Canada's Government Buys Controversial Oil Pipeline, To Ensure It Gets Expanded

Cesar Mills
May 30, 2018

Once the sale to the feds is complete, Canada will continue the construction on its own, with a view to eventually selling the whole thing down the road, once market conditions would allow it to get the best price.

On news becoming public that the Canadian government will buy the pipeline, Kinder Morgan's stock price rose sharply by 2.36 per cent, suggesting investors believed the deal was good for the company. But Ottawa will immediately seek new buyers in the private sector and has promised to also extend insurance to them for any politically-motivated delays.

"We said we would get the pipeline built and we are getting it built", she said, flanked by her celebratory caucus at a news conference overlooking the Alberta Legislature.

Canada will buy Kinder Morgan Canada Ltd's (KML.TO) Trans Mountain pipeline for C$4.5 billion ($3.5 billion), the government said on Tuesday, in hopes of saving the project that faces formidable political and environmental opposition.

The Alberta government has agreed to cover any unexpected costs that arise during construction. Morneau said those would be covered on a "user pay" basis but he did not specify how much that tab could run to.

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.

Federal Finance Minister Bill Morneau made the announcement from Ottawa and says the deal represents a sound investment. He said there have been expressions of interest from "multiple investors" in buying the project, and that the federal government has no intention of being the long-term owner.

A majority of Canadians support the pipeline, according to recent polls, but they are reluctant to see tax dollars used to support it.

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Canada needs projects like the expansion created to triple Trans Mountain's capacity to move crude oil and refined products from the Alberta oilsands and Edmonton refining complex to the West Coast, said Chris Bloomer, CEO of the Canadian Energy Pipeline Association.

"I continue to have concerns about the potential adverse consequences of a diluted bitumen spill on our marine environment, on our coast and the consequences to our economy", he said.

"In a single mandate, Justin Trudeau transformed from a climate champion into a Big Oil CEO", said Aurore Fauret, a campaigner with "There is more work to do, but we will not stop until the job is done".

Kinder Morgan Canada gave Ottawa until May 31 to come up with reassurances it could press ahead with plans to more than double the capacity of the existing pipeline amid efforts by the province of British Columbia to block construction.

Several First Nations have alleged in court that Trudeau's approval of the project was not legal since the government failed in its constitutional duty to consult them. "The project has always been in the national interest".

Canada approved the project in November 2016, following an expanded environmental review process that included additional consultations with Indigenous communities and assessing the amount of additional emissions likely to result from additional production. CEPA is concerned about the implications of the government's financial intervention for future transmission pipeline projects.

Horgan also spoke to the question of whether or not the pipeline issue is a personal one between him and Prime Minister Justin Trudeau, saying that has never been the case.

"This is a great day for Canada, for our customers and for our employees".

Other reports by GizPress

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