April 12, 2018 / 4:38 PM / 3 months ago

UPDATE 3-Canada's Trudeau to meet premiers on pipeline strife

(Adds comments by premiers of Alberta and British Columbia)

By David Ljunggren

OTTAWA, April 12 (Reuters) - Canadian Prime Minister Justin Trudeau will break off a foreign trip to hold an emergency meeting with the premiers of two provinces locked in a worsening dispute over an oil pipeline, officials said on Thursday.

The unexpected development is a sign of the pressure building on Trudeau to solve a problem that could turn into a constitutional crisis.

The federal Liberals are pitted against the Pacific province of British Columbia, which opposes plans by Kinder Morgan Canada to almost triple the capacity of its Trans Mountain pipeline from Alberta to the west coast.

Ottawa, which approved the project in 2016, insists it has jurisdiction. The British Columbia government disagrees, citing the risk of a spill.

Kinder Morgan Canada, fed up with the delays, is threatening to walk away unless the dispute is settled by May 31.

Trudeau left on Thursday for a nine-day trip, starting with a summit in Peru on Friday and Saturday. He has invited Alberta Premier Rachel Notley - who backs the pipeline - and British Columbia Premier John Horgan to come to Ottawa on Sunday. Trudeau will resume his international trip after the meeting.

Both premiers said they would attend the Ottawa session but made clear they were sticking to their positions.

“This likely is not going to be the end of the story. It’s a first step,” a senior government official told Reuters, saying Trudeau would outline the various financial, regulatory and legal options for handling the crisis.

It is the first time in decades that different levels of government in Canada have argued so openly over resources. Energy industry analysts said that unless the dispute is settled, Canada would become a much less attractive place for foreign investment.

“I think there’s a hope we break the deadlock and the prime minister can get beyond the political public posturing,” said the official, who was not authorized to speak to the media and requested anonymity. “This is impacting market confidence and investor confidence.”

Notley, who is threatening to cut oil supplies to British Columbia, told reporters in Alberta that she did not have any particular expectations for Sunday’s meeting.

“As far as negotiations (go) ... there’s only one outcome for Alberta, that is, that the pipeline gets built,” she said.

A source close to the matter said on Wednesday that Trudeau would put pressure on British Columbia to drop its resistance but would try to avoid tougher measures that might alienate voters who helped his Liberals win power.

“I don’t feel there is any need for saber-rattling, for provocation or for threats,” Horgan told reporters.

Ottawa and Notley’s government have indicated they might be prepared to invest public money in the pipeline expansion to keep the project alive.

Shares of Kinder Morgan Canada held their gains following news of the Sunday meeting and closed up 5.5 percent at C$17.50.

Notley said on Monday that if Trudeau did not step in, “the reverberations of that will tear at the fabric of (Canada) for many, many years to come.”

Horgan reaffirmed his stance that Ottawa should refer the matter to the Supreme Court for clarification. Cabinet ministers have dismissed the idea, saying it was already clear the federal government had jurisdiction over major pipelines.

Before he left for Peru on Thursday, Trudeau released a video filmed on the British Columbia coast in which he said: “I wouldn’t approve major pipeline projects if I wasn’t confident they could be done safely.” (Additional reporting by Leah Schnurr in Ottawa; Editing by Richard Chang and Peter Cooney)

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