Canada's federal government may dip its toe into the U.S. pipeline business because of its planned purchase of the Trans Mountain pipeline network from Kinder Morgan Inc., which includes a 69-mile conduit linking the line with refineries in Washington state.
According to a document filed by Kinder Morgan Canada Ltd., Trans Mountain is the sole shareholder in Puget LLC, owner of the Puget Sound pipeline, which was built in 1954 just after completion of the Canadian oil-transporting system. The line has a capacity of about 180,000 barrels per day and connects oilfields in the Canadian province of Alberta with refineries in Anacortes, Cherry Point and Ferndale, Washington near the state's coast. While those refineries are mostly supplied with crude from Alaska's North Slope, Puget Sound supplements those supplies with medium-grade oil and other products originating in Western Canada.
The May 28 document detailing the sale said the purchase will transfer "to the purchaser the ownership of the companies and limited partnerships that hold the Trans Mountain pipeline system and related expansion project, the Puget Sound pipeline system and the Canadian employees that operate the business and assets to be sold." Puget Sound starts at the U.S. border at Sumas, Washington, crosses Whatcom and Skagit counties before terminating at Anacortes, about 80 miles northwest of Seattle.
Neither Canada's government nor Kinder Morgan has announced plans for the line after the transaction closes.
Canada's government stepped in with a C$4.5 billion offer to buy Trans Mountain days ahead of a Kinder Morgan-imposed deadline that sought regulatory certainty for an expansion that would nearly triple the capacity of the line. The Houston-based company said it might abandon the C$7.4 billion expansion project after construction had been delayed by environmental group protests, legal challenges and regulatory delays. The government stepped in because it considers the export of oil sands bitumen, which would make up the bulk of shipments on the expanded system, to be vital to the nation's economic interests. Canada will attempt to find another buyer for Trans Mountain before the deal closes in the third quarter.
The Form 8-K filing also details retention bonuses totaling C$1.5 million each for Trans Mountain executives Ian Anderson and David Safari. The pair are slated to receive the bonuses in installments ending in 2020. Anderson, Trans Mountain's president, and Safari, a vice president who headed up the Trans Mountain expansion program, were each "awarded a retention bonus of C$1.5 million, which will be payable in equal parts on July 2019 and July 2020, provided that the applicable officer remains employed by [Kinder Morgan Canada] through such date."
