KMI Kinder Morgan Inc

By Paul Vieira 

OTTAWA -- Canada said Tuesday it would press ahead with the contentious expansion of a pipeline that carries crude oil to the Pacific Coast, after taking steps to address concerns from some indigenous and environmental groups.

The widely-expected decision ends nearly a year of uncertainty over the future of the Trans Mountain pipeline, formerly owned by Kinder Morgan Inc. and purchased last year by the Canadian government for 4.4 billion Canadian dollars ($3.3 billion). The lack of new pipeline infrastructure in Canada has weighed on the price of crude oil from Alberta, contributing to a yearslong slump for the country's energy sector. The pipeline debate has also helped foment a bitter regional divide, pitting western Canada against the federal government in Ottawa, over resource development.

The Liberal government cabinet, led by Prime Minister Justin Trudeau, originally approved the pipeline project in late 2016, but that decision was annulled last year by an appeals court. The court said that the original government approval was flawed because western Canadian indigenous groups weren't properly consulted and that the initial regulator's findings didn't fully consider the impact of increased oil-tanker traffic on the environment.

That forced Mr. Trudeau and officials to restart the review process for the pipeline. Canadian officials said that following a new review, the government has committed to additional steps for addressing worries over increased oil-tanker traffic, and has done a more thorough job in consulting with aboriginals.

Expansion of the Trans Mountain pipeline envisages nearly tripling capacity on the existing 710-mile corridor to 890,000 barrels a day. The Liberal government bought the pipeline project just over a year ago, after Kinder Morgan threatened to abandon the expansion because of potential roadblocks the provincial government in British Columbia tried to erect to thwart construction. Canada said it doesn't intend to be the long-term owner of the pipeline, and on Tuesday announced initial steps to gauge investment interest from indigenous groups.

Canadian officials have said the Trans Mountain expansion is crucial for the national economy because it would help Canadian producers sell more crude to faster-growing markets in Asia and rely less on the U.S. market.

Construction could begin after the pipeline operator acquires the necessary permits from federal, provincial and municipal governments, senior officials said at a briefing Tuesday. They said work could begin before the end of 2019. The officials acknowledged the project could face further legal challenges from its opponents, such as regional authorities in British Columbia, environmental groups and some indigenous organizations.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

June 18, 2019 17:36 ET (21:36 GMT)

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