Kinder Morgan Canada Limited said that the Canadian government has agreed to spend $4.5 billion (Canadian) to buy the Trans Mountain pipeline (TMEP) and triple its capacity.
The move is aimed at boosting Canada’s tar sands industry in the wake of sharp environmental opposition.
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. The Government of Canada has also agreed to work with Kinder Morgan to find a third party buyer for the pipeline system through July 22, 2018.
The move to purchase the pipeline from Houston-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 led by British Columbia, which is trying to stop the pipeline development in the courts on environmental grounds.
British Coloumbia Premier John Horgan said he will continue to fight the expansion with a court reference ccase against Kinder Morgan, despite the Canadian government's move. Putting a positive spin on the announcement, Horgan said that should there be an oil spill on the pipeline, it will make it easier for him to pick up the phone and call the Prime Minister if he has concerns than it would have been to discuss the project with Kinder Morgan’s ownership.
“The federal government now is completely accountable and I think at the end of the day that’s probably a good thing,” said Horgan.
The purchase was announced two days before the Thursday deadline set by Kinder Morgan. Once the sale is complete, Canada will resume the pipeline's construction which was put on hold in April, with an eye towards selling the pipeline sometime in the future. Finance Minister Bill Morneau said Canada does not intend to be the pipeline's long-term owner and is discussing option with interest investors.
Export Development Canada will finance the purchase, which includes the pipeline, pumping stations and rights of way along the route between Edmonton and Vancouver.
The Trans Mountain project is designed to increase capacity of the 65-year-old pipeline from Edmonton, Alberta, to Burnaby, B.C., from 300,000 to 890,000 barrels per day.
The parties expect to close the transaction late in the third quarter or early in the fourth quarter of 2018, subject to KML shareholder and applicable regulatory approvals.
image: Kinder Morgan