Canada to nationalise Kinder Morgan oil pipeline to save project

30 May 2018


Canada’s federal government will buy Kinder Morgan Canada Ltd’s Trans Mountain pipeline for C$4.5 billion ($3.5 billion) in a bid to save the project from political and environmental opposition, the government said on Tuesday.

Finance minister Bill Morneau said nationalisation of the pipeline was the only way to ensure that a planned expansion could go ahead.
Kinder Morgan Canada has proposed to more than double the pipeline’s capacity amidst stiff opposition and efforts by the province of British Columbia to block construction.
Kinder Morgan has given Ottawa until 31 May to come up with reassurances it could press ahead with plans to boost capacity of the line to a Vancouver-area port.
The federal government backs the proposal to boost the pipeline’s capacity as it would give Canada crude greater access to foreign markets.
However, the pipeline’s nationalisation would open political risks for Liberal Prime Minister Justin Trudeau.
“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.
He said nationalisation of the pipeline provided the federal jurisdiction needed to overcome British Columbia’s opposition, but did not explain how it could force the province to allow construction.
Ottawa’s move drew immediate criticism from both ruling and opposition parties, and raised prospects of Trudeau’s popularity falling in the key British Columbia province in the 2019 federal election.
“This decision represents both a colossal failure of the Trudeau government to enforce the law of the land, and a massive, unnecessary financial burden on Canadian taxpayers,” Canadian Taxpayers Federation Federal Director Aaron Wudrick said in a statement.
For now, the Canadian government will offer federal loan guarantees to ensure construction of the expansion continues through the 2018 season as part of the deal with the company, a unit of Houston-based Kinder Morgan Inc.
“We have agreed to a fair price for our shareholders,” said Steve Kean, chief executive officer of Kinder Morgan Canada and Kinder Morgan Inc.
Kean did not say why he decided to sell rather than absorb the risk of further delays. Kinder Morgan Canada will continue to own some of the assets, including crude storage, rail terminals and a condensate pipeline, he said.
“I think the transaction is a win-win. It’s actually better for Kinder Morgan than it is for Canada. They are getting a very good value,” said Paul Bloom of Bloom Investments Counsel Inc, which owns about 300,000 shares in Kinder Morgan Canada.
“British Columbia isn’t a part of the deal and while a government buy (out) makes it more likely that the project will go through, it still doesn’t guarantee there won’t be more protests,” he said in an interview.

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