While the Canadian government says it does not plan to be the long-term owner of the pipeline, its decision to purchase the project on Tuesday is part of an effort to ensure the massive pipeline expansion proceeds this summer as planned.
"We are left questioning why any company would pursue large capital investment in Canada", said a note to clients by GMP Securities analysts. The government said Tuesday it will offer future buyers "indemnity" from any losses incurred by "politically motivated unnecessary delays" - in other words, Canadian taxpayers could still be on the hook after the project is sold on, if opposition to the project continues to slow it down. The cost of pipeline bottlenecks continues to weigh on Canada's oil industry.
The Trans Mountain project is created to increase capacity of the 65-year-old pipeline from Edmonton, Alberta, to Burnaby, B.C., from 300,000 to 890,000 barrels per day.
The Trans Mountain expansion has faced fierce opposition from environmental groups and some British Columbia First Nations and municipalities. Our government is determined to defend British Columbia's interests within the rule of law and in the courts.
The pipeline connects oil sands facilities near Edmonton, Alberta, to tanks in Burnaby, near Vancouver on Canada's west coast. They said more oil-by-rail shipments would be necessary. This banker said heavyweight US investors such as Berkshire Hathaway Inc., which already has significant stakes in Canadian utilities, and Blackstone Group LP would be potential bidders.
Notley said the federal takeover gives the project "federal Crown immunity", which casts doubt on B.C.'s reference case to test the province's jurisdiction.
Morneau said that while the government will listen to bidders for the pipeline in the short-term, its sale will depend on being certain that it will get built. "It seems today that with this announcement and the federal government getting involved is they recognize how important natural resource development is for all of Canada - not just for the provinces where the projects are occurring".
In British Columbia, Premier John Horgan said, "Tens of thousands of B.C.jobs depend on pristine coastal and inland waters". Also, the 26 lenders that Kinder Morgan negotiated with agreed to exempt the pipeline company from penalties on loans if the project was delayed or obstructed because of political problems.
"Trudeau just dropped $4.5 billion of your money on a 65 year old pipeline that leaks". This is not a great day for Canada's reputation on the global investment front.
According to the Pipeline Safety Act, $1 billion in financial assurances for the existing pipeline was in place based on a $500-million parental guarantee from Kinder Morgan.
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.