Canada to implement oil tanker ban on northern B.C. coast

VANCOUVER (Reuters) - Canada will implement a moratorium on oil tanker traffic along the northern coast of British Columbia, effectively slamming the door on a controversial pipeline project that was already facing massive development hurdles.

Canada's Prime Minister Justin Trudeau takes part in a news conference in Ottawa, Canada November 12, 2015. REUTERS/Chris Wattie

In a letter released on Friday, Canadian Prime Minister Justin Trudeau instructed Transport Minister Marc Garneau to work with numerous other ministries to “formalize” the ban on oil tanker traffic, a Liberal campaign promise ahead of the federal elections last month.

Listed as one of seven “top priorities” for the Transport Ministry, more details on timing are expected after Parliament opens on Dec. 3.

The main casualty of the ban will be Enbridge Inc’s Northern Gateway pipeline, which would carry oil sands crude from near Edmonton, Alberta, to a deepwater port at Kitimat, British Columbia for export to Asian markets.

Efforts to move oil by rail to northern British Columbia ports would also no longer be viable, but the moratorium would not impact the proposed tripling of capacity on Kinder Morgan’s Trans Mountain pipeline, as that project is in the south.

“It would appear that all oil transportation, including rail and Northern Gateway, are dead in the water,” said Vancouver-based lawyer Merle Alexander, who has represented aboriginal groups opposed to pipelines.

With a moratorium in place, the energy industry will likely ramp up pressure on governments to approve other export projects, like the Trans Mountain expansion and TransCanada Corp’s Energy East.

Kinder Morgan Canada president Ian Anderson said the ban should not affect the Trans Mountain project, if the company demonstrates tanker traffic near the Vancouver port is safe.

Enbridge, meanwhile, said it remains committed to Northern Gateway, and questioned the economic impact of an oil tanker ban on northern communities and Western Canada as a whole.

Canada’s previous Conservative government approved the C$7.9 billion ($5.9 billion) pipeline last year, subject to more than 200 conditions recommended by regulators. But the project has faced staunch opposition from communities along its B.C. route and an investment decision has been delayed.

Like the proposed Keystone XL pipeline to the United States, Northern Gateway is loathed by environmentalists and Aboriginal groups who fear it will hasten the development of Canada’s oil sands and exacerbate climate change. Many also worry about the risk of a spill.

U.S. President Barack Obama rejected Keystone XL earlier this month, leaving Canadian producers facing a looming capacity crunch, with new output coming online but no new pipelines to carry that oil from landlocked Alberta to market.

Energy East, which would carry Alberta crude to refineries and an export port on Canada’s East Coast, is currently under review, as is the Trans Mountain expansion.

Shares of Enbridge closed down 0.9 percent at C$48.24 on the Toronto Stock Exchange as the broader energy industry sagged on slumping oil prices.

($1 = 1.3311 Canadian dollars)

With additional reporting by Randall Palmer in Ottawa, editing by G Crosse and Chizu Nomiyama