Canada govt steps in to buy controversial pipeline

Cesar Mills
May 30, 2018

Steel pipe to be used in the oil pipeline construction of Kinder Morgan Canada's Trans Mountain Expansion Project sit on rail cars at a stockpile site in Kamloops, British Columbia, Canada May 29, 2018.

Finance Minister Bill Morneau said the government would acquire the troubled pipeline expansion project on Tuesday.

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.

"John Horgan picked a fight with Alberta and provoked a constitutional crisis with Ottawa over this project and this is now the embarrassing result", Wilkinson said.

Kinder Morgan Canada said Tuesday it had sold the troubled Trans Mountain pipeline system and expansion project for $4.5 billion after weeks of negotiations between Finance Minister Bill Morneau and its Houston-based parent company Kinder Morgan Inc. Construction costs going forward will be included in the $4.5-billion sale price if no buyer is found.

Kinder Morgan Canada Ltd. CEO Steve Kean said the deal is "a great day for Canada" and why wouldn't he?

One institutional investor in NY, who spoke on condition of anonymity, said that if the pipeline is built he expects the federal government to make $2 billion in profit when it eventually sells the asset.

Kinder Morgan will help Ottawa find other investors, as Morneau said the government was not interested in holding on to the asset.

The pipeline has faced a number of legal and regulatory challenges from the BC government that has delayed construction of the project, which was approved by the federal government in 2016.

Canada has announced it will purchase the Trans Mountain pipeline from developer Kinder Morgan to ensure it is completed.

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Scheer said Prime Minister Justin Trudeau has failed to provide certainty and "done nothing" to establish federal jurisdiction. Morneau declined to say what the government's ultimate financial outlay would be. Here, oil tanks stand near the Trans Mountain pipeline expansion site in Burnaby, British Columbia, in April.

"If they buy Trans Mountain, they have to not do something else", Lau said in an interview.

The Canadian government said on Tuesday that it would buy a pipeline that has been the focus of widespread protests by environmentalists and some Indigenous groups, putting the government squarely on the side of the country's oil industry.

"The good news though is that I now know the owner and have his phone number and I can call him with my concerns".

Kinder Morgan set the deadline in part due to frustrations with delays caused by the British Columbia government, which is concerned about possible oil spills.

The Liberal government has made a decision to resolve the Kinder Morgan pipeline deadlock by buying the pipeline outright. Social activist and author Naomi Klein called the government's plans a "desperate scam".

The company also faced opposition from environmentalists and aboriginal groups who anxious about the pipeline spilling its tar-like heavy oil.

Opposition to the government's proposal comes also from fiscal conservatives, who question the logic behind what they describe as a government bailout.

"We said we would get the pipeline built, and we are getting it built", Notley told reporters, as her elected human backdrop applauded and hooted. "So, I guess the Kinder Morgan shareholders weren't willing to take the risk but the Canadian government has determined that taxpayers are willing to take the risk".

The fair value of the remaining assets - plus the $12-per-share after tax proceeds of the sale - is $18 per share, which reflects how sizeable the Trans Mountain system was as a portion of Kinder Morgan Canada's business, Kwan said.

Other reports by GizPress

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