What the Trans Mountain decision means for Alberta's oilpatch

If there were cheers around Alberta's oilpatch Tuesday, they may have been drowned out by the sighs of relief.

In the days leading up to the Federal Court of Appeal's decision on the Trans Mountain pipeline expansion, common wisdom across the sector was the ruling should go in its favour.

Still, few who work in oil and gas take anything for granted these days. The higher the stakes, it seems, the greater the anxiety.

But the results did go in the sector's favour — an outcome seen as vital to the industry for more than a few reasons, including hope it'll help boost confidence and, ultimately, investment in Western Canada's oilpatch.

It should also let some of the steam out of frustration that's been building in the province over the project's uncertainty.

What it won't do is lessen concern about climate change or the opposition of Indigenous groups who vowed to continue to fight the project. Those challenges remain for the sector and its political supporters.

Still, the approval is undoubtedly a win for the oilpatch — the second one in a week after Enbridge's Line 3 pipeline cleared another important regulatory hurdle in Minnesota.

"I think this is really important," said consultant Greg Stringham, who has worked for the industry, government and the Canadian Association of Petroleum Producers.

"This is probably the next to last step to allow this pipeline to go ahead and to get built and really, now, for the first time, allow Canadian oil access to the global oil market rather than just going into the United States."

The Trans Mountain project involves the twinning of an existing pipeline constructed in the 1950s to transport oil, gasoline, diesel and other products along the 1,150-kilometre route from Edmonton to Burnaby, B.C.

Ian Anderson, president of Trans Mountain Corporation, said in a statement Tuesday that it would be able to continue moving forward and building the project. In practical terms, that should mean job creation for the construction phase of the project.

The goal of the work is to raise the pipeline's capacity from 300,000 barrels a day to 890,000. 

Canada is the world's fourth-largest crude producer, but its reliance on the U.S. market, oil production growth and  struggles with pipeline bottlenecks have put the industry in a bind.

Last year, the province imposed ongoing production cuts to shrink an oil glut that's weighed on Canadian prices. If the Trans Mountain expansion is up and running in 2022 as planned, the oilpatch hopes it would help with fetching a better price for crude and help to bolster investment that's sat on the sidelines or pulled out of the energy sector over uncertainty around market access.

"We're at the whims of the U.S. market and really trapped within our own borders and the borders of North America," Stringham said.

"This outlet, while not relieving the entire pressure, does show, first, to the world that we can actually get a pipeline to the coast. And secondly, it allows us to be exposed to the higher prices in the world market than what we're seeing out of the North American market."

Certainty around approvals is key, said energy economist Peter Tertzakian.

"If the regulator has approved it, the federal cabinet has approved it, I mean, surely that should signal to people that that's an approval," he said.

If the court had ruled otherwise, the implications might have spread beyond the oilpatch, fuelling the kind of tensions that were running high before the federal election last fall.

"I sense that stuff has calmed down a bit and we just don't need it to flare up again," he said.

Climate pressure still weighs on energy investment

But anyone looking to invest in fossil fuel development must also take into account the outlook for energy demand and the impact of future regulation on greenhouse gas emitters. 

Those kinds of questions aren't going away regardless of the court's ruling. Investors worldwide are looking at oil and gas development with increasing scrutiny.

"I just wonder if the nature of the sector itself is not changing on us, you know, to the point that some of these projects that were no-brainers five years ago or 10 years ago are becoming more questionable," said Warren Mabee, director of the Queen's Institute for Energy and Environmental Policy.

To the extent Tuesday's court decision might ease tensions in Alberta, it could raise them elsewhere. 

Richard Masson, an executive fellow at the University of Calgary's School of Public Policy, expects pipeline opponents will use civil disobedience to try to halt the project, but believes the court's ruling is sound.

The court said that although Indigenous peoples "can assert their uncompromising opposition to a project," they cannot tactically use the consultation process as a means to try and veto it.

It also found that of the 129 Indigenous groups potentially affected by the project, 120 either support it or do not oppose it.  But the leadership from Squamish, Tsleil-Waututh, Coldwater, who voiced their disappointment with the Federal Court of Appeal's decision, vowed to "do what it takes to stop this pipeline."

The First Nation appellants still have 60 days to seek leave for an appeal with the Supreme Court of Canada. 

But for those who've supported the project over the years, Tuesday's ruling brought some relief — for now at least.