Kinder Morgan CEO says political solution needed for Trans Mountain project

CALGARY — Kinder Morgan is open to discussing an investment in its Trans Mountain pipeline expansion by the Alberta government if there’s clear assurance that the project can actually be completed, the company’s chief executive said Monday.

Alberta Premier Rachel Notley suggested Sunday the province could invest in the project to ensure completion of the project after the company announced it has suspended all non-essential activities and related spending on the pipeline expansion to carry Alberta bitumen from the oilsands to an export terminal near Vancouver.

Kinder Morgan has set a May 31 deadline for talks with “various stakeholders” to allow the project to proceed. Shares in the company dropped 10 per cent to $16.59 in early Monday trading on the Toronto Stock Exchange.

CEO Steve Kean said on a conference call Monday that he’s open to Notley’s suggestion, but there needs to be a clear political signal that there won’t be additional delays to the project.

“There have been some discussions. I’m not really in a position where we can talk about those specifically… Let’s be clear on that,” Kean said.

“There’s no magic formulation that’s been articulated by anyone, to us. This is what we’ll be devoting some attention to in the coming weeks.”

The company cited opposition from the B.C. government in its reasoning. The federal and Alberta governments are pushing Premier John Horgan to abandon his promise to do whatever his government can to stop the project.

Horgan is pursuing a reference case in the courts to determine if his government can control the shipment of oil through the province on environmental grounds. There is also another legal challenge in the Federal Court of Appeal, where the federal government’s approval and B.C.’s environmental assessment certificate for the project are being challenged.

As a private-sector company, Kinder Morgan can’t dictate what governments do or establish the timing but it can take actions to protect its shareholders, Kean said.

He suggested that either the province needs to change its position or the federal government must resolve the impasse, he said.

“What we have is a government that is openly in opposition (to the project) and has re-affirmed that opposition very recently,” Kean said.

“It’s outside of our control. It needs to come either at the federal level or at the provincial level.”

Kinder Morgan’s move to suspend the project will be seen as a blow to Prime Minister Justin Trudeau, who has insisted the pipeline will be built. The expansion, which would triple the amount of oil flowing from Alberta to Burnaby, B.C., was approved by the federal government in 2016.

Kean explained that part of the reason for the decision’s timing is because the company is about to ramp up investment and wants “final clarity” before it sinks more money into it. The company expects it would spend between $200 million to $300 million a month during full construction, adding it cannot justify that level of spending unless it is confident that it can finish the project.

Kinder Morgan has spent about $1.1 billion on the $7.4-billion project so far.

“We do not want to kick the can down the road, for example, until we have another $2 billion in the project…That is not a viable strategy, given the point in time where we find ourselves right now.”

A federal government official speaking on background told The Canadian Press the timing of the announcement has more to do with construction schedules than a specific event in recent days. Kinder Morgan has to get construction of the pipeline underway by the end of May or it will likely lose out on another construction season, which adds significant costs and threatens to further fray investor nerves.

The project has become a major irritant in the relationship between Alberta and B.C., with Alberta going as far as banning the import of wines from its neighbour for a period of time.

Trudeau has argued it is possible to balance the interests of both the economy and the environment in pushing for the pipeline’s expansion. The prime minister made that argument on Friday when he visited Fort McMurray, Alta.

Still, protesters have said the expansion would increase the risk of oil spills in the Burrard Inlet, and that completing it would mean the federal government will not be able to meet its commitments to cut greenhouse gas emissions by another 200 million tonnes per year by 2030.

Opposition to the pipeline has ramped up in recent weeks, with about 200 people arrested near the Burnaby marine terminal in the last month.

— By David Paddon in Toronto

Companies in this story: (TSX:KML)