Canada government ready to cover some Kinder Morgan pipeline losses

By David Ljunggren and Leah Schnurr

OTTAWA (Reuters) – Canada is prepared to cover any losses Kinder Morgan (NYSE:) Canada Ltd might suffer if a proposed oil pipeline expansion continues to be delayed by political opposition, Finance Minister Bill Morneau said on Wednesday.

The company has given Ottawa a deadline of May 31 to provide assurances it can go ahead with a plan to more than double the capacity of its Trans Mountain line from Alberta to British Columbia on the west coast. The government of the Pacific province opposes the project on environmental grounds.

“We are willing to indemnify the Trans Mountain expansion against unnecessary delays that are politically motivated,” Morneau told reporters on the same day that Kinder Morgan Canada is holding its annual general meeting.

The issue could potentially become one of the biggest crises facing Prime Minister Justin Trudeau, whose Liberal government approved the expansion. Trudeau says Canadian oil producers are losing C$15 billion ($11.7 billion) a year because pipeline bottlenecks mean they cannot get their crude to export markets.

Morneau also said if Kinder Morgan decided to walk away from the project, the indemnification would stay in place in case another company took over. Whether the company would allow a rival to build the expansion is unclear.

Morneau declined to say what aid Ottawa could provide or how much. Sources have previously said Ottawa is examining options such as loan guarantees, a bailout, or taking a stake in the C$7.4 billion project.

Shares in Kinder Morgan Canada rose more than 3 percent in early trading on the Toronto Stock exchange.

Morneau put the blame on British Columbia premier John Horgan for delaying the project while making clear Ottawa would not cover any losses caused by environmental and aboriginal demonstrators who vow to ensure the expansion never happens.

“That specific risk (Horgan’s opposition) is a risk that for a private sector player is impossible to deal with. They can’t negotiate between governments,” said Morneau.

“We see that as something we can actually indemnify. Other business risks are other business risks – anybody going into the business of building pipelines recognizes other risks.”

In an email, Kinder Morgan Canada said it was reviewing Morneau’s comments and might issue a statement.

Greenpeace Canada said in statement it was clear the project would not go ahead, adding that “signing a taxpayer-backed blank check with Kinder Morgan’s name on it is the definition of throwing good money after bad.”

In the past three years, the five major pipeline projects that Canada was banking on, either new or expansion of existing lines, have been scrapped or delayed.

The country is on the cusp of becoming the world’s fourth largest oil producer but of late, producers have cut output due to constraints in getting oil to market.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.