKenna extends olive branch to B.C. in Trans Mountain fight

Read more: Ottawa eyes First Nations investment in Trans Mountain pipeline expansion

Trans Mountain, Trudeau and the B.C.-Alberta feud: A guide to the story so far

The B.C. Court of Appeal on Thursday was presented the draft legislation, and is being asked to provide an opinion on three questions: Is the proposed bill within the province’s jurisdiction; can it apply to substances transported from another province; and, does any existing federal law render the regulations invalid?

If the court grants permission, the province would enact legislation to require Kinder Morgan – or any other large shipper of heavy oil – to meet requirements set down by the province before they can increase the volume of existing shipments. Permits would be based on the findings of a yet-to-be-appointed scientific panel that would examine how to clean up heavy oil spills in marine environments.

The B.C. NDP came to power last year on a promise to use every legal tool available to stop the Kinder Morgan pipeline project, resulting in an escalating trade war with Alberta.

Mr. Horgan’s government says the project, which would triple the capacity of the existing pipeline and result in a sevenfold increase in oil-tanker traffic, poses a risk to the environment. British Columbia maintains there are gaps in the science around how to properly clean up any marine oil spill.

The pipeline has received the conditional approval of the National Energy Board, the federal Liberal government and the previous provincial Liberal government, but opponents have argued the approval process was deeply flawed.

In a statement Thursday, Kinder Morgan said B.C.’s proposed legislation signals the province’s “continued intention to frustrate the project.”

Ms. Notley told reporters Thursday the reference case is designed to scuttle the $7.4-billion Trans Mountain expansion project by creating uncertainty about whether the pipeline would ever meet B.C.’s proposed permitting regime.

Her province will seek standing in the case to oppose B.C., she said, and predicted that Mr. Horgan’s government will lose.

Meanwhile, she said, Alberta and Ottawa are making progress in talks with Kinder Morgan to “de-risk” the project and defuse what she described as the “legal silliness” of B.C.’s court action. Both Ottawa and Alberta have promised to consider financial support and other rescue options to keep the project moving forward.

“B.C. wants the power to unilaterally throttle our resources and hurt the Canadian economy,” she said. “We will aggressively stand up for Alberta.”

B.C.’s legal team has drafted a four-page bill that would amend its Environmental Management Act, to give the director of waste management the authority to require permits of companies seeking to increase their transportation of heavy oil through the province, by pipeline or rail.

At its heart, the province is asking the appeal court to confirm that B.C.’s constitutional powers to regulate property and civil rights include the authority to control the movement of hazardous materials within its borders. The province acknowledges that the Constitution gives Canada authority over railways and pipelines that cross provincial boundaries, but will argue that having a second set of environmental standards does not frustrate Ottawa’s decisions.

Hours before B.C. filed its reference case, federal Environment Minister Catherine McKenna extended an olive branch to the B.C. government, offering to work with the province to address safety concerns over the shipment of diluted bitumen through an expanded Trans Mountain pipeline.

In her letter to B.C. Environment Minister George Heyman, Ms. McKenna said her government is ensuring the project will be “safe and environmentally responsible, and can be built and operated to the highest standards.”

She added that the federal government would be willing to establish a joint scientific expert advisory panel to “take stock of the fate, behaviour and effects of various oil products in different spill conditions” to bolster preparedness for any potential accident.

The federal government also released a reply Thursday to British Columbia’s policy statement in which the province laid out its case for regulating diluted bitumen.

In the paper, Ottawa argued it has taken major steps to safeguard Canada’s coasts and will continue to work on its own and with provincial and Indigenous partners to enhance those measures. However, it added the federal government has clear jurisdiction over interprovincial pipelines and railways.

With the pipeline’s fate uncertain, some contractors have started to make alternative plans. Sean Surerus, president of Surerus Pipeline Inc., said he is redeploying some of his 160 full-time staff to work on other projects.

The company was awarded a contract in partnership with Britain-based engineering and construction firm J. Murphy & Sons Ltd. for pipeline construction in B.C.’s Interior.

But it was told to cease all planning work late last week, with no clarity on next steps. “There’s a fair bit of unknowns, so we’re actually trying to sort out what it means for our business as well, as are the other contractors,” he said by phone from Fort St. John, B.C., where the company is based.