Canadian government to buy troubled Trans Mountain pipeline

Gwen Vasquez
May 30, 2018

Hours earlier, the federal Liberal government revealed that it will spend $4.5 billion to buy Trans Mountain and all of Kinder Morgan Canada's core assets.

"Trudeau is gambling billions of Canadian taxpayer dollars on an oil project that will never be built - a project that Kinder Morgan itself has indicated is "untenable" and that faces more than a dozen lawsuits, crumbling economics, and a growing resistance movement that is spreading around the world", Hudema said.

The company had set a 31 May deadline to decide if it would proceed with the expanded line from Edmonton, Alberta, to a port in the Vancouver area, which would give landlocked Canadian crude greater access to foreign markets.

Now the Canadian government is stepping in to make sure the pipeline is completed over the objections of environmentalists, especially those in the Vancouver area who are anxious about increased shipping traffic and the possibility of spills along the coast. Premier Rachel Notley said at the time that the province would consider all options for ensuring the project was built.

"This deal - and this pipeline - will unlock investment in our oilsands, because we're now on the path to getting full value for our energy resources".

Prime Minister Justin Trudeau has put a lot of political capital on the project, pledging over and over again that the pipeline expansion is in national interest and will be built one way or another.

Meanwhile, Caisse de Depot et Placement du Quebec, Canada's second-largest pension fund, last month disclosed holdings of 10.2 million shares in Kinder Morgan Canada, making it the largest investor outside of its parent company. It does not intend to own the project for long.

"The federal government has responded and that's their business".

The move drew immediate criticism from both sides of the political spectrum, and could hurt Trudeau's popularity in the key British Columbia battleground in a 2019 federal election.

Horgan said his concerns remain rooted in what he calls the limited scientific knowledge of how diluted bitumen behaves in water, as well as perceived gaps in prevention efforts and response plans in the event of a spill.

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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.

"It's a mess out there", said a Calgary industry source not authorized to speak publicly. Two new pipelines were built to the United States under former prime minister Stephen Harper: TransCanada's Keystone pipeline to Nebraska (not to be confused with Keystone XL), and Enbridge's Alberta Clipper to Wisconsin.

Financing for this purchase will come from Export Development Canada.

Kean did not say why he made a decision to sell rather than absorb the risk of further delays.

Once the sale is complete, he said, 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.

"So our message today is simple: when we are faced with an exceptional situation that puts jobs at risk, that puts our worldwide reputation on the line, our government is prepared to take action", he said.

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

Trans Mountain stirred an unusual public fight between neighboring provinces.

Because instead of having the private sector do it, Canadian taxpayers are now the owners of the Trans Mountain, for an initial outlay of $4.5 billion, with the final cost likely to be around $7.5 billion.

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