Federal government buys pipeline from Kinder Morgan for $4.5 billion

Published On May 29, 2018 | By Alleiya Tinglin- Dystant | News, Politics

Federal Finance Minister Bill Morneau announced Tuesday the federal government will buy Kinder Morgan Canada Ltd’s Trans Mountain pipeline project for $4.5 billion.

The agreement was approved by cabinet during an early morning meeting and the deal is expected to go through in August pending approval from the Kinder Morgan board, Morneau said.

The move comes just two days before Kinder Morgan’s May 31 deadline to decide if it would proceed with the expansion project, which would see a new pipeline from Edmonton to a port in the Vancouver area.  The pipeline would give landlocked Canadian crude greater access to foreign markets.

It was a move that made Alberta Premier Rachel Notley’s day.

“Pick up those tools, folks,” she told reporters Tuesday afternoon in Edmonton. “We have a pipeline to build.”

While the federal government says it does not intend to be the long-term owner of the project, Morneau said this was a necessary step in order to ensure investor confidence and ensure the project will get built.

“It must be built and it will be built,” Morneau said.

The purchase allows Ottawa to exert federal jurisdiction on the pipeline project. The federal government says the move will push the project forward without worry of political interference from B.C.

The Trans Mountain pipeline project has faced fierce environmental opposition especially from the B.C. government and Premier John Horgan.

“This deal had to happen because of the delays caused by the NDP government in B.C.” said Morneau.

Canada will offer federal loan guarantees to ensure construction continues through the 2018 season as part of the deal with the company, a unit of Houston-based Kinder Morgan Inc .

“So our message today is simple: when we are faced with an exceptional situation that puts jobs at risk, that puts our international reputation on the line, our government is prepared to take action,” Morneau told reporters in Ottawa.

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

“We have risks and delays due to political uncertainty, in order to get the value we know is there, we have to buy it in order to exert federal jurisdiction, and the indemnity is there so that we can exert our federal jurisdiction,” said Morneau.

Alberta’s Role in the deal 

Notley took to Twitter to voice her approval of the move by the federal government.

A visibly excited and happy Notley told reporters Tuesday afternoon she’s glad the project is proceeding.

“This is the most certainty that this project has ever had,” Notley said.

Alberta will invest up to  $2 billion in indemnities to ensure the project will go ahead, she said. Notley said this indemnity means that Alberta will have a stake in the project so if the federal government does decide to sell the project, Alberta can decide if it wants to sell or keep part of it.

Construction is set to commence within the next few weeks, and the finalized deal is pending approval.  The project aims to expand Canada’s ability to export oil to players other than the United States.

B.C will continue fight 

Premier Horgan, in a news conference this afternoon, said the purchase of the pipeline does not change his concerns.

“The good news is that now I know the owner I have his number and I can call about my concerns,” he said.

“I continue to have concerns about the potential adverse consequences of a spill on our marine environment, on our coast and the consequences to our economy,” Horgan said.

B.C. will not change its plan to contest the exclusive federal jurisdiction surrounding the project in court.

“The reference case will go forward unless I hear something different today,” said Horgan, who does not expect protests against the pipeline to end.

Horgan says that there is a high degree of risk for B.C. and its coast, and he has maintained that position from the beginning. Horgan says the the decisions made today effect tax payers and all British Columbians are on the Prime Minister and the Minister of finance.

“Accountability now falls on the federal government,” he said.

There are still many indigenous and environmental groups who will fight this project said Horgan.  Mike Hudema of Greenpeace Canada took to twitter to express his concerns with the pipeline purchase.

The Trudeau government was exploring three possible options for dealing with Kinder Morgan’s deadline:

  • Compensating Kinder Morgan — or any other company — for financial losses caused by British Columbia’s attempts to block the project.
  • The federal government buys, builds and then sells the expansion once the work is complete.
  • The federal government buys the project from Kinder Morgan, then puts it on the market for investors willing to pick up the project and build it themselves.

The Trudeau government choose the third option.

According to Kinder Morgan’s company’s website, the revenues created from the construction, and the  expansion operations would be a combined revenue of $46.7 billion, with $5.7 billion for B.C., $19.4 billion for Alberta and $21.6 billion for the rest of Canada. These numbers are for the first 20 years of the expansion.

 

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