Canada’s Federal Government Ready to Compensate Kinder Morgan for Delays

From the Star

OTTAWA—The Texas-based oil firm threatening to kill its planned expansion of an Alberta-B.C. pipeline reacted coolly to Ottawa’s offer Wednesday to compensate the company for any financial losses due to political opposition of the B.C. government.

But Steve Kean, chairman and CEO of Kinder Morgan, owner of the controversial project, did not rule out the possibility of reaching an agreement by the company’s May 31 deadline.

The finance minister says the federal government is willing to support other investors interested in the Trans Mountain pipeline expansion if Kinder Morgan backs out. Bill Morneau says building the expansion is in the “best interest” of Canadians. (The Canadian Press)

“While discussions are ongoing, we are not yet in alignment and will not negotiate in public,” Kean said. He said the company is still determined to secure “clarity” for its construction plans along with “adequate protection” for its shareholders.

For his part, federal Finance Minister Bill Morneau said he too wasn’t negotiating in public. But after spending an hour on the phone with Kean the night before, Morneau called a news conference just hours before Kinder Morgan Canada’s annual general meeting of shareholders, and laid out Ottawa’s promise to provide Kinder Morgan indemnity or insurance against financial losses he said may be caused by court challenges launched by B.C. Premier John Horgan’s government.

“We are willing to indemnify the Trans Mountain expansion against unnecessary delays that are politically motivated,” Morneau said.

He would not reveal how much Ottawa is prepared to fork out, saying he didn’t want to go into “details of discussions.” The Liberal government says it won’t cover delays due to Indigenous or environmentalists’ court challenges, with Morneau saying those lawsuits are based on arguments made “in good faith.”

But Morneau raised the stakes for Kinder Morgan, saying if it bails on the project, federal financial assurances would be available to any company that steps in to take over what Morneau insisted is a “commercially viable” pipeline expansion. Nor did he rule out the possibility that Ottawa could take a financial stake in the project to ensure it becomes a reality. “We haven’t come to any conclusions yet,” he said.

“We think plenty of investors would be interested in taking on this project,” Morneau said.

Officials told the Star the federal government doesn’t have any hard offers but has clear indications of other investors’ interest in taking over the project even without the offer of indemnification. With it, said one official, “all of a sudden that’s an attractive packaging around that.”

However observers like Dennis McConaghy, a former executive with TransCanada Pipelines and now a visiting fellow at the public policy and energy studies schools at the Ivey Business School at the University of Western Ontario, said if the goal is get construction underway to complete the twinning of the Edmonton-Burnaby pipeline by 2020 as scheduled, it makes no sense for another investor or the federal or Alberta governments to take over. “The urgency here is to get home with Kinder,” said McConaghy.

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