The court decision regarding Imperial Oil's Kearl project could affect large projects in other industries, says Dennis Mahony in The Globe and Mail

May 15, 2008

Multibillion-dollar oil sands projects will face new legal and regulatory hurdles after the Federal Court ruled against Imperial Oil Ltd. in its battle to keep the C$8 billion Kearl oil sands mine on schedule.

Imperial went to court to win back a key permit for site preparation that was voided after a Federal Court found Kearl's regulatory approval to be incomplete on the issue of greenhouse gases. The loss will set back Kearl by at least several months, if not a year or more.

The Federal Court decision means that energy industry regulatory reviews are likely to become more detailed and arduous, while legal challenges will become more common. It also means that if an oil sands plan is caught up in a court fight, the project is likely to be halted as governments will be more hesitant to issue important permits early. Companies that propose projects will have to redouble their efforts during the regulatory review to minimize the risk of potential court challenges.

Dennis Mahony says the court decision also has implications beyond the oil business and could affect big infrastructure projects in any industry. The Kearl case was watched closely across Canada by professionals working on climate change issues, he says. Even if Imperial ultimately wins back the permit, the delay highlights the growing challenge of keeping big projects on schedule. The case suggests that "it's certainly possible to delay projects by several years."

The original challenge against Kearl was brought by environmental groups, led by Sierra Club and Pembina Institute, and represented by Ecojustice. They had previously and unsuccessfully challenged Petrocan's Fort Hills oil sands mine, with the Supreme Court rejecting a leave for appeal in 2006. More of these challenges are expected until real and absolute reductions in greenhouse gas pollutants are seen.

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