Canada’s Finance Minister Bill Morneau blamed the government of British Columbia for the delay in the construction of the Kinder Morgan Trans Mountain pipeline expansion project. Reuters photo by Chris Wattie.
Kinder Morgan stopped non-essential work on Trans Mountain pipeline in April
Canadian Finance Minister Bill Morneau said on Wednesday that Canada is prepared to cover any losses Kinder Morgan Canada may suffer if construction of the Trans Mountain pipeline expansion project is delayed by political opposition.
On April 8, 2018, Kinder Morgan announced it will stop all non-essential work on its pipeline project that would more than double the capacity of its existing pipeline. The pipeline is the only line that carries Alberta crude to tide water in Burnaby BC.
Morneau put the blame squarely on the shoulders of BC Premier John Horgan for the delay in the construction.
“That specific risk (Horgan’s opposition) is a risk that for a private sector player is impossible to deal with. They can’t negotiate between governments,” said Morneau.
The government of British Columbia opposes the project on environmental grounds, however, the pipeline project was approved by the Canadian government in late 2016.
Kinder Morgan gave Ottawa a deadline of May 31 to provide assurances construction of the pipeline will be able to go ahead.
On Wednesday, Morneau told reporters “We are willing to indemnify the Trans Mountain expansion against unnecessary delays that are politically motivated.”
According to Prime Minister Justin Trudeau, Canadian oil producers lose $15 billion a year due to pipeline bottlenecks which hamper producers efforts to get their crude to export markets. These bottlenecks have also resulted in a widening discount between the value of Canadian crude versus American WTI crude.
Morneau added that should Kinder Morgan abandon its Trans Mountain expansion, the indemnification would stay in place should another company take over construction. It is unclear if Kinder Morgan would allow one of its rivals to build the pipeline.
“We acknowledge the comments by Minister Morneau this morning and appreciate his acknowledgment of the uncertainty created by the BC Government’s stated intentions to ‘do whatever it takes to stop the Trans Mountain Expansion Project’ and the ‘exceptional political risk’ this federally and provincially-approved project continues to face,” the company said in a statement.
“We appreciate his recognition that a private company ‘cannot resolve differences between governments.’”
According to Reuters, Morneau did not say what aid or how much the federal government is prepared to shell out. Sources say Ottawa is looking at possibly providing loan guarantees, a bailout or investing in the $7.4 billion project.
Morneau said Ottawa will not cover Kinder Morgan losses suffered due to environmental and aboriginal opposition, who also vow to block the construction of the pipeline.
“We see that as something we can actually indemnify. Other business risks are other business risks – anybody going into the business of building pipelines recognizes other risks.”
Jason Kenney, United Conservative Party leader, pointed out in a Tweet that the Trudeau Government has still not followed through with its promise to clarify federal authority over inter-provincial pipelines: “One month ago, Justin Trudeau said they were pursuing legislation to assert fed authority over pipeline issue. Yet the PM has done nothing since, as the clock ticks down. No wonder investors are sceptical.”
Greenpeace Canada contends the project will not go ahead, saying “signing a taxpayer-backed blank check with Kinder Morgan’s name on it is the definition of throwing good money after bad”.
Kinder Morgan says that it remains “steadfast” in its previous position: “clarity on the path forward, particularly with respect to the ability to construct through British Columbia, and ensuring adequate protection of our KML shareholders.”