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New markets for Canada's oil remain elusive

A war of words, along with legal challenges and counter-challenges, could see plans for Canada's Trans Mountain export pipeline scrapped

Canada's quest to export oil from its shores has hit dire straits, with Trans Mountain pipeline builder Kinder Morgan threatening to withdraw support for the C$7.4 bn ($5.75bn) project. The plan is to transport production from Alberta's oil sands through British Columbia (BC) to the Pacific coast. BC opposes the idea. The whole affair has sparked a constitutional crisis over jurisdictional issues that's almost certainly going to go to the country's Supreme Court.

Hanging in the balance is vitally needed export capacity—nearly 600,000 barrels a day—to secure new markets in Asia. Without it, Canadian oil will remain landlocked at the mercy of a single customer—the United States. Alberta's barrels will continue to face crippling price discounts which, analysts say, are subsidising American consumers to the tune of US$40m a day or nearly $15bn a year.

Months of increasingly heated rhetoric between the two westernmost provinces have brought both sides to a point of troubling of absurdity. BC is attempting to restrict the movement of Alberta's bitumen barrels through its territory, including by rail. Alberta has responded with threats to ban shipments of British Columbian wine.

Prime Minister Justin Trudeau attempted to bring the warring parties together to forge a compromise, but to no avail. On 18 April, Alberta's premier, Rachel Notley, tabled legislation that would restrict crude transfers to BC. This would have the effect of sending the province's already steep petrol prices through the roof. BC is overwhelmingly dependent on shipments of Alberta crude and refined products. It would have to turn to refineries in Washington State to make up the slack, a bitter irony for pipeline proponents.

Trudeau has a lot at stake in the dispute, both politically and jurisdictionally. In 2016, he personally signed off the project, despite immense pressure from environmentalists to scrap it. It's the federal regulator, the National Energy Board, which has ultimate jurisdiction and BC's moves are seen as a thinly-veiled attempt to undermine the authority of the central government.

$5.75bn—Cost of the planned Trans Mountain pipeline

The irony is that it's easier to ship oil to BC via the US and back into Canada under the North American Free Trade Agreement than it is to haul it over the Rocky Mountains.

Caught in the middle is American pipeline giant Kinder Morgan, which has already spent $1bn over the past five years to steer through an increasingly unwieldy regulatory process. On 9 April, it halted all "non-essential" spending on the project and set a deadline of 31 May for the warring parties to reach a solution or scrap it altogether. The brinksmanship is hardly surprising and increasingly typical of Canada's fractured regulatory malaise.

The governments of Canada and Alberta have vowed to use public money to buy the project outright, if need be. But on 19 April, Kinder Morgan chief executive Steve Keane said even a massive infusion of tax dollars fails to address the political and regulatory uncertainty surrounding the project, and that it may be "untenable" for a private entity.

The only thing certain is that the dispute won't be resolved any time soon, and certainly not by 31 May. On 26 April, a federal court ruled in favour of Alberta and against the BC government and the city of Burnaby's attempt to withhold permits—Burnaby would be the export terminal for the pipeline. The court also refused to hear an appeal of the decision.

It was a Pyrrhic victory for Alberta. For the BC's government responded by threatening to take the issue to the highest court in the land. A Supreme Court Challenge would take at least two years, without any guarantee the pipe would be built at all. In that scenario, it almost certainly wouldn't be.

If Kinder Morgan does indeed walk away from the project, it would be the third strike for Canada's export dreams following the rejection of the Northern Gateway pipeline in 2016 and the cancellation of Energy East to St John, New Brunswick last year.

Given Canadians' love of hockey metaphors, this is one dispute that's headed for sudden death overtime.

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