Canadian Oil Sector Anticipates Nod for Trans Mountain Pipeline Expansion

OTTAWA/CALGARY, Alberta (Reuters) - Canada's energy sector and politicians across the spectrum were anticipating the government would approve a hotly contested oil pipeline expansion on Tuesday after years of debate and court challenges.

Earlier construction of Trans Mountain pipeline. (photo: Trans Mountain)

Prime Minister Justin Trudeau's Liberal cabinet met at 0930 Eastern Time (1330 GM) to decide on the fate of plans to boost the capacity of the Trans Mountain project, and an announcement was expected after 4 pm ET.

An approval is widely anticipated after the government bought the pipeline in an effort to ensure that the expansion proceeds amid protests from environmental and aboriginal groups.

The project would triple Trans Mountain's capacity to carry 890,000 barrels per day from Alberta's oil sands to British Columbia's Pacific Coast, and help alleviate congestion on existing pipelines.

Trudeau, who faces a close election scheduled for October, has been under pressure from both western Canadian politicians who accuse him of doing too little for the struggling oil industry, and environmental groups who fear spills.

"We have always said we wanted to find the right balance between the economy and the environment. I am confident," Infrastructure Minister Francois-Philippe Champagne told reporters before the cabinet meeting.

Sixty percent of British Columbians support the expansion, while 30% oppose the project, and the remainder are undecided, according to an Ipsos poll released on Monday.

The Liberals previously approved the expansion in 2016 but that decision was overturned last year after a court ruled the government had not adequately consulted indigenous groups.

Insufficient pipeline capacity is costing the Canadian economy C$80 million per day and it is critical there be no further construction delays, the Canadian Association of Petroleum Producers said in a statement before the decision.

"If they're able to communicate that it's shovels in the ground immediately or shortly thereafter, that should send a pretty powerful signal to the (energy) market," said Eric Nuttall, a portfolio manager with Ninepoint Partners.

The expanded pipeline could be in service by 2022 if construction starts this year, analysts at Tudor Pickering Holt & Co said, but other obstacles may interrupt the project again.

A positive government decision could be appealed and Trans Mountain still requires various permits and route approvals in British Columbia, where the province's left-leaning New Democratic Party government opposes the project.

Andrew Scheer, leader of the federal opposition Conservative Party, said he expected the Liberals to greenlight the project but that meant nothing without a construction schedule.

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