Canada to buy Kinder Morgan pipeline assets

Canada to buy Kinder Morgan pipeline assets

Demonstrators protest against the expansion of Texas-based Kinder Morgan's Trans Mountain pipeline projectImage copyright
AFP/Getty Images

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Demonstrators protest against the expansion of Texas-based Kinder Morgan’s Trans Mountain pipeline project

Canada will purchase Kinder Morgan’s Trans Mountain pipeline and related infrastructure in a C$4.5bn ($3.4bn; £2.6bn) federal investment.

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

The Trans Mountain extension would connect Alberta to British Columbia and triple Kinder Morgan’s capacity.

The project faces fierce opposition from the government of British Columbia (BC) and environmentalists.

What is the proposal?

The federal government seeks to buy Texas-based Kinder Morgan’s Trans Mountain pipeline for C$4.5bn in order to develop the controversial Trans Mountain expansion, which would connect oil reserves in BC to Alberta, the home base of Canada’s oil industry. The government would also be financially responsible for developing the project, which could cost billions above and beyond the pipeline’s purchase price.

Mr Morneau said the deal with Kinder Morgan is likely to be closed by August 2018.

„This is an investment in Canada’s future,” he said.

The federal finance minister said the government does not plan to be the long-term owner of the pipeline and expects the project to be transferred to private sector investors „at an appropriate time”.

Why now?

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.

In April, Kinder Morgan suspended non-essential spending on the project. The company said it would decide on the pipeline project’s fate on 31 May.

The company’s announcement ramped up the fight over the contentious project, which has pit the federal government and the landlocked province of Alberta against BC.

The two western provinces have been sparring over the pipeline, a situation that Mr Morneau said cannot be allowed to „fester”.

Image copyright
Reuters

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Federal Finance Minister Bill Morneau says the TransCanada expansion will move forward

Who supports the deal?

Prime Minister Justin Trudeau has maintained that Kinder Morgan’s Trans Mountain pipeline expansion is in the national economic interest.

Alberta’s premier Rachel Notley, who has faced political pressure within her own province on the pipeline’s delays, said the deal is „a major step forward”.

Canada’s Chamber of Commerce, which represents Canadian businesses, said they support moving forward with the pipeline expansion project.

„While these are exceptional circumstances, we are pleased that the Trans Mountain Expansion project will proceed, beginning this construction season,” spokesperson Alita Fabiano said in a statement.

Who is opposed?

The project has been opposed by BC’s provincial government, led by John Horgan. It is deeply unpopular with the province’s environmentalists and many indigenous groups, and Mr Horgan has been fighting to delay its construction over regulatory concerns.

He said the government’s announcement does not assuage these concerns, but that he would rather deal with the federal government than a private corporation.

„The good news though is that I now know the owner and have his phone number and I can call him with my concerns,” he told CBC on Tuesday.

Opponents of the Kinder Morgan project are concerned over the environmental impact of extracting more fossil fuels from Alberta’s oil sands and the possibility of an oil tanker spill in Canada’s Pacific waters.

Many expressed outrage at the government’s decision to buy the pipeline. Social activist and author Naomi Klein called the government’s plans a „desperate scam”.

Green Party of Canada leader Elizabeth May, who is an MP in BC, tweeted that Kinder Morgan was „laughing all the way to the bank” and accused the government of subsidising fossil fuels.

On Monday, she pleaded guilty to criminal contempt in relation to her March arrest during a pipeline protest. A judge ordered her to pay a C$1500 fine.

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

„This move sets a terrible precedent and signals to other prospective investors that large projects such as pipelines cannot be built by private industry in Canada,” said Aaron Wudrick, federal director of the Canadian Taxpayers Federation.

„Worst of all, the cost and risk of a $7bn project that was going to be willingly financed entirely by a private company will now be unnecessarily transferred onto the backs of Canadian taxpayers.”

Last month, about 200 protesters opposing the expansion were arrested for breaking a court injunction barring them from entering within five metres (16ft) of two Kinder Morgan terminals in Burnaby, BC.

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