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Canadian politicians step up pipeline rhetoric ahead of Kinder Morgan deadline

Kinder Morgan Inc. is sticking to a May 31 deadline for Canadian governments to resolve their differences on the C$7.4 billion Trans Mountain oil pipeline expansion, despite a flurry of recent political activity.

As Canada's federal government offered a financial backstop, Alberta's government passed a law to enforce its pro-pipeline stance, and British Columbia's premier restated his intent to kill the project, Kinder Morgan Canada Ltd. held its annual general meeting in a downtown Calgary hotel as demonstrators waved placards showing their support for the project.

Steven Kean, CEO of the Houston-based pipeline giant and its Canadian subsidiary, stuck to the company's script, saying the project would not move forward without "clarity on the path forward, particularly with respect to the ability to construct through British Columbia and ensuring adequate protection of our [Kinder Morgan Canada] shareholders."

Kean's remarks were included in a statement issued by the company after Canadian Finance Minister Bill Morneau pledged earlier May 16 to indemnify the company against financial risks posed by his government's regulatory standoff with British Columbia. Kinder Morgan also released a statement on the results of the only items up for vote at the annual meeting: the election of a slate of six directors — three of whom, including Kean, are senior executives at Kinder Morgan Inc., and the appointment of auditors.

While Kinder Morgan's response was low-key, politicians at the provincial and federal levels had much to say about the pipeline. As Alberta Premier Rachel Notley prepared to head for the provincial Legislature for a vote on a bill that could cut off supplies of gasoline and other fuels to British Columbia because of the pipeline dispute, she said at a news conference, "Albertans have the right to choose how our energy is shipped so that Alberta gets the best return possible. With the price differential on our oil taking billions of dollars out of our economy, Alberta has the right to work in the public interest to reduce the cost to the treasury and the economy." The law, known as Bill 12, was passed later in the day.

Across the Rocky Mountains in British Columbia, Premier John Horgan told the Canadian Press that he will continue to defend his province's environment and marine economy from spills that could be created by the increase of shipments of mostly oil sands bitumen on Trans Mountain to 890,000 barrels per day from 300,000 bbl/d. Most of that oil would be shipped via tanker to foreign markets from Kinder Morgan's Westridge terminal in Burnaby, British Columbia.

Horgan said he was alerted by Prime Minister Justin Trudeau that the federal government was preparing to take action. "I said, 'Fair enough, do what you like,' and today I guess we're getting the first step of that," Horgan said, according to the news agency.

SNL Image

Kinder Morgan Canada's Westridge terminal in Burnaby, British Columbia.

Source: Kinder Morgan Canada Ltd.

Canada's offer of a financial backstop for the project is aimed at keeping it alive as British Columbia steps up legal action and delays needed permits. Canada's constitution gives the federal government authority over interprovincial and international energy transportation. The federal government could ask the Supreme Court of Canada to validate that authority, but the process could take up to a year. Kinder Morgan set its May 31 deadline to allow it to start construction in the summer.

The Canadian Energy Pipeline Association, an industry group that represents the nation's biggest pipeline operators, applauded the federal government's engagement with Kinder Morgan but did not endorse the use of government funds for the project.

British Columbia's actions place "unnecessary hurdles in the way of progressing a federally approved project and [undermine] Canada's reputation as a secure place for foreign investment," association CEO Chris Bloomer said in a May 16 statement. "The project should proceed because, as the federal government has recognized, it is in the best interest of Canada. It should not require financial intervention by government."

Alberta's passage of Bill 12 would allow Notley's government to limit shipments of fuels such as gasoline, diesel and jet fuel to its western neighbor. British Columbia, with a single refinery in its most populous region, receives the majority of those fuels through the Trans Mountain network.

Horgan has claimed that the law would be beyond the province's constitutional authority, the same argument Alberta has raised about a proposed British Columbia rule that would limit increases in bitumen shipments. "With the B.C. government seeking to limit what energy products can flow across provincial borders, Alberta has the right to make that decision for ourselves," Notley said.