Prospects advance for Canada's oil pipelines, but hurdles remain

By Rod Nickel

WINNIPEG, Manitoba (Reuters) - Prospects for expanding pipelines to move Canadian oil to markets have brightened, but plenty of hurdles remain for the Canadian sector, which has struggled for years with low prices and a glut in storage due to long project delays.

Two of three major proposals - TC Energy Corp's Keystone XL and the Canadian government-owned Trans Mountain - have cleared obstacles to bring them closer to fruition.

The third, Enbridge Inc's Line 3 replacement, faces a new round of hearings in Minnesota to weigh its environmental risks.

Canada is one of the world's largest producers of oil, with output of roughly 4.7 million bpd. But it has been unable to take full advantage due to bottlenecked pipelines.

"The folks I talk to in the energy industry and investment industry are very much in the mode of 'Don’t count your chickens before they hatch,'" said Mike Tims, vice-chairman at Matco Investments in Calgary, Alberta.

"People are more optimistic clearly, because there is progress being made. But there have been a sufficient number of deferrals and delays. We're reluctant to count on it until it actually happens."

Line 3 hearings, scheduled for three days, began on Friday with the Minnesota Public Utilities Commission listening to public comment. The commission will decide whether a revised environmental impact statement is adequate.

"This project would bring skilled labor to the area, help people get a great job," said Carrie Robles, a business agent for the Laborers Local 563.

But Christy Dolph, a research scientist at University of Minnesota, said Line 3's environmental risks are too great.

"We are in an unfolding climate catastrophe," she said. "Stand with science, stand with the people, and deny this project."

TC Energy this month announced an aggressive construction schedule as the U.S. Bureau of Land Management granted a 30-year right of way.

The company has not yet greenlit the project.

Trans Mountain, a pipeline that Ottawa intends to expand, survived a challenge from the British Columbia government this month.

The projects could still bog down. Canada's Federal Court of Appeal is scheduled to rule on Tuesday whether the Canadian government adequately consulted indigenous groups about the Trans Mountain expansion.

All three proposals look riskier than when they were first proposed due to rising public pressure to shift away from fossil fuels, said Eugene Kung, staff lawyer at West Coast Environmental Law, an advocacy organization opposed to Trans Mountain.

"None of these remain done deals."

(Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Dan Grebler and David Gregorio)