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Canada Purchases Trans Mountain Pipeline from Kinder Morgan

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Construction on the Trans Mountain expansion (file image courtesy Kinder Morgan / Transmountain.com)

By MarEx 2018-05-29 18:59:00

Canada's government has reached an agreement to purchase Kinder Morgan's Trans Mountain oil pipeline, paving the way for an expansion that would triple its capacity. The project has been held up by local resistance, and Kinder Morgan announced in April that it would halt spending on the project due to opposition from British Columbia's provincial government.

Canada will spend $3.4 billion to acquire the existing pipeline and the rights to the expansion project, subject to Kinder Morgan shareholders' approval. "It must be built and it will be built," said Finance Minister Bill Morneau in a televised statement. "Make no mistake: this is an investment in Canada's future."

Canadian Finance Minister Bill Morneau (right) with Natural Resources Minister Jim Carr, May 29 (Bill Moreau / Twitter)

Morneau criticized the New Democratic Party (NDP) government in British Columbia for creating "political uncertainty" and making it difficult for Kinder Morgan to proceed with the project. Minister of Natural Resources Jim Carr said that the political polarization over the pipeline's construction was atypical for Canada, and he suggested that the federal government's intervention would restore stability and certainty. Polls suggest that most Canadians support the construction of the pipeline, including more than half of the residents of B.C. 

The rationale for the pipeline's construction is to secure access to an overseas export market for Canada's oil producers. At present, the oil sands fields in Alberta have only limited connections to the sea, leaving the United States market as only available option for large-scale exports. The overwhelming majority of Canada's oil exports are sold to American refiners at a discount to international benchmarks, reducing fuel prices for American consumers and income for Canadian producers. "For too long we have relied on one trading partner for our oil and gas exports," Carr said.

The opposition to the project centers on the increased tanker traffic through the port of Vancouver and the Salish Sea that would result from its construction. In a statement, the BC NDP said that "today's announcement on Kinder Morgan's pipeline and tanker project doesn't change the risk of a [sevenfold] increase in tanker traffic — or the risk to our environment and economy from a diluted bitumen spill." 

After the government's announcement, the NDP indicated that its position remains the same. "I said to the Prime Minister that ownership of the project doesn’t change my concerns," said B.C. Premier John Horgan. "The good news though is that I now know the owner and have his phone number and I can call him with my concerns."