Kinder Morgan sets May 31 deadline to keep Trans Mountain expansion alive
CALGARY -- The future of the Trans Mountain pipeline expansion was cast in doubt on Sunday as Kinder Morgan Canada suspended all non-essential activities and related spending on the project in the face of mounting opposition from British Columbia.
With the company citing its decision largely on the B.C. government's legal challenges to the pipeline and the need to protect its shareholders, the federal and Alberta governments pushed Premier John Horgan to abandon his promise to do whatever his government can to stop the project.
"The government of Canada calls on Premier Horgan and the B.C. government to end all threats of delay to the Trans Mountain expansion," federal Natural Resources Minister Jim Carr said in a news release. "His government's actions stand to harm the entire Canadian economy."
In Edmonton, Premier Rachel Notley said Alberta would consider taking on an equity stake in the pipeline if Kinder Morgan investors are considering backing away.
What’s the most likely outcome for the Trans Mountain Expansion?
"If we have to, Alberta is prepared to do whatever it takes to get this pipeline built," said Notley, without discussing the dollar value of such an investment.
"Alberta is prepared to be an investor."
Kinder Morgan's move will be seen as a blow to Prime Minister Justin Trudeau, who has insisted the pipeline will be built. The expansion, which would triple the amount of oil flowing from Alberta to Burnaby, B.C., was approved by the federal government in 2016.
The company said it will consult with "various stakeholders" to try and reach an agreement by May 31 that might allow the project to proceed, adding it needs "clarity" on its ability to do construction in B.C. and protect its shareholders.
"As KML has repeatedly stated, we will be judicious in our use of shareholder funds. In keeping with that commitment, we have determined that in the current environment, we will not put KML shareholders at risk on the remaining project spend," Steve Kean, the company's chairman and CEO, said in a statement.
"A company cannot resolve differences between governments. While we have succeeded in all legal challenges to date, a company cannot litigate its way to an in-service pipeline amidst jurisdictional differences between governments."
Kean said the uncertainty around the company's ability to finish the project "leads us to the conclusion that we should protect the value that KML has, rather than risking billions of dollars on an outcome that is outside of our control."
Kinder Morgan has spent about $1.1 billion on the $7.4-billion project so far.
Horgan is pursuing a reference case in the courts to determine if his government can control the shipment of oil through the province on environmental grounds, which Kinder Morgan mentioned as a factor in its decision.
"Rather than achieving greater clarity, the project is now facing unquantifiable risk," the company said in its statement.
There is also another legal challenge in the Federal Court of Appeal, where the federal government's approval and B.C.'s environmental assessment certificate for the project are being challenged.
A federal government official speaking on background told The Canadian Press the timing of the announcement has more to do with construction schedules than a specific event in recent days. Kinder Morgan has to get construction of the pipeline underway by the end of May or it will likely lose out on another construction season, which adds significant costs and threatens to further fray investor nerves.
Carr said the government was given a heads up Saturday afternoon that the decision was coming, which prompted him to return to Ottawa from New York.
He said it wasn't expected, but his office was aware the delays and uncertainty posed by British Columbia's threats were having an impact.
"We knew that their investors were getting nervous," said Carr in an interview.
He criticized British Columbia, saying the province's "threat of prolonged court action has consequences" not just for Canada but for B.C. as well.
He noted the B.C. economy is heavily dependent on natural resources -- be it oil, natural gas, wood products or mining -- and scaring off Kinder Morgan investors could have long-term consequences on British Columbia's ability to attract investment elsewhere.
"It is not in the interests of the B.C. government for investors to think B.C. is not a good place to invest," Carr said. "There are consequences to those actions and we're seeing those consequences."
The project has become a major irritant in the relationship between Alberta and B.C., with Alberta going as far as banning the import of wines from its neighbour for a period of time.