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UPDATE 2-Canadian court allows new challenges to Trans Mountain oil pipeline expansion

Rod Nickel and Nia Williams

expansion@ (Adds quote from court decision, comment from industry group)

Sept 4 (Reuters) - Canada's Federal Court of Appeal on Wednesday agreed to hear six challenges to the Canadian government's earlier approval of an expansion of the Trans Mountain oil pipeline, potentially adding to delays ahead of an October election.

In a ruling posted on its website, the court said the six challenges relate to the adequacy of the government's consultations with indigenous groups, and that they must proceed on strict, short deadlines.

The decision marks the second time in just over a year that long-delayed Trans Mountain has run into legal obstacles.

The project, which Prime Minister Justin Trudeau's government bought last year, is one of several pipeline projects Canada's oil industry says are badly needed to allow Canadian crude to reach higher-paying refiners in the United States and Asia.

The court will not allow challenges on environmental concerns and alleged conflict of interest grounds to proceed, but is allowing six challenges related to the government's duty to consult aboriginals, called First Nations.

"The applicants do acknowledge that the Government of Canada introduced some new initiatives to assist consultation and added some conditions on the project approval that was ultimately given," the court said in its decision. "But to them this is just window-dressing, box-ticking and nice-sounding words, not the hard work of taking on board their concerns, exploring possible solutions, and collaborating to get to a better place."

The court quashed the government's previous approval in August 2018, mainly over inadequate consultation.

That decision led to the government conducting a new round of consultations before re-approving the project in June.

Projects to expand or build new Canadian pipelines have become deeply contentious in recent years, as some indigenous groups fear spills and the continued expansion of Alberta's oil sands. Growing Canadian crude oil production, at a time when pipelines are oversubscribed, forced the Alberta government this year to impose production limits to ease a glut and support prices.

The Canadian Association of Petroleum Producers (CAPP), whose members include Suncor Energy Inc and Canadian Natural Resources Ltd, said the decision was disappointing.

"The (project) has already undergone a lengthy, thorough and extensive regulatory review process, including extensive consultation with all stakeholders," CAPP Chief Executive Tim McMillan said in a statement. "Despite this setback, CAPP fully expects construction to begin in September.

(Reporting by Rod Nickel in Winnipeg and Nia Williams in Calgary, Editing by Tom Brown and Lisa Shumaker)