British Columbia Vows to Block Pipeline Expansion

The government of British Columbia, Canada's westernmost province, vowed Thursday to use every legal option to stop construction of Kinder Morgan Inc.'s planned expansion of a pipeline connecting the Alberta oil sands with the Pacific Coast.

Under new, left-leaning leadership and citing risks to its environment and food supply, the province began to detail its plan to halt the energy project that Prime Minister Justin Trudeau approved late last year. Shares in Kinder Morgan Inc. and its Canadian subsidiary fell on the news but later recouped some losses.

The development sets up another showdown over the need to get Canada's landlocked oil and gas reserves to faster-growing Asian markets to spur growth -- a crucial goal for a resource-reliant country that is still dealing with lower commodity prices.

The provincial New Democratic government, sworn in last month, had said it would try to stop the 7.4 billion Canadian dollar ($5.8 billion) expansion of the Trans Mountain pipeline as part of a power-sharing deal with the environment-focused Green Party.

The pipeline expansion, as envisioned by Houston-based Kinder Morgan, would triple daily capacity to 890,000 barrels of crude oil on an existing 714-mile project that carries crude from the Alberta oil sands to British Columbia's Pacific coast. The project was viewed as a way to boost sales of crude oil to Asia and reduce reliance on the U.S. market, where Canadian crude sells at a discount to global prices.

A potentially steep increase in heavy-oil tanker traffic off Vancouver's harbor "is not in British Columbia's interests," said George Heyman, the province's environment minister. "Not for our economy, our environment, or thousands of existing jobs. We will use all available tools to protect our coastal waters and our province's future."

Mr. Heyman cited the Deepwater Horizon spill in the Gulf of Mexico in April 2010 and how Louisiana suffered "reputational harm," such as a drop of tourism and a decline in sales of seafood from the Gulf Coast.

The province plans to step up consultations with indigenous groups to ensure their concerns are met. Until those talks are completed and the province's legal obligations are satisfied, British Columbia said it would prohibit construction of the expansion on government-owned land.

Mr. Heyman added the province would seek "intervenor status" in a lawsuit headed to Canada's Federal Court that aims to overturn Ottawa's approval.

The chief executive of Kinder Morgan's Canadian unit, Ian Anderson, said the company "takes seriously" the remarks from British Columbia's government and remains prepared to work with authorities to address the concerns. Kinder Morgan Canada's stock price fell 3.6% in trading on Toronto stock market, closing the session at C$17.28.

"It still remains to be seen what the British Columbia government can actually do to stop, or materially delay, the project and how the B.C. government's opposition will be reconciled with Ottawa's approval," said Robert Kwan, an analyst with RBC Capital Markets. Nevertheless, he said the announcement would "negatively impact" sentiment and share price.

Environmental advocacy groups applauded the move. Kinder Morgan's expansion "cannot move forward -- end of story. It's great to see British Columbia taking this strong stand for the climate and for Indigenous rights," the group 350.org said in a statement.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

August 10, 2017 18:50 ET (22:50 GMT)