Kinder Morgan Canada Ltd. (KMCL) is suspending all nonessential activities and related spending on its Trans Mountain Expansion Project (TMEP). KMCL also announced that, given actions in opposition to the project by the Province of British Columbia, it will not commit additional shareholder resources to TMEP. KMCL, however, will consult with various stakeholders to reach agreements by May 31 that may allow TMEP to proceed.
“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,” said KMCL Chairman and Chief Executive Officer Steve Kean. TMEP has the support of Canada’s federal government and the provinces of Alberta and Saskatchewan but faces continued active opposition from the government of British Columbia.
KMCL had previously announced a “primarily permitting” strategy for this year’s first half, 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, KMCL explained, TMEP now facing unquantifiable risk. British Columbia has been asserting broad jurisdiction and reiterating its intention to use that jurisdiction to stop TMEP, said KMCL.
“A substantial portion of the project must be constructed through British Columbia,” Kean continued, “and since the [province’s] change in government in June 2017, that government has been clear and public in its intention to use ‘every tool in the toolbox’ to stop the project.”
Trans Mountain has spent $1.1 billion (Can.) to develop TMEP since its initial filing with the National Energy Board in 2013. “While we are prepared to accept the many risks traditionally presented by large construction projects, extraordinary political risks that are completely outside of our control and that could prevent completion of the project are risks to which we simply cannot expose our shareholders,” said Kean. “If we cannot reach agreement by May 31, it is difficult to conceive of any scenario in which we would proceed with the project.”
Given the uncertain conditions, KMCL is not updating its cost and schedule estimate.
NEB decided in May 2016 that TMEP was in the public interest, with federal approval following in November 2016, and approval by British Columbia in January 2017. The election of a new British Columbia government in May 2017, however, brought opposition to the project.
As part of the same announcement approving TMEP, NEB blocked Enbridge Inc.’s proposed Northern Gateway pipeline, a greenfield project also designed to ship Alberta crude to Canada’s west coast (OGJ Online, Nov. 30, 2016). There are no other proposed projects to move crude produced in Alberta along this route.
