Copyright of the Daily Oil Bulletin 2018
Kinder Morgan Suspends Non-Essential Spending On Trans Mountain Expansion
Kinder Morgan Canada Limited today announced that it is suspending all non-essential activities and related spending on the Trans Mountain expansion project.
KML also announced that under current circumstances, specifically including the continued actions in opposition to the project by the province of British Columbia, it will not commit additional shareholder resources to the project.
The company will consult with various stakeholders, however, in an effort to reach agreements by May 31 that may allow the project to proceed.
The focus in those consultations will be on two principles: clarity on the path forward, particularly with respect to the ability to construct through B.C.; and, adequate protection of KML shareholders.
“As KML has repeatedly stated, we will be judicious in our use of shareholder funds. In keeping with that commitment, we have determined that in the current environment, we will not put KML shareholders at risk on the remaining project spend,” said KML chairman and CEO Steve Kean.
The project has the support of the federal government and the provinces of Alberta and Saskatchewan but faces continued active opposition from the B.C. government.
“A company cannot resolve differences between governments. While we have succeeded in all legal challenges to date, a company cannot litigate its way to an in-service pipeline amidst jurisdictional differences between governments,” added Kean.
KML had previously announced a “primarily permitting” strategy for the first half of 2018, focused on advancing the permitting process, rather than spending at full construction levels, until it obtained greater clarity on outstanding permits, approvals and judicial reviews.
Rather than achieving greater clarity, the project is now facing unquantifiable risk, the company said.
Previously, opposition by the province of British Columbia was manifesting itself largely through B.C.’s participation in an ongoing judicial review. “Unfortunately, B.C. has now been asserting broad jurisdiction and reiterating its intention to use that jurisdiction to stop the project,” the company said. “B.C.’s intention in that regard has been neither validated nor quashed, and the province has continued to threaten unspecified additional actions to prevent project success. Those actions have created even greater, and growing, uncertainty with respect to the regulatory landscape facing the project.”
In addition, the parties still await judicial decisions on challenges to the original Order in Council and the B.C. Environmental Assessment Certificate approving the project.
“These items, combined with the impending approach of critical construction windows, the lead-time required to ramp up spending, and the imperative that the company avoid incurring significant debt while lacking the necessary clarity, have brought KML to a decision point,” the company said.
Federal government calls on Horgan, B.C. to end all threats of delay
In a statement, Natural Resources Minister Jim Carr said: "The Government of Canada believes that the Trans Mountain expansion pipeline is in our national interest, which is why we approved the project and why we continue to stand by our decision.
This project will expand export markets for Canadian resources and create thousands of good, middle class jobs and no one should be standing in the way of those jobs and the families that stand to benefit, he added.
“The Government of Canada calls on Premier [John] Horgan and the B.C. government to end all threats of delay to the Trans Mountain expansion. His government's actions stand to harm the entire Canadian economy. At a time of great global trade uncertainty, the importance of Canada's role in the global energy market is bigger than individual projects and provinces.”
Carr added: “We will act in Canada's national interest to see that this project is built. Our government's approach to resource development will grow our economy and protect the environment. These are not competing interests, they are shared priorities. We have the responsibility to ensure the stability and growth of the Canadian economy and to get our resources to market, and British Columbia shares in this responsibility.
“Our government stands behind this project and has the jurisdiction in this matter. Under Canadian constitutional law, this is well-established and clear and has been reaffirmed by multiple courts, including the Supreme Court of Canada.
“We are determined to find a solution. With all our partners, we continue to consider all available options. As our prime minister has said, this pipeline will be built."