Pipe­line pledge won’t cost tax­pay­ers a cent: Morneau


Fi­nance Min­is­ter hints at al­ter­na­tives to Kinder Mor­gan, CPPIB says it could in­vest

Fed­eral Fi­nance Min­is­ter Bill Morneau says the guar­an­tee against fi­nan­cial loss that the Trudeau gov­ern­ment has pledged to the Trans Mountain pipe­line ex­pan­sion pro­hind ject would come at no cost to Cana­dian tax­pay­ers − and Ottawa might even make money off of it.

Ear­lier this week, the Lib­eral gov­ern­ment vowed to in­dem­nify the project against costs in­curred if the B.C. gov­ern­ment de­lays or ob­structs it. The move was an at­tempt to spur Kinder Mor­gan, the com­pany be- the ex­pan­sion, to re­sume con­struc­tion or sell it to an­other en­tity that would.

If Kinder Mor­gan does walk away, Mr. Morneau says “plenty of in­vestors would be in­ter­ested” in the project, and high­lighted in a Reuters in­ter­view that Canada’s pen­sion funds could be po­ten­tial play­ers.

The Canada Pen­sion Plan In­vest­ment Board (CPPIB), which man­ages the largest pen­sion fund in the coun­try, said it might con­sider be­com­ing in­volved.

“If it’s an op­por­tu­nity that has de­cent re­turns, then we’ll look at it,” CPPIB CEO Mark Machin said later to the news agency, adding that the fed­eral gov­ern­ment’s in­dem­nity pledge against po­lit­i­cal risk was help­ful.

In April, af­ter mount­ing op­po­si­tion from the B.C. gov­ern­ment, en­vi­ron­men­tal groups and pro­test­ers, Kinder Mor­gan halted all nonessen­tial spend­ing on the $7.4-bil­lion plan to twin an ex­ist­ing pipe­line be­tween Ed­mon­ton and Burn­aby, B.C. It gave Ottawa until May 31 to meet its con­di­tions to move ahead on the project.

Mr. Morneau is now seek­ing to play down con­cerns, am­pli­fied by en­vi­ron­men­tal­ist crit­ics and the Green Party, that the pledge he an­nounced this week amounts to a “blank cheque” for an Amer­i­can pipe­line com­pany.

On Thurs­day in Toronto, the Fi­nance Min­is­ter, who has yet to fully ex­plain how an in­dem­nity would work, said Cana­di­ans should think of it like in­sur­ance. And Ottawa, he said, would in re­turn earn a pre­mium from Trans Mountain project back­ers for ex­tend­ing this in­sur­ance.

“This is in­sur­ance against some­thing that [a] pri­vate-sec­tor ac­tor can’t deal with,” Mr. Morneau said of B.C.’s op­po­si­tion to the project. Premier John Horgan has proposed mea­sures that would threaten the Trans Mountain ex­pan­sion.

This in­dem­nity wouldn’t be of­fered free of charge, Mr. Morneau said. “Like any in­sur­ance, it will have a pre­mium at­tached to it.”

Re­porters asked Mr. Morneau on Thurs­day to reveal how much the in­dem­ni­fi­ca­tion might amount to − or what the re­sult­ing fi­nan­cial risk could be for the fed­eral gov­ern­ment.

The Fi­nance Min­is­ter re­sponded by say­ing he be­lieves the ap­proach Ottawa is tak­ing would pre­clude any big bailout by tax­pay­ers.

“By talk­ing about it as a com­mer­cial project, and by talk­ing about the fact we could find a way to in­dem­nify and charge for that in­dem­ni­fi­ca­tion, we don’t ex­pect that there would be any costs to Canada,” Mr. Morneau said.

“We ac­tu­ally think this is a project that can be done on com­mer­cial terms and we’re try­ing to find a way that en­sures that hap­pens.”

His as­sess­ment that this guar­an­tee won’t bur­den tax­pay­ers is premised on the ex­pec­ta­tion that there is a strong enough busi­ness case for the Trans Mountain ex­pan­sion that some other en­tity would build it even if Kinder Mor­gan walks away.

Prime Min­is­ter Justin Trudeau, speak­ing to re­porters in New York on Thurs­day, said he’s con­fi­dent the eco­nom­ics of the Trans Mountain ex­pan­sion are solid be­cause it will help Cana­di­ans fetch higher prices for oil ex­ports “The dis­count Cana­dian oil pro­duc­ers [must ac­cept] be­cause we only have a sin­gle mar­ket to which we sell 99 per cent of our oil ex­ports – the United States − means we’re los­ing about $15-bil­lion a year. And get­ting ac­cess to dif­fer­ent mar­kets for our nat­u­ral re­sources ac­tu­ally makes good eco­nomic sense.“

Con­ser­va­tive nat­u­ral re­sources critic Shan­non Stubbs said Mr. Morneau’s as­ser­tion that this guar­an­tee wouldn’t cost Cana­di­ans any­thing “makes no sense” and called on the Lib­eral gov­ern­ment to lay out specif­i­cally what this in­dem­nity would en­tail.

Ne­go­ti­a­tions be­tween Ottawa and Kinder Mor­gan are un­re­solved. Last week, Mr. Morneau flew to Houston for a face-to-face meet­ing with Kinder Mor­gan Inc. CEO Steve Kean.

Ali Houn­sell, a spokes­woman for Kinder Mor­gan Canada Ltd., de­clined to an­swer whether the com­pany was will­ing to pay Ottawa a pre­mium for the promised in­dem­nity. She said the com­pany will not be ne­go­ti­at­ing in pub­lic. “There­fore, [it] will have noth­ing to say on Mr. Morneau’s com­ments.”

Sep­a­rately, the fight be­tween the Al­berta and B.C. gov­ern­ments over the Trans Mountain ex­pan­sion is ex­pected to end up in Al­berta’s courts.

A bill al­low­ing Al­berta to choke off the sup­ply of fos­sil fu­els to Bri­tish Columbia will be chal­lenged in the courts by next week, B.C. At­tor­ney-Gen­eral David Eby said Thurs­day.

Mr. Eby con­tends that the leg­is­la­tion passed Wed­nes­day evening in Al­berta’s leg­is­la­ture, de­signed to in­flict eco­nomic pain on Bri­tish Columbia over the Kinder Mor­gan pipe­line dis­pute, is un­con­sti­tu­tional.

“We are dis­ap­pointed that the Gov­ern­ment of Al­berta has re­jected our pro­posal to re­fer their leg­is­la­tion to the courts,” he said. “We will now move for­ward and chal­lenge the con­sti­tu­tional va­lid­ity of Bill 12 in the Court of Queen’s Bench of Al­berta by next week.”

B.C. is al­ready fight­ing the ex­pan­sion of the Trans Mountain oil pipe­line in the fed­eral Court of Ap­peal and in B.C. Supreme Court. As well, it has re­ferred its own proposed leg­is­la­tion to cap oil ship­ments across the prov­ince to the B.C. Court of Ap­peal.

Ear­lier this week, B.C. proposed that Al­berta re­fer Bill 12, Pre­serv­ing Canada’s Eco­nomic Pros­per­ity Act, to the courts to de­ter­mine if it re­spects ju­ris­dic­tional pow­ers un­der the Cana­dian Con­sti­tu­tion.

By talk­ing about it as a com­mer­cial project, and by talk­ing about the fact we could find a way to in­dem­nify and charge for that in­dem­ni­fi­ca­tion, we don’t ex­pect that there would be any costs to Canada. BILL MORNEAU MIN­IS­TER OF FI­NANCE

Bill Morneau

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