The Government of Canada has reached an agreement with Kinder Morgan to buy the Trans Mountain Expansion Project and related pipeline and terminal assets for US$3.5 billion (C$4.5 billion), as the federal government stepped in to save the project after British Columbia’s fierce opposition to the project was threatening to derail it.
Kinder Morgan last month gave Ottawa an ultimatum: Chairman Steve Kean said the company would suspend all work on the expansion project entirely if the legal issues surrounding it cannot be resolved by May 31, adding that it would not continue risking shareholder funds on the project unless the clouds over it clear.
Both the federal government and the provincial government of Alberta, which would be the main beneficiary of the expansion, have made it abundantly clear they are behind the project, and yet neither has managed to budge B.C.’s government, even with the threat—by Alberta—to turn the current oil tap off.
Prime Minister Trudeau has said the Trans Mountain expansion is vitally important for Canada, a project of strategic interest and a major job creator. Currently, he said yesterday, Canada is losing US$11.56 billion (C$15 billion) annually because of the pipeline constraint.
The transaction on which the federal government and Kinder Morgan agreed upon on Tuesday is expected to close in August 2018.
“It is not, however, the intention of the Government of Canada to be a long-term owner of this project. At the appropriate time, Canada will work with investors to transfer the project and related assets to a new owner or owners, in a way that ensures the project’s construction and operation will proceed in a manner that protects the public interest,” the government said on Tuesday.
Kinder Morgan Canada and the Canadian government have agreed to work to seek a third party buyer for the Trans Mountain Pipeline system and the expansion project (TMEP) through July 22, 2018, Kinder Morgan Canada said.
“As part of the agreement, the Government of Canada has agreed to fund the resumption of TMEP planning and construction work by guaranteeing TMEP’s expenditures under a separate Federal Government recourse credit facility until the transaction closes,” Kinder Morgan said.
“Today’s agreement will help advance Canada as an energy leader, as a place where good projects get built. This is yet another step in building an energy future with Canadians where the environment and economy go hand-in-hand,” Jim Carr, Canada’s Minister of Natural Resources, said.
|Tsvetana Paraskova for OilPrice.com|