Kinder Morgan Suspends Pipeline Construction


Energy infrastructure company Kinder Morgan announced Sunday (April 8) the suspension of all non-essential activities and related spending connected to the Trans Mountain pipeline expansion project.

The decision stems from British Columbia’s resistance to the project, along with Kinder Morgan unwillingness to saddle shareholders with the additional risk that comes with construction costs ramping up from $200 million to $300 million a month.

Alberta Premier Rachel Notley has indicated that her government is open to buying the pipeline, however, to ensure the project is completed.

Pipeline Background

The CA$6.8 billion ($5.09 billion) Trans Mountain Pipeline Expansion would, according to Kinder Morgan’s plans, run from Strathcona County, Alberta (near Edmonton) to a tanker port in Burnaby, British Columbia (near Vancouver), staying mostly alongside the current Trans Mountain Pipeline, built over 50 years ago.

The company noted that 73 percent of the pipeline would use the same right-of-way as the existing pipeline, 16 percent would follow other linear infrastructure rights-of-way, and 11 percent would require new right-of-way. The project involves 980 kilometers (609 miles) of new pipeline, and the reactivation of 193 kilometers of deactivated pipeline. It would expand the pipeline system's capacity from 300,000 to 890,000 barrels per day.

As of December 2017, Kinder Morgan anticipated the permitting process for its Trans Mountain expansion to take longer than originally expected, likely pushing back the oil pipeline’s completion until 2020.

According to the Montreal Gazette, Kinder Morgan argued before the National Energy Board that local officials in Burnaby have not provided firm timelines and guidance during the permitting process. Corrigan, the company said, had “poisoned the well” in the city with his public comments opposing the project, making it impossible for Kinder Morgan to get fair treatment.

Suspension of Operations

According to the Star, Kinder Morgan will be consulting with stakeholders by May 31 in order to reach an agreement that would allow the project to move forward.  

“We have determined that in the current environment, we will not put [Kinder Morgan Canada Limited] shareholders at risk on the remaining project spend,” said Steve Kean, the company’s chairman and chief executive officer.

“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.”

Natural Resource Minister Jim Carr noted that, under Canadian law, Ottawa has the legal capacity to approve the project, emphasizing that he was determined to find a solution. Prime Minister Justin Trudeau has also recently declared that the pipeline is in the “national interest.”

Alberta Offer

Notley said in a statement that Alberta was considering “a number of financial options to ensure that the Trans Mountain expansion is built, up to and including purchasing the pipeline outright if it were to come to that.”

When asked if Ottawa would support Alberta’s bid to invest in the project or even take it over, Carr reportedly sidestepped the question. No solutions have been reached as yet.

According to Bloomberg, Canada’s oil industry has been negatively impacted by limited pipeline capacity. Trans Mountain, TransCanada’s Keystone XL project and Enbridge Inc.’s replacement of its Line 3 pipeline were all seen as ways to help alleviate restrictions.

“The project is critical to Canada and the future of its oil and gas industry,” noted Alex Pourbaix, chief executive officer of oil-sands producer Cenovus Energy Inc. “If the rule of law is not upheld and this project is allowed to fail, it will have a chilling effect on investment not just in British Columbia, but across the entire country.”


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

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