In the corridors of Alberta’s legislature and round the oilpatch, federal Finance Minister Invoice Morneau’s dedication to backstop development of the Trans Mountain pipeline undertaking was greeted with optimism Wednesday.
For a undertaking that is been devoid of a lot hope just lately, this was no small feat.
But Ottawa’s promise of monetary indemnity, which is mainly an enormous insurance coverage if Kinder Morgan has to pay for delays attributable to the B.C. authorities, is just not a silver bullet for the challenges nonetheless confronting the undertaking. Nor is it a assure Kinder Morgan will resolve by month’s finish to interrupt floor on the $7.4-billion pipeline that would ship heavy oil to the West Coast.
Not but, anyway.
Kinder Morgan Canada CEO Steve Kean was predictably mum on the topic throughout the firm’s annual assembly in Calgary on Wednesday, held a pair of hours after Morneau’s announcement in Ottawa.
Later, Kean stated in a press release that he appreciated the acknowledgement of the uncertainty created by the B.C. authorities’s court docket challenges, but cautioned that “whereas discussions are ongoing, we aren’t but in alignment.”
The corporate has threatened to desert the undertaking if it would not see a transparent path ahead by Could 31.
So, many questions remain. What’s the danger to taxpayers? Is that this sufficient for Kinder Morgan? If it is not, will the Alberta authorities, or one other firm, step in to construct the undertaking?
A giant backstop
The indemnity is not a direct subsidy or an possession stake, but it’s important. Morneau would not present an estimate when pressed by journalists.
“I feel that is precisely the means this business negotiation needed to go,” stated Dennis McConaghy, a former senior govt with pipeline big TransCanada.
“This was by no means about investing in the pipeline [for the government], it was about taking completion danger to a stage that Kinder might bear.”
He factors to 2 court docket challenges towards Kinder Morgan. One issues whether or not the undertaking falls underneath provincial or federal jurisdiction, whereas the different claims insufficient session of B.C. communities. With the indemnity, there may be a lot much less monetary danger for the firm.
“The largest danger they can not bear is a judicial determination that units the clock again,” he stated.
Nonetheless, he expects there are a selection of key negotiations to happen between Ottawa and Kinder Morgan to resolve what precisely the backstop covers and the restrict of how a lot the federal authorities will spend.
“When you’ve got the will to agree on the key factors, papering it could all the time be carried out as shortly as individuals want it to be carried out.”
One danger gone, but others remain
Ottawa’s dedication nonetheless would not shield Kinder Morgan towards different potential delays and bills, corresponding to these attributable to protesters.
That is why some specialists nonetheless aren’t satisfied it presents a inexperienced gentle for the firm.
“I am undecided that this can be a sufficiently big announcement to get Kinder Morgan to be snug to maneuver ahead,” stated Richard Masson, the former CEO of the Alberta Petroleum Advertising and marketing Fee and govt fellow of the College of Calgary’s Faculty of Public Coverage.
Certainty remains to be the No. 1 challenge — and Kean hasn’t let something slip.
The assertion by Kinder Morgan’s chief govt reiterated the firm’s goals: readability on a path ahead for the undertaking, notably the skill to construct by B.C., and guaranteeing sufficient safety for shareholders.
Alberta Premier Rachel Notley stated Wednesday that conversations between the provincial and federal authorities and Kinder Morgan are ongoing but insights into these talks have been sparing.
Potential new proprietor
If Kinder Morgan abandons the undertaking, specialists say there can be suitors to take it over — even perhaps the Alberta authorities.
The federal authorities acknowledged that reality by stating the indemnity can be prolonged to whoever takes cost.
Studying between the strains of Morneau’s announcement, Masson can see the state of affairs the place Alberta assumes a much bigger function.
“That claims to me that there is a excessive chance that someone else goes to take over this undertaking,” he stated.
“The one someone else I feel is sensible is Alberta at some stage. So it is fairly doable that Alberta will find yourself on the hook for the delays related to protests, like on-the-ground protesters, whereas the federal authorities can be on the hook for delays concerned with court docket instances, and there could also be some half of a discount that is been struck.”
If persons are severe about getting this undertaking carried out and in service in 2020, there’s just one means to try this — make the cope with Kinder Morgan.– Dennis McConaghy, former senior govt with TransCanada
Masson stated there is definitely a enterprise case for Alberta to get entangled, contemplating oil manufacturing in the province is rising and export pipelines are full. If even a number of hundred thousand barrels a day cannot discover their strategy to market, it outcomes in a reduction on all the oil produced in the province.
“It prices a fortune in phrases of jobs, in phrases of taxes, and in phrases of royalties,” he stated. “This undertaking is important for Alberta.”
Notley, who raised the prospect of Alberta taking up the undertaking a number of weeks in the past, repeated Wednesday that the province is ready to “do no matter is important” to get it constructed.
She additionally stated it was fairly clear from Morneau’s assertion that Ottawa is ready to increase the indemnity to “any purchaser that got here alongside, if that had been the place we ended up in.”
Nonetheless, if Kinder Morgan sells the undertaking, that might additionally take time and set the timeline again additional. That is why McConaghy says the Alberta and federal governments are nonetheless hoping Kinder Morgan pushes ahead with the pipeline.
“If persons are severe about getting this undertaking carried out and in service in 2020, there’s just one means to try this — make the cope with Kinder Morgan,” he stated.
“Kinder Morgan is just not going to promote the current property that they’ve associated to this undertaking simply.