Alberta seeks to cut oil to British Columbia in pipeline row

VANCOUVER (Reuters) – Alberta officials will introduce legislation on Monday expected to give the provincial government power to cut oil shipments to neighboring British Columbia in an escalation of a row over the stalled expansion of a Kinder Morgan Canada pipeline, which the Pacific province opposes.

The Trans Mountain expansion issue has pitted Ottawa against British Columbia. It could turn into a constitutional crisis, derail Prime Minister Justin Trudeau’s energy strategy and dent business confidence.

Alberta’s legislation, slated for Monday afternoon, could make gasoline more expensive in British Columbia and comes a day after an emergency summit to unlock the stalemate failed. On Sunday, Trudeau pledged financial aid to the $7.4 billion project, reiterating Ottawa has jurisdiction over it and it will be built.

But shortly after the summit ended, B.C. Premier John Horgan tweeted: “I will continue to fight to defend B.C. jobs, our economy and environment – now, and for future generations.”

Horgan campaigned on a pledge to block the expansion, which would nearly triple capacity on the existing pipeline from Alberta to B.C.’s coast.

Trudeau said his government would draft legislation, which is unlikely to come for several weeks, to reaffirm federal jurisdiction over the issue.

The legislation and financial aid have the same aim “of making sure that one, that this pipeline will be built and two, that all of the investors involved know that we take this seriously and they can be confident it will go through,” said a source close to the government.

Kinder Morgan Canada’s shares rose in early trading and then dipped to $17.17 on the Toronto Stock Exchange, down 8 Canadian cents. The energy sector as a whole was also slightly down as oil prices slipped.

Twenty-eight Kinder Morgan pipeline protesters who have been arrested for civil contempt at the company’s Burnaby Mountain facilities were due to appear in court on Monday.

More than 170 people, including federal Green Party leader Elizabeth May, have been arrested since mid-March for violating a civil injunction obtained by Kinder Morgan.

“We continue to regard the calculus as fraught, and believe the failure to resolve legal challenges make the actual construction of (the Trans Mountain expansion)difficult – even with federal government intervention,” Credit Suisse analysts said in a research note on Monday.

Oil producers and the Alberta government are desperate for the pipeline to go ahead, as rising production has outstripped existing pipeline capacity, leading to a widening of the normal differential between Western Canadian oil prices and the U.S. benchmark.