OTTAWA – Finance Minister Bill Morneau will announce as early as Tuesday morning where the government plans to go with Kinder Morgan to ensure the controversial Trans Mountain pipeline expansion will be built.
The Canadian Press has learned there are three options on the table, which include the government buying and building the expansion, then selling it once it’s complete; and buying it on an interim basis, then selling it to investors and leaving them to handle the construction.
Morneau has already unveiled the third option: leaving original project architect Kinder Morgan to handle construction but covering any cost overruns incurred as a result of political interference.
The federal cabinet has been summoned to meet Tuesday morning, two hours earlier than usual, after which Morneau will discuss which of the three options the government has decided on.
Kinder Morgan gave Ottawa until Thursday to convince it to proceed by settling down jittery investors who fear a court challenge from the B.C. government would make the project too great a liability.
Prime Minister Justin Trudeau has put a lot of political capital on the project, pledging over and over again that the pipeline expansion is in the national interest and will be built one way or another.
Since the government has declared the project to be in the national interest, it has financial tools available to it to buy into the project, similar to when the former government bailed out General Motors and Chrysler during the financial crisis in 2008 and 2009.
Trudeau said Canada loses $15 billion a year because oil cannot be exported anywhere but the United States, adding that the pipeline expansion opens up the option of exporting to Asian markets.
He also said Canada’s environmental protections for oceans and its climate change policies hinge on Canada being able to sell its natural resources even as the country begins to transition to cleaner sources of energy.
Trudeau dispatched Morneau to negotiate a deal with Kinder Morgan in mid-April, a week after the company halted all non-essential spending on the $7.4-billion pipeline pending reassurances from Ottawa that opposition to the project was not going to prevent it from being completed.
That decision came as British Columbia Premier John Horgan was working on a court challenge to seek judicial guidance on whether provinces can restrict what flows through pipelines for environmental reasons. The court challenge was filed about two weeks later.
Provinces have jurisdiction over the environment, but the Constitution gives Canada the authority over interprovincial transportation, including pipelines.
Horgan contends Canada has jurisdiction to build the pipeline but that he can regulate what flows into his province within the pipeline. His concerns largely stem from the limited science available on how diluted bitumen behaves if it is spilled and the risk that comes from increasing the amount of it being shipped on tankers out of Kinder Morgan’s marine terminal in Burnaby, B.C.
Trudeau argues the project went through several approvals, including an expanded environmental approval process that did more consultation with Indigenous communities and looked at additional environmental risks, including the effect on emissions of producing more oil to flow through the pipeline.
Trudeau would not tip his hand Monday on the state of talks with Kinder Morgan but reiterated his government’s constant refrain that the project is absolutely going to be built.
“We continue to engage in financial discussions on the way we are going to do that,” Trudeau said.
After Morneau went public with the option to cover cost overruns May 17, Kinder Morgan CEO Steve Kean said the company and the government were not yet “in alignment” and the negotiations would not take place in public.
Construction has begun on some of the modifications for the company’s marine terminal in Burnaby, where Trans Mountain’s oil is loaded onto tankers for export. The pipeline itself has been awaiting final route approvals, and construction permits. The May 31 deadline was set with construction season limitations in mind.
The company has already spent about $1 billion on the project to date, and if construction started on time this summer, completion was scheduled for December 2020. The proposal is to run the pipeline parallel to the existing one that runs between Edmonton and Burnaby to increase capacity almost three fold.
Tim McMillan, president of the Canadian Association of Pipeline Producers, said what happens this week is “huge, not just for our industry or this pipeline, but I think for Canada.”
McMillan said if a pipeline that meets a high regulatory standard, has all the approvals, support from a majority of Canadians and the backing of the federal government cannot get built, it sends a chilling signal that Canada is not open for business.
“It’s essential we see a smooth transition to construction at this point,” he said.