Morneau to give speech in Calgary ahead of Kinder Morgan deadline

Morneau to give speech in Calgary ahead of Kinder Morgan deadline

Canada is likely to buy Kinder Morgan Canada Ltd.'s Trans Mountain oil pipeline and its controversial expansion project in a bid to ensure it gets built amid fierce opposition, according to a person familiar with the talks.

Finance Minister Bill Morneau said that buying the existing pipeline and its planned expansion project, which will carry crude oil from landlocked Alberta to a port in the Vancouver area, is the only way to ensure the halted project gets built.

Morneau said the government's hand was forced by B.C. Premier John Horgan, who has gone to court for judicial approval to regulate what can flow through the pipeline - a measure of opposition that made Kinder Morgan Canada, the project's original owner, too nervous to continue. "We have met the deadline", she tweeted.

She added Alberta is willing to invest up to $2 billion in indemnity that will be converted to equity if necessary.

"If you think about the dozens of pipelines that exist for crude oil, natural gas liquids, natural gas itself, petroleum products, all throughout the USA and Canada - and we track this stuff - I'm not aware of a single one that's owned by any government entity ... not on this scale".

The issue has divided two Canadian provinces, pitting Alberta's government against leaders in British Columbia.

Prime Minister Justin Trudeau has put a lot of political capital on the project, pledging over and over again that the pipeline expansion is in national interest and will be built one way or another.

Provinces have jurisdiction over the environment, but the Constitution gives Canada the authority over interprovincial transportation, including pipelines.

"And, it will reassure investors that Canada is a country that respects the rule of law and gets big, important things done", he added. Horgan said the fact the pipeline is about to be owned by a federal Crown corporation doesn't affect the case.

However, the minister also said if Kinder Morgan were to walk away from the pipeline, there are other investors willing to step in.

The politician leading the charge against the expansion of the Trans Mountain pipeline says the fight will continue in court, regardless of who owns the project.

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Notley said there's a difference of opinion among Indigenous communities, and many support the pipeline.

Canada needs projects like the expansion created to triple Trans Mountain's capacity 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.

Kinder Morgan Canada had ceased all non-essential spending on the Trans Mountain expansion in April, vowing to cancel it by a deadline of this Thursday unless it received assurances it can proceed without delays and without undue risk to shareholders.

"We believe this is the best way to protect thousands of well-paying jobs and the safest and most effective way to get our resources to world markets", Morneau told a news conference in Ottawa after the meeting.

Export Development Canada will finance the purchase, which includes the pipeline, pumping stations and rights of way along the route between Edmonton and Vancouver, as well as the marine terminal in Burnaby, B.C., where oil is loaded onto tankers for export.

Tim McMillan, head of the Canadian Association of Petroleum Producers (CAPP), said the situation should never have come to this.

"We need to deal with the political uncertainty", he said.

He said the failure of the proposed Northern Gateway pipeline to the West Coast and Energy East pipeline project to the East Coast means Canada remains highly dependent on the US market for exports.

"I'd say the deal is a slight positive as it helps reduce balance sheet leverage and removes this significant project execution overhang", St. Louis-based Edward Jones analyst Jen Rowland said in an email.

Meanwhile, Notley said it's unlikely her government will enact landmark legislation passed earlier this month to turn off the taps to B.C.

In a research note, he said that Calgary-based pipeline giants Enbridge Inc. and TransCanada Corp. would be likely buyers if they "were able to secure sufficient security from the government".

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