Canada’s government has said it is buying a controversial pipeline expansion project to ensure it gets built in the face of stiff opposition from environmental activists and a regional government.
Bill Morneau, finance minister, announced on Tuesday the government will pay Kinder Morgan 4.5 billion Canadian dollars (US$3.5bn) for the Trans Mountain pipeline.
The project will duplicate an existing 1,150km pipeline, allowing it to ship up to 890,000 barrels of oil a day from landlocked Alberta to the Pacific coast of neighbouring British Columbia, in western Canada, for export overseas.
The government’s move effectively nationalises the project in a bid to quash dozens of legal challenges and protests at construction sites.
“The federal government has reached an agreement with Kinder Morgan to buy the Trans Mountain pipeline and the infrastructure related to the project,” said Morneau.
“This allows us to get rid of the political risk around [the pipeline] because we [are imposing] federal jurisdiction over the project,” he said.
Kinder Morgan investors must still approve the sale, which is scheduled to close in August, but the deal will allow construction to resume immediately, the minister added.
Ottawa approved the project in 2016 after an environmental review, saying it was in the “national interest”.
Currently, 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.
Access to new oil markets was also key to Canada meeting its Paris climate target because Alberta, the nation’s singled largest pollution emitter, agreed to take action against carbon emissions, if it gained access to new markets for its oil.
But British Columbia’s social democratic government recently joined environmental activists’ fight against the pipeline, provoking a trade row with Alberta and leading Kinder Morgan to temporarily halt its construction until the dispute was resolved.
Amid the feud, the pipeline has become a barometer for foreign investments in Canada, with some warning of a spillover into other sectors of the economy.
Morneau said the government’s purchase of the project “will ensure that we’re able to safely get Canadian oil resources to world markets where we can get a fair price for them”.
He added: “It will reassure investors that Canada is a country that respects the rule of law and gets big, important things done.”
A majority of Canadians support the pipeline, according to recent polls, but they are reluctant to see tax dollars used to support it.
Opponents of the pipeline are concerned about the risk of oil spills from tankers along Canada’s pristine Pacific coast impacting fisheries and tourism.
But Morneau said the Alberta-British Columbia feud, which led Alberta to boycott British Columbia wines and threaten to cut the neighbouring provinces fuel supplies, “cannot be allowed to fester”.
He said it threatens Canada’s reputation as a safe place to invest, puts thousands of jobs at risk and holds back Canada’s economic growth.
“We’ll get that pipeline built,” Prime Minister Justin Trudeau told reporters as he headed into a cabinet meeting.
His Liberals face a difficult balancing act in trying to champion climate action while supporting growth in Canada’s oil sector.
Until now, Trudeau’s government has used a soft tone to try to convince British Columbia to abandon its opposition to the pipeline, hoping not to alienate voters in the province before next year’s general election. But British Columbia has refused to yield.
Later on Tuesday, many criticised the government’s move, saying it raised broader environmental concerns by enabling increased development of the carbon-heavy oil sands, as well as burdened Canadian taxpayers for a project that should be paid by the private sector.
Green Party of Canada Leader Elizabeth May called it a “huge subsidy to fossil fuels” on Twitter.
Kinder Morgan laughing all the way to the bank. KM gets $4.5billion and walks away. Canada to raise money to build $7.4 billion project.
— Elizabeth May (@ElizabethMay) May 29, 2018
Over the last three years Kinder Morgan earned $340 million in Canada and paid just $1.1 million in taxes.
That’s a 0.3% tax rate. What!?
And now Justin Trudeau is offering public money to pay for the insurance for its pipeline too.https://t.co/zFGnxycgcv
— Nathan Cullen (@nathancullen) May 28, 2018
Oh @JustinTrudeau, you've been mislead. I feel genuinely sad for you. Those who coaxed you into giving Kinder Morgan $4.5 billion of Canadians' tax dollars for a worthless pipeline project, have just destroyed your reputation – here at home & internationally. #StopKM #Climate
— Meanwhile in Canada (@MeanwhileinCana) May 29, 2018
Indigenous leaders, who have been at the forefront of a grassroots campaign against the Trans Mountain project, have vowed that the pipeline “will never be built“.
Many indigenous people see the new pipeline as a threat to their lands, echoing concerns raised by Native Americans about the Keystone XL project in the US.
Vancouver Mayor Gregor Robertson called the pipeline an “unacceptable risk” that threatens 10,000 jobs in the harbour.
Mike Hudema, a climate and energy campaigner at Greenpeace Canada, said the government “has just signed up to captain the Titanic of tar sands oil pipelines, putting it on a collision course with its commitments to indigenous rights and the Paris climate agreement.
“Trudeau is gambling billions of Canadian taxpayer dollars on an oil project that will never be built – a project that Kinder Morgan itself has indicated is ‘untenable’ and that faces more than a dozen lawsuits, crumbling economics, and a growing resistance movement that is spreading around the world,” Hudema said.
In recent months, thousands have protested against the project across Canada.
Many activists were arrested for blocking construction on oil transport terminals in British Columbia, including May, the Green Party leader. During protests in March, 172 people were arrested in one week.
According to Hudema, the movement opposing the project “will not back down” following the government’s purchase.
“Two out of five proposed new tar sands pipelines have now been cancelled in the face of indigenous and environmental legal challenges, widespread public opposition and changing economics,” Hudema said.
“The Trans Mountain Expansion faces even steeper obstacles and will soon become the third, and Trudeau just put the public on the hook for the costs,” Hudema said.
Under the proposed federal plan, the Trans Mountain pipeline will be placed under the stewardship of a new Crown corporation and Ottawa will divest itself of the project at a later date.
“It’s not the intention of the government of Canada to be a long-term owner of the project,” Morneau said, adding that pension funds and indigenous groups have already expressed an interest in buying stakes in the project.
Alberta province also pledged to provide “emergency funding” for the pipeline’s construction, if needed.