Canada cannot start work on Trans Mountain pipeline until deal closes: minister

By Julie Gordon

WASHINGTON (Reuters) – The Canadian government would like to see construction accelerate on the Trans Mountain pipeline expansion, but has no control over decisions to resume or start new work until it takes ownership of the major pipeline project, Canada’s natural resources minister said.

“We think that construction and staying on a schedule is important, but that will be up to Kinder Morgan (NYSE:) as long as they are the owner of the pipeline,” Jim Carr said in an interview in Washington, D.C. where he is attending the World Gas Conference.

Carr said he expects the deal to close in “mid to late summer.”

The Canadian government agreed to buy Kinder Morgan Canada Ltd’s (TO:) Trans Mountain pipeline and project for C$4.5 billion ($3.4 billion) in late May, promising the deal would allow work on the massive expansion to begin immediately.

Kinder Morgan halted all non-essential work on the C$7.9 billion project earlier in May, citing regulatory uncertainty and opposition from the province of British Columbia.

The Trans Mountain pipeline runs from Edmonton, Alberta to a deepwater port in the Vancouver area. The expansion would nearly triple its capacity, giving Canadian producers greater access to Asia and other world markets.

“We know that expanding export markets is a good idea and that has been reinforced by recent events,” said Carr, noting that 99 percent of Canada’s oil and gas exports go to the United States.

Canada’s oil producers, who currently sell their crude at a steep discount to the North American benchmark, are desperate for construction to begin. Some aboriginal groups and the province of British Columbia fiercely oppose the expansion.

On Wednesday, Kinder Morgan said it is seeking permits to start work on its Burnaby Terminal expansion, a major component of the project. It has previously said that work is underway at its Westridge Marine Terminal. It did not provide an updated construction schedule.

Under the current schedule, terminal construction should already be well underway with pipeline construction starting in July. The anticipated in-service date is December 2020, though it was unclear if that was still attainable.

“We think that there’s value in having the construction schedule accelerate, but until we own the project we can’t control that,” Carr told Reuters.

The government does not intend to own the pipeline for long and is looking for a new buyer.

($1 = 1.3296 Canadian dollars)

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