Canada imposes further delays on two major pipeline projects

By Randall Palmer and Leah Schnurr

OTTAWA (Reuters) - Canada announced new interim rules on Wednesday for environmental reviews that will impose delays on two projects - TransCanada Corp's Energy East pipeline and Kinder Morgan Inc's expansion of its Trans Mountain Pipeline.

The Liberal government issued the rules on the grounds that public trust needed to be restored in the process for assessing big energy projects.

Proponents say that after U.S. President Barack Obama's denial of the Keystone XL pipeline, all-Canadian projects are needed so the country's oil can reach its east and west coasts and fetch higher prices abroad.

"All we're saying here is that Canadians deserve to have trust in their environmental assessment process or else no projects will go ahead," Environment Minister Catherine McKenna told a news conference.

"That doesn't mean that no project is going to go ahead, it just means we have to do a proper review because this is the 21st century and that is the way you get resources to market."

The rules are designed to take greater account of environmental impacts and indigenous groups' view for the two pipelines, which are opposed by environmentalists and some communities but backed by industry.

McKenna also said the government would separately calculate direct and upstream greenhouse gas emissions linked to the projects.

She declined to explain how much weight would be given to the climate change effects, saying there would be no maximum fixed for each project, and she said it would only be one of many factors the government would take into account in determining whether a project was in the national interest.

She said no existing project would be required to go back to square one.

The rules push back the deadline for the government to decide on Trans Mountain to December 2016 from August, with a review by the national energy regulator still to be done by May.

Ottawa extended the period for the regulator's review and subsequent government decision of the Energy East pipeline to 27 months from the currently mandated 18 months.

Alberta Environment Minister Shannon Phillips said the province's ability to access energy markets is "crucial."

"If these new rules will allow the issues to be heard and then to get to a decision, then they will have helped the process," she stated.

TransCanada said it needed time to review the rules but supported delivering resources to market in the "safest and most environmentally sound way possible."

(Additional reporting by David Ljunggren in Ottawa and Julie Gordon in Vancouver; Editing by Peter Cooney and Sandra Maler)