On Sunday, Kinder Morgan Canada announced it will be suspend most of the work on the company’s $7.4 billion expansion of the Trans Mountain pipeline. Trans Mountain photo.
Trans Mountain pipeline expansion would have tripled capacity
After Kinder Morgan Canada announced it is suspending most work on the $7.4 billion expansion of the company’s Trans Mountain pipeline on Sunday, shares in the company dropped by as much as 19 per cent in trading on Monday.
Kinder Morgan Canada chief executive Steve Kean said that unless legal challenges against the project were resolved by May 31, the company will completely scrap its plans to complete the project which would nearly triple capacity on the pipeline.
Trans Mountain carries crude from the Alberta oil sands to tide water in Burnaby, British Columbia.
The expansion of the pipeline was approved by the Trudeau government, but has faced multiple challenges from environmentalists, local and provincial governments and some First Nations.
On Monday, Prime Minister Justin Trudeau reiterated that the project “will be built”.
But Kean said “actions initiated by British Columbia may not be the last,” according to Reuters.
Despite the drop in share prices, Kean said the company’s dividend won’t be hit by the decision and that Kinder Morgan was “by no way some kind of wounded duck”.
Company stock rebounded slightly on Monday, and by 12:23 p.m., EDT, was trading down just over 10 per cent.
Reuters reports analysts are now concerned that the decision to stop work on Trans Mountain will have an impact on other pipeline projects which face similar opposition.
“I am certainly not optimistic about the future of it because of … historically what’s going on here with pipeline development in the last decade,” Kelly Ogle, President of Canadian Global Affairs Institute told Reuters.
The lack of pipelines in Canada has impacted the oil industry and has caused Canadian crude prices to be significantly lower than others due to transportation bottlenecks.
“Rail lacks capacity.. the KXL (Keystone pipeline) is several years away at least, Energy East is not happening.. this is a sad state for oil transport and it’s a giant resource that we are leaving behind,” said Ogle.