May 30 (UPI) — The federal decision by the Canadian government to take over the Trans Mountain expansion gets the project removed from provisional spats, analysts said.
After spending more than $ 850 million (USD) since it petitioned federal regulators for the project in 2013, pipeline company Kinder Morgan signaled in April that opposition to its plans to triple the design capacity for its Trans Mountain network to the western coast of Canada exposed its shareholders to undue risk.
On Tuesday, the federal government announced plans to purchase Kinder Morgan’s pipeline and terminal assets for $ 3.5 billion, two days before the company was set to shelve the project.
“Our government believes that the commercial agreement we have reached with Kinder Morgan is the best way to protect thousands of good, well-paying jobs while delivering a solid return on investment for Canadians,” Finance Minister Bill Morneau said in a statement. “This is an investment in Canada’s future.”
The government said the financial move ensures Trans Mountain construction can continue through the 2018 work season. The project, like the Keystone XL oil pipeline from Alberta through the United States, has been a source of contention for environmental advocates and leaders on both sides of the border.
When announcing it may pull the plug, Kinder Morgan added the opposition to Trans Mountain has led to increased provincial tensions.
“The move to acquire ownership helps to reduce the uncertainty over the future timing of pipelines and the future value of western Canadian crude oil which has weighed on investment decisions in western Canada,” Kevin Birn, the director for regional energy projects at consultant group IHS Markit, told UPI.
In January, British Columbia Premier John Horgan considered new regulations on bitumen, a heavier type of oil found in Canada. Included among the proposals was a restriction on transportation until the government determined what would happen if there was a spill of the thicker type of oil.
Saskatchewan Premier Scott Moe said Horgan’s administration has shown willingness only to stand in the way. Alberta later proposed legislation that would block exports of oil, natural gas or fuels to its neighbors in British Columbia.
A project delay or cancellation would’ve had U.S. complications as well because some of the 300 million barrels of oil per day traveling through the existing Trans Mountain network feeds refineries in Washington state.
Sandy Fielden, the director for oil and products research at Morningstar, told UPI the federal decision settles the provincial matter, but might have unintended consequences for Prime Minister Justin Trudeau‘s administration.
“This transaction is a workaround to solve a political problem between the Federal and provincial governments in Canada,” he said. “It sets a precedent for any other midstream company that runs into opposition to their pipeline to ‘cry wolf’ and get bailed out by the Canadian government.”
Alberta’s government estimated that pipeline projects like Trans Mountain could stimulate economic growth by as much as 2 percent by 2023. Horgan, for his part, suggested the fight wasn’t over.
“Our government is determined to defend British Columbia’s interests within the rule of law and in the courts,” he said.