OTTAWA 鈥� The federal government is spending $4.5 billion to buy Trans Mountain and all of Kinder Morgan Canada鈥檚 core assets, Finance Minister Bill Morneau said Tuesday as he unveiled the government鈥檚 long-awaited, big-budget strategy to save the plan to expand the oilsands pipeline.
In return, Kinder Morgan will go ahead with its original plan to twin the pipeline this summer while the sale is finalized, which likely won鈥檛 happen until August, Morneau told a news conference in Ottawa.
Once the sale is complete, he said, Canada will continue the construction on its own, with a view to eventually selling the whole thing down the road, once market conditions would allow it to get the best price.
Morneau presented the options during an early-morning cabinet meeting Tuesday before ministers signed off on the chosen option, which comes just days before the company鈥檚 self-imposed May 31 deadline and is still subject to the approval of Kinder Morgan shareholders.
鈥淲e believe this is the best way to protect thousands of well-paying jobs and the safest and most effective way to get our resources to world markets,鈥� Morneau told a news conference in Ottawa after the meeting, Natural Resources Minister Jim Carr at his side.
鈥淢ake no mistake: this is an investment in Canada鈥檚 future.鈥�
Pressed about why the federal government鈥檚 $4.5-billion price tag was so much lower than Kinder Morgan鈥檚 stated $7.4-billion project value, Morneau said Ottawa was purchasing all the relevant assets 鈥� but he studiously avoided saying whether construction would increase costs.
鈥淲e are purchasing the assets; we are purchasing the existing assets, and the investment in the twinning of that pipeline, and those assets are what is required for us to move forward with the expansion,鈥� he said.
鈥淚t allows us to move forward with the investments required to get the expansion completed and delivering the value that we know it can deliver to the 91原创 economy.鈥�
He hinted, however, that there would be additional costs, to be defrayed by the revenue generated by the pipeline itself.
鈥淚t creates effectively a toll, a user-pay, to be paid by the oil companies. So the additional investments will be dealt with in that way,鈥� Morneau said.
鈥淭his is a project that will not have a fiscal impact. When you鈥檙e making an investment, you鈥檙e buying an asset, and that is something that goes on the balance sheet. So there is no fiscal hit with this purchase.鈥�
Export Development Canada will finance the purchase, which includes the pipeline, pumping stations and rights of way along the route between Edmonton and 91原创, as well as the marine terminal in Burnaby, B.C., where oil is loaded onto tankers for export.
Morneau said 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.
鈥淭o investors considering Canada as a place to build big, important, transformative projects like the Trans Mountain expansion, we want you to know that you have a partner in Ottawa,鈥� Morneau said.
鈥淥ne who not only respects the rule of law, but who understands the challenges you are up against and will work with you to find solutions that work for everyone.鈥�
Alberta Premier Rachel Notley cheered the news on Twitter.
鈥淭his is a major step forward for all 91原创s. We have met the deadline,鈥� she tweeted. 鈥淭his project has more certainty than ever before. We won鈥檛 stop until the job is done!鈥�
The plan 鈥� similar to how Canada financed and managed shares in General Motors and Chrysler in 2009 during the financial crisis 鈥� will include a new Crown corporation to manage the project.
The deal brings some certainty to an expansion project that has been on the rocks ever since B.C. went to court in hopes of blocking it, fearing the impact of a spill of diluted bitumen, the raw output from Alberta鈥檚 oilsands.
Steve Kean, chairman and chief executive of Kinder Morgan Canada Ltd., said the deal represents the best opportunity to complete the expansion project.
鈥淲e鈥檝e agreed to a fair price for our shareholders and we鈥檝e found a way forward for this national interest project,鈥� he told a conference call with financial analysts.
Ottawa has the constitutional authority to build interprovincial projects like pipelines, but B.C. Premier John Horgan has gone to court to get a judge to weigh in on whether B.C.鈥檚 jurisdiction for the environment would allow him to regulate what flows through the pipeline.
The ensuing uncertainty, paired with vociferous opposition from environmental groups and some Indigenous communities in B.C., prompted Kinder Morgan to halt investment until the federal government could inject some certainty into the project.
鈥淭he previous government spent 10 years pitting the environment and the economy against each other; they pitted us against each other. It polarized us. That is not who we are,鈥� Carr told the news conference.
鈥淭he majority of 91原创s support this project. The majority of 91原创s understand that we are in a transition to a clean-growth century, and we will not get there overnight. But we will get there.鈥�
Ottawa is pressing ahead, firmly of the opinion there is no doubt about its jurisdiction. It is also confident it will prevail in a Federal Court challenge by some Indigenous communities over its approval of the pipeline, a ruling on which is due any day.
A Finance Department official says that as a Crown project in the national interest, Canada has special allowances to proceed that may not be available to a private-sector company.
Canada approved the project in November 2016, following an expanded environmental review process that included additional consultations with Indigenous communities and assessing the amount of additional emissions likely to result from additional production.
Prime Minister Justin Trudeau has long insisted the project is in Canada鈥檚 national interest and is a pivotal part of the country鈥檚 economic future.
Canada loses $15 billion every year on the sale of oil because the U.S. remains its only export customer, resulting in a lower price, Trudeau argues. A lack of capacity in pipelines or in rail cars to ship oil produced in Alberta is also hurting Canada鈥檚 energy sector.
