Liberal government to buy Trans Mountain pipeline for $4.5B

Liberal government to buy Trans Mountain pipeline for $4.5B

The transaction on which the federal government and Kinder Morgan agreed upon on Tuesday is expected to close in August 2018.

"The federal government has reached an agreement with Kinder Morgan to buy the Trans Mountain pipeline and the infrastructure related to the project,"said Morneau".

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.

Finance Minister Bill Morneau unveiled the government's long-awaited, big-budget strategy on Tuesday to save the plan to expand the oilsands pipeline.

Kinder Morgan last month gave Ottawa an ultimatum: Chairman Steve Kean said the company would suspend all work on the expansion project entirely if the legal issues surrounding it can not be resolved by May 31, adding that it would not continue risking shareholder funds on the project unless the clouds over it clear. But $4.5 billion won't cover the future construction costs.

Now, Wall said, the government takes on the risk of completing the project itself, which puts taxpayers in a precarious position.

The pipeline connects oil sands facilities near Edmonton, Alberta, to tanks in Burnaby, near Vancouver on Canada's west coast.

The Export Development Bank of Canada will finance the plan and create a Crown corporation to run and manage the pipeline during Canada's ownership period. Morneau said cabinet approved the move, which now is before the company's shareholders.

The fact the federal government needed to buy Trans Mountain to ensure the project goes ahead does not bode well for the industry, said Chris Bloomer, CEO of the Canadian Energy Pipeline Association.

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"We 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", he said.

With files from the Canadian Press.

Alberta's oil industry has seen its attempts to have other pipeline projects built sunk by regulatory and political opposition, including cross-border projects such as Keystone XL, still stalled because of opposition in Nebraska and South Dakota.

"I feel betrayed", one woman said, adding that she wasn't sure how it was anyone in Ottawa's business what happens in B.C. on our coastline.

Until now, Trudeau's government has used a soft tone to try to convince British Columbia to abandon its opposition to the pipeline, hoping not to alienate voters in the province before next year's general election.

While Mr. Morneau claimed the pipeline is the safest and most effective way to get natural resources to world markets, the truth is there is little, if any, demand for oil sands bitumen in Asia. Kinder Morgan had paused non-essential spending on the project over disputes between provincial governments in Alberta and B.C.

Alberta Premier Rachel Notley cheered the news of the federal government's purchase on Twitter. But over the past 30 years, the Canadian government has launched a major privatization effort, selling Air Canada, Canadian National Railway and Petro-Canada.

"Trudeau is gambling billions of Canadian taxpayer dollars on an oil project that will never be built", Mike Hudema, a climate and energy Campaigner at Greenpeace Canada, declared in a statement on Tuesday.

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