Canada purchases Trans Mountain pipeline project for $4.5B

Canada purchases Trans Mountain pipeline project for $4.5B”

The federal government announced Tuesday it is buying the Trans Mountain pipeline, the expansion project to twin it, and all of Kinder Morgan's core Canadian assets for $4.5 billion plus other costs.

It is subject to approval by Kinder Morgan's shareholders. It certainly won't cost any less than the almost $7.5 billion Kinder Morgan had allocated for it. Kinder Morgan Canada President Steve Kean said the company's "Canadian employees and contractors... will now resume work on this important Canadian project". Kinder Morgan makes about $200 million a year from selling space in the existing pipeline to oil companies to ship their product. Shares in the company gapped higher at the open and hit a high of $18 before falling back to $16.83 by mid-morning.

Kinder Morgan Canada shares initially jumped as much as 8.5 percent before ending down 3 percent, while the broader Canada share index fell 0.6 percent. The pipeline is meant to move Canadian crude to ports in the Vancouver area for shipment to foreign markets.

While Brad Wall is happy the federal government stepped in to ensure the Trans Mountain extension's construction, he doesn't believe the Liberals needed to buy it.

While the Canadian government says it does not plan to be the long-term owner of the pipeline, its decision to purchase the project on Tuesday is part of an effort to ensure the massive pipeline expansion proceeds this summer as planned.

Canadian taxpayers, conscripted by Trudeau, have now assumed all of the risk from Houston-based Kinder Morgan, which halted work on the pipeline last month, threatening to abandon the project by May 31, because it was too financially risky to proceed.

The purchase includes the pipeline, pumping stations, and rights of way along the route.

Finance Minister Bill Morneau unveiled the government's long-awaited, big-budget strategy on Tuesday to save the plan to expand the oilsands pipeline. "The federal government has made a choice that was motivated by the decisions of a private company that gave a deadline not to me, not to BC, but to stakeholders. And when we have something to announce you can be sure we will announce it".

Alberta has also agreed to provide funding for any unexpected costs that arise during construction.

But he also acknowledged: "It will be a federally owned project and that has some difference in terms of the paramountcy of the federal government".

The government was immediately slammed from all sides for its stunning move.

Environmental activists and their allies among indigenous groups say the development will increase the risk of oil spills from the pipeline and from oil tankers along British Columbia's coastline.

The rest of the world is transitioning away from fossil fuels, said Weaver.

"Canada stands to sacrifice its global reputation, irreplaceable iconic species like the Southern resident Killer Whales, and its commitments to meet its Paris Climate targets and to reconcile with Indigenous people - all while putting enormous risk on Canadian taxpayers".

Ottawa is pressing ahead, firmly of the opinion there is no doubt about its jurisdiction.

Kinder Morgan Canada Ltd. listed on the Toronto Stock Exchange on May 30 past year, luring investors with the promise of building the massive Trans Mountain expansion project.

Still, the federal government approved the pipeline in November 2016, on the condition that it meet 157 conditions related to its impact on Indigenous communities, environmental impacts and myriad other areas. CEPA is concerned about the implications of the government's financial intervention for future transmission pipeline projects.

Canada loses $15 billion every year on the sale of oil because the US remains its only export customer, resulting in a lower price, Trudeau argues.

While Ottawa's move is notionally positive for Canadian oil producers, the nationalization of key infrastructure is unlikely to boost investment confidence in Canada, noted GMP First Energy analyst Robert Fitzmartyn.

Editor's note: This article was updated with additional quotes and background at 11:05 a.m. on May 29, 2018.

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