Ottawa is going to purchase the assets of the Trans Mountain Expansion Project for $4.5 billion.
Finance Minister Bill Morneau and Natural Resources Minister Jim Carr announced this morning in Ottawa today that, in addition to purchasing the assets, the Government of Canada has reached a commercial agreement with Kinder Morgan in order to facilitate construction of the pipeline.
Kinder Morgan had imposed a May 31 deadline for assurances that it would be able to proceed after British Columbia sought a legal opinion on what jurisdiction, if any, it had over regulating bitumen flow through the province.
“Our government believes that the commercial agreement we have reached with Kinder Morgan is the best way to protect thousands of good, well-paying jobs while delivering a solid return on investment for Canadians,” said Morneau, in a news release. “This is an investment in Canada’s future.”
The agreement will guarantee the resumption of work for the summer construction season, said Morneau. Federal loan guarantees will ensure that construction continues through the 2018 season.
The $4.5 billion transaction to buy the assets is expected to close in August 2018. Morneau did not discuss what the estimated construction costs will now be.
Morneau said this represents a fair price for Canadians and for shareholders of the company, and will allow the project to proceed under the ownership of a Crown corporation. The core assets required to build the Trans Mountain Expansion Project have significant commercial value, and this transaction represents a sound investment opportunity, he added.
It is not, however, Ottawa’s intention to be a long-term owner of this project. Canada will work with investors, once they come forward, to transfer the project and related assets to a new owner or owners, in a way that ensures the project’s construction and operation will proceed in a manner that protects the public interest, he said.
Ottawa will extend federal indemnity to protect any prospective new owner from costs associated with politically motivated delays, which it had offered to Kinder Morgan in hopes it would proceed with the pipeline.
The province of Alberta will also contribute to get the project built. Alberta’s contribution would act as an emergency fund and would only come into play if required due to unforeseen circumstances. In return, Alberta will receive value commensurate to their contribution, through equity or profit-sharing.
The Trans Mountain Expansion Project involves building a new pipeline along the existing Trans Mountain Pipeline running from Edmonton, Alberta to Burnaby, British Columbia, and expanding the capacity of the terminal in Burnaby.
This expansion will increase daily capacity from 300,000 to 890,000 barrels, while improving market access to the US Pacific Coast and Northeast Asia.