Canadian government buys Trans Mountain project for $4.5 billion

3:17pm


Image Credit CFJC Today

In an extraordinary move aimed at boosting Canada's tar sands industry in the wake of sharp environmental opposition, the Canadian government said Tuesday that it will spend $3.5 billion to buy the Trans Mountain pipeline and triple its capacity.

The price tag is less than the company's estimated $7.4-billion projected cost but taxpayers will be on the hook for $4.5 billion according to details released by Finance Minister Bill Morneau and Natural Resources Minister Jim Carr at a news conference Tuesday.

The move to buy the pipeline from an affiliate of USA -based pipeline company Kinder Morgan follows the company's threat to pull the plug on the expansion because of delays caused by opponents of the project.

"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", Morneau told reporters. "It's still the right thing for the country", he said.

The plan echoes how the federal government financed and managed shares in General Motors and Chrysler in 2009 during the financial crisis.

Morneau couldn't say what additional costs, if any, would be incurred by Canadians in building the pipeline. "They pay good economic rents and they're long-life assets", he said.

This despite Obama's hypocritical veto of the Keystone XL pipeline to move Alberta's oil to the U.S. Gulf Coast.

The deal for the bulk of the Canadian subsidiary of Texas-based Kinder Morgan Sale proceeds are about $12 per share after capital gains taxes, he said.

BC Liberal party leader Andrew Wilkinson didn't mince words in a statement blaming the purchase on Premier John Horgan's continued opposition to the project.

Alberta will contribute up to C$2 billion toward unforeseen costs, payable once the project is complete, Premier Rachel Notley said.

The twinning of the 1,150-kilometre-long Trans Mountain pipeline between Strathcona County, near Edmonton, and Burnaby, B.C., will almost triple its capacity to an estimated 890,000 barrels a day and increase traffic off B.C.'s coast from approximately five tankers to 34 tankers a month.

The PM is sticking with his message of reassurance, even though there is no deal with Kinder Morgan yet ahead of Thursday's deadline.

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".

Under the agreement between the federal government and Kinder Morgan, the company would resume construction on the project, which was put on hold in April.

Canada needs projects like the expansion created to triple Trans Mountain's capacity to move crude oil and refined products from the Alberta oilsands and Edmonton refining complex to the West Coast, said Chris Bloomer, CEO of the Canadian Energy Pipeline Association.

"We're going to see more of this until we get to a point where we have stable government that recognizes jurisdiction and also that recognizes that projects that have passed through the stages that they need to pass through the stages of approval should be built", he said.

The environmentalists and anti-pipeline First Nations (not all of which oppose the project) will blame the greedy, foreign oil barons and their political puppets in Canada.

The issue has divided two Canadian provinces, pitting Alberta's government against leaders in British Columbia.

Notley added: "This is the most certainty this project has ever had".

"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".

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