The federal government is spending $4.5 billion to buy the existing Trans Mountain pipeline and infrastructure related to the controversial expansion project to transport crude from Alberta’s oilsands to the coast of British Columbia, Finance Minister Bill Morneau said Tuesday.
Ottawa has reached an agreement with Kinder Morgan to immediately restart construction on the expansion project that is expected to nearly triple the capacity of the existing pipeline, which has been in operation since 1953, Morneau said in a joint press conference with Natural Resources Minister Jim Carr in Ottawa.
To ensure that construction work on the $7.4 billion project, which was approved by the Trudeau Liberals in November 2016, is restarted immediately, the federal will guarantee financing for the 2018 summer construction season, through a loan guarantee from Export Development Canada, Morneau said.
“The Trans Mountain expansion project is of vital interest to Canada and to Canadians,” Morneau said. “Our government’s position is clear: it must be built and it will be built.”
The project will sustain thousands of well-paying jobs and ensure that Canadian oil products can be sold on world markets at fair prices, Morneau said.
‘A fair price’
The government expects to sell the pipeline back to private investors once the expansion project is complete.
“This $4.5-billion investment represents a fair price for Canadians and for shareholders of the company and will allow the project to proceed under the ownership of a crown corporation,” Morneau said.
The federal government and Alberta government will offer financial security, or indemnification against any ongoing political risk, to the new investors.
He would not say, however, how much the federal government expects to spend on the expansion of the 1,150-kilometre pipeline that currently carries about 300,000 barrels of oil per day from northern Alberta to the oil terminal in Burnaby, a suburb of Vancouver.
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The transaction presents a “sound investment opportunity,” Morneau insisted, adding that the government has done its due diligence on possible construction costs.
The project will not have a fiscal impact on federal treasury and the government expects to recoup all its investments through tolls paid by oil companies to use the pipeline to move their products to world markets, he said.
“Many investors have already expressed interest in the project, including Indigenous groups, Canadian pension funds and others,” Morneau said.
Morneau did not say, however, what would happen if the government can’t find a private buyer or buyers for the completed expansion project.
Morneau’s and Carr’s press conference came following and early morning cabinet meeting in which Morneau briefed the Liberal government about the details of his plan. Morneau said cabinet approved the move, which now is before the company’s shareholders.
This decision comes days before Kinder Morgan’s May 31 deadline to get reassurance that the pipeline can go ahead.
The pipeline expansion project has faced intense opposition from the British Columbia government, environmental activists and many Indigenous groups, who are worried about the potential for oil spills in vital land and marine habitat, as well as increased tanker traffic in the narrow waterway off the coast of Burnaby, B.C.
Reacting to the government announcement, B.C. Premier John Horgan said Tuesday he remains concerned about “catastrophic consequences of a diluted bitumen spill in British Columbia regardless the owner of the pipeline.”
The B.C. government will continue opposing the project through all the legal means at its disposal, Horgan said.
Carr insisted, however, that the plan does not sacrifice the environment for the economic benefits.
“The majority of Canadians support this project,” Carr said. “The majority of Canadians understand that we are in transition to a clean growth century and we will not get there overnight but we will get there.”
Conservative leader Andrew Scheer said the Liberal plan sent a terrible message to foreign investors.
“This is a very sad day for Canada’s energy sector,” said Scheer, who leads Canada’s official opposition. “The message that is being sent to the world that in order to get a big project built in this country the federal government has to nationalize a huge aspect of it.”
Kinder Morgan said the federal proposal represents the best way forward for shareholders and Canadians.
“The outcome we have reached represents the best opportunity to complete Trans Mountain Expansion Project and thereby realize the great national economic benefits promised by that project,” said in a statement chairman and CEO Steve Kean.
“Our Canadian employees and contractors have worked very hard to advance the project to this critical stage, and they will now resume work in executing this important Canadian project.”
Alberta Premier Rachel Notley called the deal “a major step forward for all Canadians.”
This is a major step forward for all Canadians.
We have met the deadline.
This project has more certainty than ever before.
We won’t stop until the job is done!
I’ll have more to say later this morning. #KeepCanadaWorking #ABleg #ABpoli #TMX
— Rachel Notley (@RachelNotley) May 29, 2018
Today, we’ve taken action to create & protect jobs in Alberta and BC, and restart construction on the TMX pipeline expansion, a vital project in the national interest. Watch Ministers @Bill_Morneau and @jimcarr_wpg: https://t.co/cgAn3lH8jq
— Justin Trudeau (@JustinTrudeau) May 29, 2018
Kinder Morgan laughing all the way to the bank. KM gets $4.5billion and walks away. Canada to raise money to build $7.4 billion project.
— Elizabeth May (@ElizabethMay) May 29, 2018