Faced with a May 31 deadline set by Kinder Morgan, the Canadian government is under pressure to assure the company that it will not face further legal challenges to the Trans Mountain pipeline expansion, or any financial risks to its shareholders.
In case the government is inclined to drag its feet, Kinder Morgan’s Chief Executive Officer Steve Kean told a mid-April conference call that events earlier in the month have reinforced his concerns that the C$7.4 billion project may be “untenable for a private party to undertake.”
He said differences among the Canadian, Alberta and British Columbia governments “are outside of our ability to resolve,” even though the company issued a statement saying it was “actively engaged” with the federal and Alberta governments on a financing arrangement to ensure the pipeline gets built.
Other parties?
At the same time senior federal officials told the Canadian Broadcasting Corp. the government is willing to offer political and financial support to other companies if Kinder Morgan abandons the project.
One official expressed confidence that either a single major company, or a consortium, might be interested in acquiring and developing the Trans Mountain plan to ship 590,000 barrels per day of diluted bitumen to the shipping terminal at Burnaby in the Port of Vancouver.
“There’s no advantage to be gained in saying you don’t want an asset after you’ve sunk a billion dollars into it,” the official said, effectively echoing Prime Minister Justin Trudeau’s insistence that “this pipeline will get built.”
But Greg Stringham, an energy industry analyst and former vice-president of the Canadian Association of Petroleum Producers, told the CBC he doubted that any company would be ready to pick up where Kinder Morgan left off.
He said that even involving a consortium would only diversify the risk without removing the “political problem.”
Martin Pelletier, chief investment officer with TriVest Wealth Management, agreed with Stringham’s view that the industry mostly wants “concrete action by the federal government to ensure there are no further delays.”
Early legislation promised
Meanwhile, the Trudeau government has promised early legislation to reassert its authority over pipelines that cross interprovincial borders and are deemed to be in the “national interest.”
But that could result in a backlash from Quebec, which used political and regulatory roadblocks to force TransCanada to drop its plans for Energy East, a proposal to ship 1.1 million barrels per day of bitumen from Alberta for refining in Ontario, Quebec and New Brunswick, as well as overseas shipment.
Compounding the difficulties, the British Columbia government said it will file a case by April 30 in the B.C. Court of Appeal to determine if it has jurisdiction over Trans Mountain.
Attorney General David Eby said the province’s goal is “to ensure we are actually exercising the full extent of our jurisdiction, the full extent of our authority.”
B.C. Environment Minister George Heyman said the appeal case is designed to determine his province’s right under the Canadian Constitution “to regulate against deleterious impacts on the environment, on the economy, on the provincial interests” regardless of the Canadian government’s claim that it has sole authority over major interprovincial projects.
However, Heyman weakened his government’s stand earlier in April in the B.C. legislature when he said that during the transition of power last July to the New Democratic Party government of Premier John Horgan “it became clear, through listening to legal advice, that we did not have the authority to stop a project that had been approved by the federal government.”
Heyman said he was told by Horgan that stopping progress on Trans Mountain “would be inappropriate and unlawful.”
