Ottawa Buying Trans Mountain Pipeline Assets for $4.5 billion

Ottawa Buying Trans Mountain Pipeline Assets for $4.5 billion

Ottawa Buying Trans Mountain Pipeline Assets for $4.5 billion

Canada's federal government said Tuesday it is buying a controversial pipeline from the Alberta oil sands to the Pacific Coast to ensure it gets built.

The Canadian government said on Tuesday it will buy Kinder Morgan Canada Ltd's (Toronto:KML.TO - News) Trans Mountain pipeline project for C$4.5 billion ($3.5 billion) but does not intend to be the long-term owner of the project, which has faced fierce environmental opposition. The plan includes the existing pipeline that's been in operation since 1953.

"The federal government has reached an agreement with Kinder Morgan to purchase the Trans Mountain pipeline and the infrastructure related to the project", he said.

Morneau said there'd be no fiscal impact of the plan - suggesting he doesn't expect to make or lose money on the deal.

The pipeline would allow Canada to diversify and increase exports to Asia, where it could command a higher price.

Now 99 percent of Canada's oil is sold to the United States at a discount, and access to the Pacific coast is seen as key to diversifying the world's sixth largest oil producer's energy exports.

"For too long we have relied on one trading partner for our oil and gas exports", Natural Resource Minister Jim Carr said. The project has been beset by legal uncertainty and rising protests from environmental groups and the province of British Columbia.

If the project does eventually complete, the pipeline expansion will nearly double Canada's production capacity in the pacific oil markets from 300,000 barrels per day (bpd) to 590,000bpd. This isn't meant to be a long-term purchase. He declined to say what construction costs would be for the expansion project, and downplayed concerns about finding a new buyer.

Canada first offered earlier this month to indemnify the expansion project before making Tuesday's announcement. "We've agreed to a fair price for our shareholders and we've found a way forward for this national interest project", he told a conference call with financial analysts.

"Ultimately, this thing will be built but we may go through a lot of ups and down before we get there".

Alberta Premier Rachel Notley cheered the news of the purchase on Twitter.

The provincial government in oil-producing Alberta will create an emergency fund of as much as C$2 billion for the project, which would only be used in "unforeseen circumstances". "We won't stop until the job is done!"

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