UPDATE 3-Canadian regulator backs oil pipeline expansion, urges whale protections

Canada's National Energy Board (NEB) regulator recommended on Friday that Ottawa approve expansion of the government-owned Trans Mountain oil pipeline, but made new, nonbinding recommendations to mitigate harm to Pacific Ocean killer whales. The pipeline is in the national interest as it will create jobs and allow Canadian oil to reach more markets, the NEB said in a report.

But expanding it is likely to significantly harm the killer whale population off the coast of British Columbia and increase greenhouse gas emissions from ships, the board said in its report. A "worst-case" spill, while unlikely, would also be damaging, it said. The NEB made 16 new recommendations, ranging from offsetting increased underwater noise to reducing greenhouse gas emissions from ships. The recommendations constitute nonbinding advice to the government.

The Canadian government in September directed the board to conduct a new review of its application to nearly triple the capacity of Trans Mountain, which the government bought for C$4.5 billion ($3.43 billion) last year from Kinder Morgan Canada to ensure it gets built. The move came after Canada's Federal Court of Appeal overturned the Liberal government's 2016 approval to expand the pipeline, which runs from Alberta's oil heartland to the British Columbia coast. The court ruled that the NEB failed to consider marine impacts and that the government did not adequately consult indigenous groups.

The NEB's ruling is a political win, albeit with mixed implications, for Prime Minister Justin Trudeau, ahead of a fall election. He faces both anger from Western Canadians over the oil industry's struggles and pressure from environmentally minded voters who do not want pipelines built. Canada's oil production has expanded faster than pipeline capacity, causing a glut in Alberta last year that depressed prices.

The NEB's 689-page report now goes to Trudeau and his Cabinet, which by law has 90 days to respond. Consultation with indigenous groups is well under way and the government is in a "strong position" to decide within that time frame, but has made no decision, Natural Resources Minister Amarjeet Sohi said in an interview. Sohi said the NEB's 16 recommendations "broadly align" with his government's values, but that it needs more time to study them.

The Southern Resident killer whale population is already under threat, and even the pipeline's "relatively minor" impacts would cause additional harm in various ways, including potential strikes by ships, the board's chief environment officer, Robert Steedman, said. The board's decision is hardly surprising, given that the NEB limited its review to 12 nautical miles of the whales' habitat, and refused to consider the impact on salmon-spawning areas, said Eugene Kung, lawyer at West Coast Environmental Law.

"The fix was in from the start," he said. "This project amounts to a death sentence for the South Resident orcas." The NEB failed to produce evidence that the pipeline's expansion will create jobs and benefit the economy, said Elizabeth May, leader of Canada's Green Party.

The board also imposed 156 binding conditions, including issues of emergency preparedness and consultation with indigenous communities, for examples. ($1=1.3136 Canadian dollars) (Reporting by Rod Nickel in Winnipeg, Manitoba; editing by Jonathan Oatis)