Canada to purchase Trans Mountain oil sands project

By Mike Lee | 05/29/2018 12:59 PM EDT

A protester holds a sign during a rally in Vancouver, Canada, last year against Kinder Morgan’s Trans Mountain pipeline.

A protester holds a sign during a rally in Vancouver, Canada, last year against Kinder Morgan’s Trans Mountain pipeline. William Chen/Wikipedia

Canadian Prime Minister Justin Trudeau’s administration agreed to buy Kinder Morgan Inc.’s troubled oil sands pipeline, in a move that deepens the administration’s support for the fossil fuel industry.

The government will pay about $4.5 billion Canadian dollars ($3.5 billion) for the line, which Kinder Morgan said on its website is worth about C$7.4 billion ($5.7 billion). Both the company and the Trudeau administration will help find a third-party buyer, and the administration will help finance the project until the deal closes, according to a statement.

"We think this is a great day not only for our company but for Canada," Kinder Morgan CEO Steve Kean said on a conference call.

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Kinder Morgan has been trying since 2012 to build a second pipeline alongside its existing Trans Mountain line from Alberta to the Vancouver area, which would nearly triple the system’s capacity to about 900,000 barrels a day. It’s the only pipeline that connects the oil sands fields to the ocean, and expanding it would allow larger oil shipments to Asia (Energywire, May 21).

The project has been approved by Canada’s federal government, but it’s been blocked by environmental protests and legal challenges from the provincial government in British Columbia. Kinder Morgan had threatened to abandon the project by May 31 if the provincial government didn’t drop its legal challenges.

Trudeau has committed to reducing Canada’s greenhouse gas emissions to help fight global climate change but has also supported production of Canada’s oil sands in Alberta, which produce more pollution than other forms of crude. In 2016, he authorized construction of the Trans Mountain line and another line into Minnesota to help export the region’s crude (Energywire, Nov. 30, 2016).

The move will increase the backlash against Trudeau from green groups and indigenous tribes, who worry that the Trans Mountain expansion will increase the risk of offshore oil spills.

"It is unforgivable that the Canadian government is doubling down on this project," said Rachel Rye Butler, an organizer for Greenpeace.

The sale will relieve Kinder Morgan of a substantial risk — the cost of the Trans Mountain plan has grown with the delays — and it will be able to use the proceeds to reduce its debt.

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