Ottawa looks set to approve a much-debated plan to expand a pipeline this week, people familiar with the process told Reuters, but the move is unlikely to help Prime Minister Justin Trudeau rebuild support ahead of the elections of October.
The liberal government last year took the unprecedented step of buying the Trans Mountain pipeline from Kinder Morgan Canada for $ 4.5 billion to ensure expansion to help solve crude oil bottlenecks .
If completed, the expansion would almost triple the capacity on the oil pipeline running from the crude Alberta western province to the Pacific coast of British Columbia. But he faced growing protests from environmental activists and Aboriginal groups.
Mr. Trudeau – who came to power promising to improve Canada's environmental record – faces a difficult decision. If he approves it, it could upset environmentalists and local residents who fear the impact of the project.
If he rejects it, he risks further alienating an energy lobby that has accused him of wanting to destroy his own industry while he has continued with plans to strengthen the environmental assessments of the main new energy projects at a time of low prices.
He said the expansion will proceed if the conditions are right. His government will make a final decision on Tuesday and Finance Minister Bill Morneau will address a business audience in the energy capital Albertan in Calgary on Wednesday.
Two federal government officials with knowledge of the situation said that there was no doubt that Ottawa would give the green light.
"I expect an approval. Anything else will pose serious questions about what we are doing on the energy file," said one of the sources, who requested anonymity given the delicacy of the situation.
A government source from Alberta also said that the approval was planned. "It is the least this government can do to approve this pipeline," the source said.
However, a federal government source insisted that no decision had yet been taken and noted that Ottawa had the power to reject the announcement.
The prime minister's office declined to comment.
The cabinet will have to consider whether the project has done enough to gain Aboriginal support. An original expansion plan approved by the liberals in 2016 was overthrown by a court that ruled the government had not adequately consulted the indigenous groups. Ottawa says it has intensified talks with indigenous communities.
Wood Mackenzie analyst Mark Oberstoetter said it was more than 50% likely that the government could go ahead with Trans Mountain, since a rejection "would be a difficult story to tell your taxpayer base".
The Canadian Association of Oil Producers has predicted that the total investment in the oil and natural gas sector in Canada will decrease by around 10% to $ 37 billion in 2019 starting in 2018, underlining how Canada struggled to recover from the global slump in 2014-15 oil prices.
But even if it is approved, construction may not start soon, given the resistance of environmental and Aboriginal groups.
And an approval would do little to revive liberal fortunes in Alberta, where the party looks set to lose all three parliamentary seats in the October vote.
At the same time, it could also upset voters in B.C., where there are greater concerns about the potential impact of expansion and where liberals have 17 legislators.
Significantly, many of those places are in the Lower Mainland and connected to the coast that could be affected by the project, said Kathryn Harrison, professor of political science at the University of British Columbia.
"There are significant risks to liberals in British Columbia," he said.
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