Canada govt steps in to buy controversial pipeline

29 May, 2018, 21:31 | Author: Chad Warren
  • ​Senate passes bill calling for Ottawa to back Trans Mountain | Regulatory

A Kinder Morgan-led consortium planned to expand the Trans Mountain network to the western coast of Canada, tripling its design capacity to 890,000 barrels per day.

The federal government announced a deal with Houston-based Kinder Morgan Inc.to purchase the existing Trans Mountain pipeline between Alberta and British Columbia, as well as the expansion project to twin the pipeline, before markets opened Tuesday and Finance Minister Bill Morneau said Ottawa did not intend to be a long-term owner. "It must be built and it will be built", Morneau said. The purchase includes the pipeline, pumping stations, and rights of way along the route.

"Any purchaser of the project would be covered by a federal indemnity protecting them against any financial loss posed by politically motivated unnecessary delays, in line with the indemnity offered to Kinder Morgan by the government on May 16, 2018", said the finance department. "We have met the deadline", she tweeted.

The ensuing uncertainty, paired with vociferous opposition from environmental groups and some Indigenous communities in B.C., prompted Kinder Morgan to halt investment until the federal government could inject some certainty into the project.

Canada loses $15 billion every year on the sale of oil because the USA remains its only export customer, resulting in a lower price, Trudeau argues. "We've agreed to a fair price for our shareholders and found a way forward for this national interest project". Trudeau pledges regularly that the pipeline will be built.

The Trans Mountain expansion would nearly triple capacity to 890,000 barrels of oil on a line running from Alberta to a terminal near Vancouver.

Now 99 percent of Canada's oil is sold to the United States at a discount, and access to the Pacific coast is seen as key to diversifying the world's sixth largest oil producer's energy exports.

Trudeau approved the expansion, arguing that it was "economically necessary" and enabled him to overcome opposition to a carbon tax plan that will help Canada cut its greenhouse emissions.

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"Many British Columbians feel very passionatiately about this project".

On Tuesday morning, Finance Minister Bill Morneau announced Ottawa would spend $4.5 billion to buy the pipeline expansion, and all of Kinder Morgan Canada's core assets.

Horgan said federal ownership of the pipeline won't alter his government's actions, because the reference case to try and regulate the import of oil into the province is not specific to any pipeline.

Horgan said he's anxious about the "catastrophic consequences" should there be a spill, regardless of the owner, and will continue to fight it in court.

Alberta Premier Rachel Notley says she sees no immediate need to turn off the oil taps to British Columbia now that the federal government is taking over the Trans Mountain pipeline expansion.

"They have 10 to 20 years of firm commitment for shipments so from an investors perspective, there aren't too many projects like this that can provide that type of certainty in terms of cash flow over that period", said ARC Energy Research Institute senior director Jackie Forrest.

"We believe this is the best way to protect thousands of well-paying jobs and the safest and most effective way to get our resources to world markets", Morneau told a news conference in Ottawa after the meeting.

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