In an extraordinary move aimed at boosting Canada's tar sands industry in the wake of sharp environmental opposition, the Canadian government said Tuesday that it will spend $3.5 billion to buy the Trans Mountain pipeline and triple its capacity.
The announcement was made by Canada's finance minister, Bill Morneau, who called the proposed purchase "an investment in Canada's future".
The forecast price of oil, in particular, West Texas Intermediate which is averaging at US$70 a barrel could be an "upside risk to the forecast", the report said.
Calling a controversial pipeline expansion "a vital project in the national interest", Canadian Prime Minister Justin Trudeau says his government is buying the Trans Mountain pipeline to ensure that the expansion is built, despite protests from environmentalists and other groups. Ottawa will buy the pipeline and all of Kinder Morgan's core assets for $4.5-billion, including pumping stations and rights of way along the route between Edmonton and Vancouver, as well as the marine terminal in Burnaby, British Columbia.
The federal Liberal government and its new Crown corporation are on track to be taught the same lesson. "Though it is an unequivocal statement of support to getting oil to tidewater and for the pipeline".
In British Columbia, Premier John Horgan said, "Tens of thousands of B.C.jobs depend on pristine coastal and inland waters".
Alberta's oil industry has seen its attempts to have other pipeline projects built sunk by regulatory and political opposition, including cross-border projects such as Keystone XL, still stalled because of opposition in Nebraska and South Dakota.More news: Maryland slammed by raging flash floods
Pressed about why the federal government's $4.5-billion price tag was so much lower than Kinder Morgan's stated $7.4-billion project value, Morneau said Ottawa was purchasing all the relevant assets - but he studiously avoided saying whether construction would increase costs.
The federal government can in theory step in and disallow any provincial laws that British Columbia might use to block the pipeline, but this provision in the Canadian constitution has not been used since the 1940s.
"To investors considering Canada as a place to build big, important, transformative projects like the Trans Mountain expansion, we want you to know that you have a partner in Ottawa", Morneau said.
"If you think about the dozens of pipelines that exist for crude oil, natural gas liquids, natural gas itself, petroleum products, all throughout the USA and Canada - and we track this stuff - I'm not aware of a single one that's owned by any government entity ... not on this scale".
Reaction to the deal is certainly mixed and coming from all parts of the country, including from British Columbia's two leading men and Rachel Notley, the premier of Alberta. But it's bad news for Canadian taxpayers who will ultimately have to bear the cost.
"The majority of Canadians support this project". "We've agreed to a fair price for our shareholders and found a way forward for this national interest project". "I think that's been reinforced by the fact that Kinder Morgan was able to build up through different open seasons to a high level of commitment (from shippers)", he said.
The pipeline has become a flash point for a wider debate in Canada over the environmental impact of tapping Alberta's oil sands, which critics view as a particularly polluting energy source.