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Pipeline in crisis
Kinder Morgan suspends Trans Mountain work; sets May 31 deadline for governments
Gary Park Petroleum News
In a stunning move, Kinder Morgan has suspended all “non-essential” work on its Trans Mountain pipeline expansion in Canada, effectively setting May 31 as a “make-or-break” deadline for its future in the C$7.4 billion project.
Alberta Premier Rachel Notley immediately raised the stakes, declaring that her province will do “whatever it takes to get this pipeline built,” including taking an ownership position.
She also promised early legislation that will have “serious economic consequences” for British Columbia, hinting at possibly turning off the flow of crude oil and natural gas to B.C., which she and Kinder Morgan blamed for the fast-emerging test of Canada’s national unity.
Notley said the message to British Columbia will be blunt: “Don’t mess with Alberta.”
Kinder Morgan Chief Executive Officer Steve Kean told analysts April 9 his company was “open” to discussions on having Alberta as a partner.
B.C. Premier John Horgan denied his government has been harassing the plans to triple shipments of crude bitumen to 890,000 barrels per day through Vancouver to Asia, insisting that the pipeline is not in Canada’s national interest.
“It’s been said we are somehow compromising the national climate action plan and I profoundly disagree with that,” he said. “I reject the notion that our opposition to risking our coast and our economy is somehow tied to the climate plan.”
Horgan also dismissed any suggestion that his government’s position is creating a constitutional crisis over the Canadian government’s right to approve the transport of energy resources across provincial borders.
Federal approval in 2016 Notley told her cabinet April 9 it’s time for the government of Prime Minister Justin Trudeau to show that its 2016 approval of Trans Mountain is worth more than the paper it`s written on.
In a “frank” phone conversation April 9, she told Horgan Alberta “will now be moving forward very aggressively.”
The Globe and Mail said in an editorial April 8 the federal government “must use whatever tools it has, courts included, to re-establish its jurisdiction and get Trans Mountain back on track.”
“To do otherwise threatens the basic tenets of confederation. A province cannot use underhanded tactics to effectively seize control of the development of (Canada’s) natural resources.”
The national newspaper accused Horgan’s government of “naked hypocrisy” since gaining power last summer by “using its stated desire to protect the environment as a reason for delaying Trans Mountain. At the same time, however, it is supporting the development of its natural gas reserves, offering tax breaks to (the C$40 billion LNG Canada project) that includes ... a new pipeline and a new tanker terminal on the B.C. coast.”
Jobs, revenue cited Notley said Horgan is wrong if he thinks B.C. can “mess” with Trans Mountain, which she noted will create thousands of jobs and billions of dollars in revenue that will benefit all of Canada.
“Let me be absolutely clear ... they cannot mess with Alberta,” adding that if her government is forced to invest public money in the project “we will be a significantly more determined investor than British Columbia has dealt with up to this point.”
Notley called on the Trudeau government to “work in defense of Alberta and working people in Western Canada in the way they have in the past for other parts of this country,” pointing to federal assistance for Ontario’s auto sector and Quebec’s aerospace industry in times of crisis.
In a rare move, Jason Kenney, leader of Alberta’s United Conservative Party, agreed with Notley, although he said Kinder Morgan’s announcement was predictable.
He accused the federal government of standing by “passively uttering meaningless bromides for the past nine months.
“Now is the time for federal action. It is time for the federal government to act like a federal government, for our prime minister to lead like a prime minister should ... in the national interest,” Kenney said.
While “philosophically opposed to corporate welfare,” he said that where there has been a “major market failure there is a compelling case for the state to come forward, using its credit, its financial leverage, to ensure economic progress. I believe this is such an instance.”
Trudeau: ‘rule of law’ Before Kinder Morgan delivered its ultimatum, Trudeau met with eight oil patch chief executive officers in Fort McMurray on April 6 and again insisted that the pipeline expansion will proceed.
“Canada is a country of the rule of law and the federal government will act in the national interest. Access to world markets for Canadian resources is a core national interest. The Trans Mountain expansion will be built,” he declared.
Natural Resources Minister Jim Carr told reporters April 8 that Horgan should end all threats to delay Trans Mountain.
His government’s actions “stand to harm the entire Canadian economy,” while promising to use “all possible options” to force B.C. to back off.
But he would not comment when asked if that could include deploying the Canadian military to end protests and disruptions at Trans Mountain sites.
When pressed, Carr would only say: “We are not ruling anything out ... all options are on the table.”
C$1.1 billion spent Kean said in a news release April 8 that his company, having already spent C$1.1 billion on the project, is taking steps to protect its value rather than risking additional billions of dollars on an outcome that its beyond its control.
“A company cannot resolve differences between governments. While we have succeeded in legal challenges (estimated at 14) to date, a company cannot litigate its way to an in-service pipeline amidst jurisdictional differences between governments.”
He said the “uncertainty created by B.C. has not been resolved, but instead has escalated into an inter-governmental dispute.”
University of Alberta economist Andrew Leach said it was not reasonable to compare Energy East, TransCanada’s planned link from the oil sands to Atlantic Canada, which he rated as the “least attractive option to get crude to market,” while Trans Mountain “is the best option and not building it significantly compromises the value of (Alberta) natural resources.”
Andrew Wilkinson, leader of the British Columbia Liberal Party, said Horgan has “let his activist environment minister (George Heyman) ignore the rule of law as this government picks winners and losers by willfully ignoring the constitution.”
“Investors large and small interested in our province need to know the provincial government will treat everyone fairly and equally. This is a project that has received federal approval and falls under federal jurisdiction, yet (the New Democratic Party government) used it to pick a trade war with Alberta and start a confrontation with the federal government,” he said.
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