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Canadian Government Buys Embattled Pipeline

Friday, June 1, 2018

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The government of Canada will buy U.S. energy company Kinder Morgan’s Trans Mountain Pipeline in a CA$4.5 billion ($3.47 billion) deal that Prime Minister Justin Trudeau hopes will expedite the stalled expansion of the pipeline in Alberta and British Columbia.

The sale, announced Tuesday (May 29), will transfer ownership of the 710-mile pipeline from the American company, which had been attempting to add a second line amid resistance from local citizens and government officials, to the federal government, which has supported the expansion.

Burnaby BC
Kinder Morgan

Trans Mountain moves crude from the Alberta oil sands to Burnaby, British Columbia (pictured), where tankers would transport much of the oil to Asia.

The transaction does not ensure that the Trans Mountain expansion will go forward, but essentially guarantees that the battle over the project will continue. In April, Kinder Morgan suspended work related to the expansion in reaction to civic resistance in British Columbia and concerns about the growing costs of the project.

The company had said at that time that it would consult with stakeholders by the end of May in order to determine whether the project was worth continuing to pursue.

Local Friction

Derek Corrigan, mayor of Burnaby, British Columbia, has led the resistance to the pipeline expansion; officials and citizens in the area are concerned mainly about tanker traffic around the province’s southern coast. Environmentalists filed suit last year against the expansion, citing concerns about endangered orcas in the waters near Burnaby.

Provincial officials in British Columbia have also resisted the expansion plan. According to Trudeau’s office, the prime minister spoke Tuesday with British Columbia Premier John Horgan and “reiterated the federal government’s jurisdiction over interprovincial pipelines,” setting up a potential showdown over the project. Trudeau hopes to resume construction this summer.

Opening Export Markets

Trudeau’s Liberal government supports the pipeline expansion as a way to get oil from the sands of Alberta to tankers that will carry the product to China and elsewhere in Asia. Nearly all Canadian crude exports currently go to the United States, but China and India are poised to represent 90 percent of the world’s increase in demand for crude in the next 25 years, according to the Canadian Association of Petroleum Producers.

Canada’s National Energy Board has reported in recent years that pipeline capacity has been outstripped by production in the oil sands of Alberta. Rail transport has been required to supplement oil pipelines since 2012; several pipeline projects have stalled or been rejected during that time.

In 2016, Enbridge Energy’s Northern Gateway pipeline project was rejected by Trudeau’s government after tanker traffic was banned on British Columbia’s northern coast, where that pipeline would have terminated. Enbridge’s Line 3 expansion has been underway since last year in Canada but portions of that expansion project in the U.S. have yet to be approved.

And TransCanada’s Keystone XL, which would move crude from Alberta to Steele City, Nebraska, was rejected by the U.S. government in 2015 before being revived last year by the administration of President Donald J. Trump; TransCanada has not made an official decision on whether that project will move forward, but it has confirmed commercial interest in the pipeline and has notified government agencies of its intent to begin clearing brush for the project this fall.

The Canadian government reportedly plans to sell the pipeline to another operator, and has only taken control of the line to prevent the cancellation of the expansion plan.

   

Tagged categories: Government; Infrastructure; NA; North America; Oil and Gas; Pipelines; Program/Project Management

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