Mixed industry reaction to pipeline buyout
Deal to sell Trans Mountain welcomed with misgivings
Canada’s energy industry welcomed news Tuesday that the Trans Mountain expansion pipeline is more likely to be built, but expressed grave misgivings over Ottawa’s decision to buy both the expansion and the existing line for $4.5 billion in order to achieve that goal.
Canada needs projects like the one designed to triple Trans Mountain’s capacity in order to move crude oil and refined products from the Alberta oilsands and Edmonton refining complex to the West Coast, said Chris Bloomer, CEO of the Canadian Energy Pipeline Association.
But he said the association is “deeply concerned” that the government felt it had to purchase the project to get it built. Ottawa’s move comes some 18 months after it had been approved.
“Something had to happen,” Bloomer said of project delays blamed on opposition by British Columbia’s provincial government, municipalities, Indigenous groups and individual protesters.
“It’s a little confusing that the government felt it needed to nationalize this asset and own it in order to assert what we all thought along the way was its jurisdiction.”
Pipelines that cross provincial borders are federally regulated but B.C. continues to persist with a court challenge that it has the right to restrict diluted bitumen shipments within its boundaries.
The situation has created a “confused” marketplace where different pipeline projects are treated unequally and no one knows the rules future proposals are expected to follow, Bloomer said.
The federal move is welcome to get the stalled project going, said Tim McMillan, CEO of the Canadian Association of Petroleum Producers, adding he also is pleased that Ottawa has committed to put the project back in private hands “where it belongs.”
“I think these are extraordinary circumstances and we should work very hard never to find ourselves in this position again,” he said at a news conference in Calgary.
Trans Mountain owner Kinder Morgan Canada Ltd.’s shares lurched higher, then fell, after the federal government announced the purchase deal early Tuesday. The stock rose to $18 in early trading on the Toronto Stock Exchange but fell back to $16.29, down 30 cents or two per cent, by mid afternoon. The company’s stock had been halted prior to the announcement.
The Canadian subsidiary of Houstonbased Kinder Morgan, Inc. estimated the deal is worth about $12 per restricted voting share, after capital gains tax — about three-quarters of its total share price. Kinder Morgan Canada will continue to
hold an integrated network of crude tank storage and rail terminals in Alberta. It will also own a terminal in Vancouver and the Cochin Pipeline system which transports light condensate from the United States to Fort Saskatchewan, just northeast of Edmonton.
It expects its approximately 30 per cent share of after-tax proceeds to be about $1.25 billion. It didn’t specify how it would spend the proceeds of the sale but did say it plans to continue to invest in Canada.
“We’ve agreed to a fair price for our shareholders and found a way forward for this national interest project,” Steve Kean, CEO of both Kinder Morgan Canada and its parent company, said on a morning conference call. He said he would work with the government to try to find a third party to buy the assets by July 22.