Canada's Government Buys Controversial Oil Pipeline, To Ensure It Gets Expanded

Canada to buy Kinder's Trans Mountain pipeline for $3.5 billion

Federal government will purchase Trans Mountain pipeline for $4.5B

Energy East, which would have converted a natural gas pipeline to oil and extended it all the way to New Brunswick, was cancelled last fall when TransCanada decided conditions had changed, including new federal regulations and lower oil prices.

The pipeline connects oil sands facilities near Edmonton, Alberta, to tanks in Burnaby, near Vancouver on Canada's west coast. Kinder Morgan makes about $200 million a year from selling space in the existing pipeline to oil companies to ship their product.

January 30, 2018: B.C. government moves to restrict any increase in diluted bitumen shipments until it conducts more spill response studies, a move that increases the uncertainty for Trans Mountain. It also aroused opposition from some Indigenous nations along the pipeline route.

Construction has begun on some of the modifications for the company's marine terminal in Burnaby, where Trans Mountain's oil is loaded onto tankers for export. Climate-change activists saw it as an attempt to prop up the carbon-emitting oilsands industry. Proponents will also be required to improve consultations with First Nations.

Present day prime minister of Canada, Justin Trudeau, has now purchased the Kinder Morgan pipeline on behalf of the Canadian taxpayers.

In theory, this compromise seemed doable.

Morneau says the federal government does not plan to be a long-term owner and is in negotiations with interested investors, including Indigenous communities, pension funds and the Alberta government, which will provide funding for any unexpected costs that arise during construction.

"Kinder Morgan has recently indicated that it needs to be provided with certainty that it can build the Trans Mountain Pipeline by May 31 or it is not proceeding with the project", town documents stated.

Companies that have already invested heavily in the oilsands will continue to mine bitumen at nearly any price in an effort to offset their fixed costs. Canada has the world's third largest oil reserves but 99 percent of its exports now go to refiners in the USA, where limits on pipeline and refinery capacity mean Canadian oil sells at a discount. Since then, the Keystone XL pipeline, which is meant to take heavy oil from Alberta to Texas, has been approved. CIBC lowered Kinder Morgan Canada from an "outperform" rating to a "neutral" rating and cut their price target for the stock from C$23.00 to C$22.00 in a report on Tuesday, April 10th. The planned expansion was expected to cost the Texas-based company $7.4 billion more.

The government's purchase price is reasonable if broken down into $3.5 billion for the existing pipeline and $1 billion to recoup money already spent on the expansion, said Richard Masson, former CEO of the Alberta Petroleum Marketing Commission and a fellow at the University of Calgary's School of Public Policy.

NDP Leader Jagmeet Singh said he has not instructed any other MPs in his caucus about how to participate in protests and said he understands the frustration and anger of people who felt the Trudeau government promised to protect the environment, not build more pipelines. We shall see if that works out.

And how does a federal Liberal government's purchase of a massive fossil-fuel project created to send product out of the country (not address usage at home) square with that same government's stated desire to tackle greenhouse-gas emissions via taxation? But he suggested Notley and Ottawa have tried to buy their way out of a problem which faces the same staunch resistance it did before.

In a statement, Kinder Morgan said it was alerted to an operational disruption through its internal safety system in the early hours of Sunday morning.

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