The Canadian administration said on Tuesday it will buy Kinder Morgan Canada’s Trans Mountain pipe project for C$4.5 billion ($3.5 billion) but does not intend to be the long-term possessor of the project, which has faced fierce environmental opposition.
Finance Help Bill Morneau said that buying the existing pipeline and its designed expansion project, which will carry crude oil from landlocked Alberta to a haven in the Vancouver area, is the only way to ensure the halted project gets built.
The regime will also offer federal loan guarantees to ensure construction persevere ins through the 2018 season as part of the deal with the company, a component of Houston-based Kinder Morgan.
Kinder Morgan Canada’s shares broke as much 8.5 percent in Toronto.
Morneau said the purchase of the duct gives the project the federal jurisdiction needed to overcome the provincial foe of British Columbia, but he did not say how it could force the province to allow the pipeline to be constructed.
“So our message today is simple: when we are faced with an exceptional berth that puts jobs at risk, that puts our international status be known on the line, our government is prepared to take action,” Morneau told pressmen.
Kinder Morgan halted the project in April due to permitting delays and civil opposition in British Columbia, and set a May 31 deadline to decide if it would proceed with the expanded form ranks.
The pipeline would give Canadian crude greater access to inappropriate markets, but is opposed by environmental groups and some aboriginal groups.
“We receive agreed to a fair price for our shareholders and have found a way forward for this nationalist interest project,” said Steve Kean, chief executive administrator of Kinder Morgan Canada and its parent, Kinder Morgan.
Kean did not say why he assertive to sell rather than absorb the risk of further delays to Trans Mountain. Kinder Morgan Canada on continue to own the remaining assets, including crude storage, rail crt cathode ray tubes and a condensate pipeline, and look to expand, he said.
Canada’s oil sector has been stung in the former times year as foreign energy companies retreated amid concerns with the environmental toll, high production costs and a risky regulatory order.
Morneau said more investment will be needed to complete the construction of the ready expansion, and that in the long term the project “has commercial value” and should be in the Tommy sector.