Canadian Bailout Moves Forward After Trans Mountain Pipeline Sale Deadline Passes | KNKX

Canadian Bailout Moves Forward After Trans Mountain Pipeline Sale Deadline Passes

Jul 24, 2018

The Canadian government has taken another step towards buying the controversial Trans Mountain pipeline. This is the latest move in a deal that would lead to a massive increase in oil tanker traffic through Puget Sound and the Salish Sea, made possible by the Canadian government. 

A key deadline passed on Sunday. After failing to find another buyer by then, a transaction has been set in motion that must be approved by Kinder Morgan shareholders. That will likely happen this fall.

If so, the Canadian government becomes the sole owner of the Trans Mountain pipeline.

Currently owned by the Houston-based company, the pipeline is 60 years old and overdue for repairs. It originates in Alberta and ends at a terminal in suburban Vancouver.

Kinder Morgan has been working on plans to nearly triple its throughput as it works on improving weak areas along the line. That expansion would bring as much as a sevenfold increase in oil tanker traffic -- upwards of 34 ships a month -- laden with crude bitumen oil, traveling out from Burnaby, near Vancouver, through the Salish Sea and Puget Sound en route to Asia.

The government of Canadian Prime Minister Justin Trudeau announced the $3.5 billion (CA$4.5 billion) transaction in May, just as Kinder Morgan was considering pulling the plug on expanding the pipeline.

Scott Montgomery, a professor who specializes in energy policy at the University of Washington’s Jackson School of International Studies, says the big question now is whether Canada will be able to find a buyer.

He says the government’s price undervalues the pipeline. But it has also promised to invest about a billion more in work on the line.   

“Their intent is to sell it. They don’t know how to build a pipeline – the government. So if they have a very hard time selling it, then it probably won’t happen. And there’ll be repercussions from that of course,” Montgomery said.

He says if no other buyer is found, he doubts the controversial expansion will take place. However, he suspects investors from China may be interested, especially as the price of oil continues to go up.  

David Moscrop, a political scientist at Simon Fraser University, which is located directly adjacent to the pipeline’s terminus, says the current lack of a buyer is not unexpected.  

“I’m not the least bit surprised,” Moscrup said. “I suspect no one, including the federal government, is going to be surprised they didn’t find a buyer.  It was a moonshot to begin with.  No one was going to want it after Kinder Morgan decided they didn’t want it."

Moscrop says if the expansion does happen, it probably could be sold for a profit.  If it does not get built, it may mean the political end for Prime Minister Trudeau.

The expansion is facing extensive opposition from the British Columbia government and local governments in Washington state as well as many U.S. tribes and some First Nations. 

All are concerned about the increased risk of oil spills and say government investments should go not to a bailout of the line, but instead support the transition to cleaner, renewable sources of energy.