Trudeau government buys Trans Mountain pipeline for $4.5 billion

The massive project to get Canadian oil to the west coast has faced stiff opposition from First Nations, the BC government, and environmentalists.
May 29, 2018, 1:31pm
Prime Minister  Justin  Trudeau speaks at the Civil Society 7 meeting in Ottawa on Monday, May 28, 2018. THE CANADIAN PRESS/ Justin Tang

The federal government has reached an agreement to buy the controversial Trans Mountain pipeline project from Kinder Morgan for $4.5 billion, ending months of uncertainty as to whether the Alberta-B.C. pipeline expansion will proceed.

“To guarantee the summer construction season of the Trans Mountain pipeline will proceed as planned, the federal government has reached an agreement with Kinder Morgan to purchase the pipeline and all infrastructure related to the Trans Mountain project,” federal Finance Minister Bill Morneau told reporters at a press conference in Ottawa this morning.

The decision was approved by cabinet at an early morning meeting Tuesday — it is now subject to approval from Kinder Morgan shareholders.

The project was suspended by Kinder Morgan last month citing the need to protect its shareholders in the face of mounting opposition from the B.C. government, environmental and First Nations protesters. The company had invested $1.1 billion in the $7.4 billion project, and was looking for some kind of assurance from the federal government that delays to construction due to protests and legal challenges would stop costing them money.

The Trudeau government purchase of the project doesn’t necessarily guarantee that the pipeline expansion will be completed. A First Nations legal challenge that is opposed to the construction of the pipeline on Indigenous territory is still before the Federal Court of Appeal — that decision could stall the project entirely.

The government has said that its purchase of the Trans Mountain project will be temporary — just to sort out political uncertainty — upon which the project will be sold to a third party buyer.

“The project should be in the private sector. But in order to get it done, we need to deal with political uncertainty and the only way that can be done is exerting our jurisdiction by purchasing the project,” Morneau said.

Any third party builder who takes on the expansion project will receive an indemnity from the federal government to ensure that pipeline will be completed. Earlier this month, the government offered to compensate Kinder Morgan if it would agree to complete the project, but the Houston-based company rejected that offer.

“We will be paid $4.5 billion for all Trans Mountain assets even if a third party buyer is not found,” Kinder Morgan Canada CEO Steve Kean told investors on a conference call this morning.

The government’s $4.5 billion price tag includes the purchase of the existing Trans Mountain pipeline that has been in operation since 1953, and all “integral assets” related to the twinning line that will run alongside the older pipeline and increase the amount of crude oil that can flow out of the Alberta oil sands.

“The federal government’s decision is a great step forward,” said Alberta Premier Rachel Notley in a statement.

Reaction from opponents was swift Tuesday morning.

And observers pointed out there are still hurdles to cross.

The proposed project entails twinning an existing pipeline from Alberta’s oilsands to the British Columbia coast, but also traversing new ground in certain areas including Burnaby. It will increase the flow of diluted bitumen from 300,000 barrels to 890,000 barrels per day and increase tanker traffic in the Burrard Inlet sevenfold.