Canada tells Kinder Morgan it will purchase oil pipeline
Canada has agreed to purchase the Trans Mountain oil pipeline and its controversial expansion from the Canadian subsidiary of Kinder Morgan as the Trudeau government moves to ensure the project gets built amid fierce opposition from environmentalists and British Columbia’s provincial government.
The project was designed to move crude from the tar sands of Alberta to ports on the Pacific Coast of British Columbia, but it became embroiled in a dispute between the provinces
and the government of Prime Minister Justin Trudeau, who approved the pipeline at the end of 2016.
Kinder Morgan shut down construction on the pipeline expansion in April in the hope that provincial and federal officials would resolve their differences.
Help to find buyer
Kinder Morgan, headquartered in Houston, said Tuesday that it would sell the pipeline for $3.5 billion and help the Canadian government find another buyer to take over the project. The sale is scheduled to close in the third or fourth quarter.
The purchase agreement marks a stunning development for Trudeau’s government — effectively nationalizing the country’s highest-profile pipeline project until an operator can be found.
The project has been beset by legal uncertainty and rising protests from environmental groups and the province of British Columbia.
That uncertainty made it “too risky” for Kinder Morgan, but the federal government will get it built and find a buyer, Trudeau said Tuesday.
“The project became too risky for a commercial entity to go forward with it; that’s what Kinder Morgan told us,” Trudeau said during an interview in Toronto ahead of a Group of Seven summit that Canada will host next week.
“We are going to ensure that it gets built so that we can get our resources to new markets.”
Canada earlier offered to indemnify the expansion project but is now set to buy it, along with the existing pipeline that’s been in operation since 1953. The Canadian government plans to sell the project — the existing line and its expansion — as soon as is reasonable once it is guaranteed that it will be built, according to a person familiar with the matter.
Best chance to finish project
Kinder Morgan CEO Steve Kean said the sale would benefit Canadian citizens, oil producers and Kinder Morgan shareholders.
Kean said in a statement that the outcome of the talks represents the best chance to complete the Trans Mountain Exof pansion Project “and thereby realize the great national economic benefits promised by that project.”
Kinder Morgan stock rose about 1 percent to close at $16.04 a share on the New York Stock Exchange.
Kinder Morgan officials noted that the company remains a big player in the Canadian energy industry.
The company’s holdings include crude tank storage and rail terminals in Alberta; an export/ import terminal in Vancouver; and a pipeline carrying light condensate from the United States to Alberta.
Kinder Morgan and the Trudeau government had been in talks since the company set a May 31 deadline for the government to give certainty in the face opposition from British Columbia, which is concerned about increased tanker traffic and possible oil spills along the Pacific coast.
Trudeau pledged again on Monday that the pipeline would be built.
The Trans Mountain expansion would almost triple capacity to 890,000 barrels of oil on a line running from Alberta to a terminal near Vancouver.
The 600-mile expansion is seen by the oil industry as a crucial link to Asian markets, allowing producers to diversify away from the U.S., which takes the vast majority of Canadian oil exports.