The federal government has reached an agreement with Kinder Morgan to purchase the existing Trans Mountain pipeline and the project’s infrastructure.
The $4.5 billion dollar deal was approved by the cabinet on Tuesday – now needing to be passed by Kinder Morgans shareholders.
The deal is expected to close in August.
Until that time, the government will finance the company’s summer construction season through a loan guarantee from Export Development Canada, so the project can once again restart.
Finance Minister Bill Morneau says the pipeline will proceed under the ownership of a crown corporation, but they don’t plan on being the long-term owners. He adds the idea is to eventually transfer the project back to a private company.
Meanwhile, the Alberta Government is calling the deal a major step forward.
After pushing forward legislation to restrict oil and gas exports to British Columbia, a wine ban and multiple court battles, Premier Rachel Notley says it seems that the work is finally paying off.
“When Kinder Morgan issued its deadline our government responded immediately – we committed that certainty would be assured and we committed that we would do whatever it takes.”
Notley also believes this is the most certainty the project has ever had.
The province is also set to financially backstop the project, a maximum of $2 billion. If the funds are needed, they would look to receive equity in the completed project.
Concern Over The Deal
There is some concern arising over the route the federal government took.
President and CEO of Auspice Capital Tim Pickering tells Mix News he thinks this sends the wrong message to the world and sets a precedent for future projects.
“What do you think Trans Canada is feeling today? Here’s a Canadian organization, TransCanada that’s been vital to this country and very well respected, yet Energy East was walked away from, there was no effort to find a solution there,” said Pickering. “I think it sends the wrong message to Canadians, that it’s ok to break the law and we as taxpayers are going to turn a blind eye and save the day and let B.C. off the hook, so I think it’s a double-edged sword.”
In past history, Pickering says Canada’s government has a had issues building such infrastructure on time and economically.
“Canadian taxpayers should be concerned about that.”
As for a new company taking over, there is a concern the wrong message may be sent to the global market if a Canadian company is chosen after everything Kinder Morgan went through.
Pickering says foreign oil companies may feel that business in Canada is now an impossible task.
“They have too many risks, they want out, Kinder Morgan wants out.”
Meanwhile, the Canadian Energy Pipeline Association says they’re happy the project is moving forward, but are also concerned about the implications of the government’s financial intervention for future projects.
In a statement, CEPA’s President and CEO Chris Bloomer says this seems like a slap on the wrist for British Columbia.
“Projects require clarity and predictability, and once approved should not be subject to costly delay tactics that thwart Canada’s economic and social prosperity.”
Overall, CEPA notes they’re happy to see the project start up again, creating thousands of jobs.
– With files from Elizabeth Priest