Kinder Morgan should compensate Surrey, B.C. if Trans Mountain pipeline approved, city says

BURNABY, B.C. – The National Energy Board got an earful Tuesday on the first day of hearings into Kinder Morgan Canada Ltd.’s plan to expand its Trans Mountain pipeline network to the West Coast.

Amid protests and marches outside, an NEB panel was told its process is “out-dated,” that it does not have the authority to determine whether First Nations have been consulted and that, overall, the $5.4 billion project should not be approved.

Anthony Capuccinello, solicitor for the City of Surrey, through which the pipeline runs, was the first intervenor to summarize his city’s arguments regarding the pipeline.

Lawyers for other local municipalities, First Nations and non-governmental organizations are preparing final oral submissions over the next two weeks on the project, which would expand the Trans Mountain system’s capacity to deliver oil from Alberta to the West Coast by 590,000 barrels per day.

Arguing that the NEB’s approach to granting and overseeing pipeline approvals is out-dated, Capuccinello called Kinder Morgan’s story supporting its Trans Mountain pipeline expansion project “a fiction.”

He said the pipeline company should compensate his city for the additional cost of building and maintaining infrastructure such as sewers and roads, which in Surrey is complicated by the need to work around the existing Trans Mountain pipeline, and he said would be further complicated by the expansion.

“It is not for the City of Surrey and residents of British Columbia to pay those costs and subsidize the shareholders of Trans Mountain,” Capuccinello said.

In a sharply worded address, he repeated the city’s written argument filed last week, that the expansion would boost the cost of building and maintaining infrastructure like sewers and roads in metro Vancouver by $93 million over 50 years.

Surrey, unlike the neighbouring city of Burnaby, isn’t necessarily opposed to the project, but expects to be compensated for the additional infrastructure costs its construction would impose on the city.

“The city does not in principle support any expansion of the Trans Mountain system that negatively impacts the city of Surrey,” Capuccinello said.

He also asked the NEB to require Kinder Morgan to decommission, remove and relocate portions of the existing Trans Mountain pipeline through Surrey, a step which the city said in its written argument would “significantly reduce the costs of operating, maintaining and replacing infrastructure.”

He said the cost of removing the existing line in Surrey and relocating it is estimated at $36 million, or one per cent to two per cent of the project’s total cost.

Later in the day, representatives from the Musqueam Indian Band expressed “great concern about the pipeline route, and not just the pipeline route but the increased tanker traffic that goes with it.”

“Musqueam has established aboriginal rights to fish in its traditional territory,” the band’s lawyer James Reynolds told the hearing.

The Musqueam band is demanding the government “fully justify” the expansion project, which it said will infringe on its ability to fish territory including the Burrard Inlet in Vancouver, which the Supreme Court has recognized as its traditional territory.

“We submit that the evidence that Musqueam gave has clearly satisfied the test of showing non-trivial infringement,” Reynolds said. “The burden is now on the Crown to justify the infringement and this has not been done.”

The requirement to justify an infringement on an aboriginal right, the band noted in a written submission filed in November, is “distinct from a regulatory process such as the NEB process and the Crown’s duty to consult and accommodate unproven rights.”

The hearings are scheduled to continue in Burnaby before shifting back to Calgary, where oil and gas companies and other First Nations will be allowed to summarize their arguments.

On Wednesday, representatives from Burnaby, home to one of the project’s most outspoken opponents in Mayor Derek Corrigan, are scheduled to make final arguments.

 

gmorgan@postmedia.com

Twitter.com/geoffreymorgan

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CP Rail asks U.S. Justice Department to investigate rivals’ response to Norfolk bid

Canadian Pacific Railway Ltd. is asking the U.S. Justice Department to investigate whether its competitors are conspiring to block its proposed acquisition of Norfolk Southern Corp., accusing them of “unprecedented” and “likely illegal” actions.

But two prominent U.S. rail lawyers say it will be a difficult case to make, and CP’s rivals are likely protected from any antitrust charges.

In a letter addressed to the Justice Department’s antitrust division, CP argues that recent media reports indicate that its rivals are “organizing a collective campaign” to block CP’s proposed takeover offer, which Norfolk Southern has repeatedly rejected.

Last week, Reuters quoted executives from CSX Corp., Union Pacific Corp. and BNSF as saying they are opposed to the proposed merger and have met to discuss it.

“We don’t want Class 1 railroad mergers to happen,” Union Pacific CEO Lance Fritz was quoted as saying. “We’ll do everything in our power to make them not happen.”

CP spokesman Marty Cej said the company only decided to ask the Justice Department to weigh in after careful consideration.

“We get it that some competitors might not like the idea of a more efficient competitor, but when statements are made in the press that others have gotten together to prevent mergers, we just thought that was eyebrow-raising,” Cej said in an interview.

Michael McBride, a transportation lawyer at Van Ness Feldman LLP in Washington, D.C., said it’s unlikely that CP’s letter will result in its competitors being charged with antitrust violations.

“I think this is quite a long shot to expect the Justice Department to investigate this,” McBride said.

“I think the Justice Department would be inclined to go after the railroads if they were collectively setting rates or terms of service, refusing to haul certain kinds of things or creating agreed-upon commercial limitations, but probably not for something like this kind of advocacy.”

The Justice Department’s decision will rest on its interpretation of the Noerr-Pennington doctrine, which says that private entities are immune from antitrust laws as long as they’re lobbying the government.

CP says in its letter than the doctrine doesn’t apply in this case, because it hasn’t yet reached an agreement with Norfolk Southern or filed an application with any government agency.

But McBride said the railways’ public comments are likely part and parcel of a broader advocacy effort that includes government lobbying and which would therefore be protected from any antitrust actions.

Another prominent U.S. rail lawyer said CP’s letter “smacks a bit of desperation.”

“This seems to me to involve potential overreaching on CP’s part,” said the lawyer, who agreed to speak only anonymously, as he did not want his comments to impact his practice.

In its letter to the Justice Department, CP said its competitors are more worried about what a merger will mean for their own profitability than what it will mean for the public.

“The collective communication strategy of these competitor railroads is also likely illegal because it is anticompetitive; it is an agreement to collectively work together to prohibit the introduction of competition by a new competitor, which is akin to a group boycott in principle and intended effect,” it adds.

Tuesday’s letter is part of an escalating war of words between CP and Norfolk Southern, with most of the other Class 1 railroads publicly taking Norfolk Southern’s side. Norfolk had rejected CP’s latest bid of roughly US$31 billion in December, calling it “grossly inadequate” and some industry observers say that U.S. regulators are unlikely to allow a merger of the larger Class 1 railroads.

“I view this as another part of the war for public opinion,” said Tony Hatch, principal at railway consulting firm ABH Consulting. “Those guys sent it over the net and (CP CEO Hunter Harrison) sent it back in with a sharp rejoinder.”

Cej denied this, saying the letter simply intends to draw the Justice Department’s attention to a worrying issue.

“This isn’t a PR campaign,” he said. “This is transparency.”