Why the Government of Canada bought the Trans Mountain Pipeline

On May 29, 2018, the Government of Canada announced its intent to purchase the Trans Mountain Pipeline and its expansion project, ensuring that the twinning of the line will be seen through to completion. As Canadians, we are all owners of the Trans Mountain Pipeline, working together so we all benefit from the jobs, tax revenue, and investment profits it will bring – from coast to coast.

Alberta and Canada respond to Kinder Morgan’s request

The Trans Mountain expansion project was approved after extensive regulatory and environmental reviews.

But the B.C. government took on different tactics to delay the project. These actions created frustration for the previous owner of Trans Mountain – Kinder Morgan.

On April 8, 2018, Kinder Morgan announced that it was suspending all non-essential works and related spending on the pipeline expansion. The company wanted reassurance by May 31 that despite ongoing efforts by the B.C. government to delay and challenge the project, there was a clear path forward to build the pipeline through to the Canadian coast.

In response to Kinder Morgan’s announcement, the Government of Alberta publicly reassured Canadians that it would take whatever steps necessary to see the project to completion – even if it meant buying the project outright. Albertans and their government began a campaign to pressure the federal government to assert its jurisdiction and solve the challenges that faced the pipeline project. The federal and Alberta governments both agreed that environmental progress and economic development go hand in hand, and that the project is in the national interest of all Canadians.

Alberta offered to be part of the federal government's solution provided three conditions were met:

Construction of the pipeline expansion would resume immediately
There would be certainty that the project would move forward
Albertans would see value for any investment

Canada buys the pipeline from Kinder Morgan

On May 29, 2018, the federal government reached an agreement in principle with Kinder Morgan to buy the Trans Mountain expansion project, the current Trans Mountain Pipeline, and related assets for $4.5 billion. This decision meets Alberta's three conditions and means that Canadians are one step closer to having the pipeline expansion built. On August 31, 2018, Kinder Morgan’s board of directors approved the sale.

Federal ownership helps remove obstacles

A federally owned pipeline is more likely to be built than one operated by a private company. There are two reasons for that.

First, the federal government has a very different legal relationship with the province of British Columbia than a private company does. Tactics the B.C. government might use to discourage a private company would not work on the federal government. The Government of Canada has special immunities and is not affected by the provincial laws that the B.C. government had threatened to use to delay the project.

Second, the economics are different for the federal government. Kinder Morgan had to address shareholder concerns about whether this project would be the best financial return for their investment. The federal government will be able to get a return for this project in four ways:

The profits both the new and existing pipeline create
The government revenue the expansion provides (estimated at $46.7 billion over the next 20 years)
The economic activity this project generates from coast to coast
The confidence investors have in Canada as a place to do business, as demonstrated by this assurance that federally approved projects get built.

Expanding the Trans Mountain Pipeline is in the national interest, and that is reflected in the direct involvement of the federal and Alberta governments. The up-front cost of the pipeline represents only a small fraction of what the federal government has spent on other economic initiatives, such as the $9-billion auto sector bailout in 2009.

Honouring previous agreements

Previous agreements signed with communities along the pipeline route still stand.

The Trans Mountain Pipeline will support communities from coast to coast. The agreements that were signed with Indigenous and community groups will not be affected by federal government announcing to buy the pipeline.

Alberta’s investment in Trans Mountain

Alberta will contribute up to $2 billion toward the project as an emergency backstop that won’t be paid until oil is flowing. If this investment is needed, Alberta’s contribution will be converted into equity, maximizing the return on the investment for Albertans.

Put another way, Alberta is willing to buy up to $2 billion of a company – but Alberta only has to pay for its purchase once the company is able to make a profit.

While this could be considered a good deal for any investor, the payoff for Alberta is more than a return on a pipeline investment. It will attract investment to Alberta and get higher and fairer prices for Alberta’s energy resources.

Governments support key projects that benefit all Canadians

Governments in Alberta and Canada have a history of stepping in to help carry major, nation-building projects across the finish line.

In the 1970s, Alberta could only access its oil sands through open pits. Using steam was unheard of at the time. Premier Peter Lougheed created a Crown corporation called the Alberta Oil Sands Technology and Research Authority. It invented the steam-assisted gravity drainage (SAGD) technology that’s now commonplace in the oil sands and lets us get to the oil underground without surface mining.
Another example of governments helping to build our energy sector is Syncrude, which has generated billions in taxes and royalties. But it would never have gotten off the ground without the public investing in it.
The same is true for Hibernia on the East Coast. Deep sea oil drilling needed federal investment to get underway. It brings in profit every year.

Today, it’s commonplace for the private sector to invest in the oil sands or deep sea drilling. What’s not commonplace is building pipelines to the Canadian coast, something that has not been done in almost 70 years. That’s a long time. So, just as the public sector got steam oil exploration and deep sea oil exploration going, the Governments of Canada and Alberta are going to get this pipeline going too.

The Trans Mountain Pipeline expansion project will support tens of thousands of jobs, provide billions of dollars in benefits to our cities and towns, and show the world that when Canada makes a decision, we stand behind it.

Canadian leaders show their support

"The Canadian Chamber again calls on the federal government to stand behind its own regulatory processes and to fulfil its constitutional responsibilities. The federal government needs to act now by engaging directly with the province of British Columbia and ensuring that the fair and scientifically sound decisions on the Trans Mountain Pipeline are carried out."

"We've continued to rely on one customer, which is the United States. The movement of that product to the West Coast makes sense to me and that product should be allowed to go into the marketplace."

"The decision we made was in the national interest and we're going to move forward with that decision, which means we're going to get the Trans Mountain Pipeline built."

"The Métis of Alberta are working together to provide a better future for our children and grandchildren. Solid economic investment, including pipelines like the Trans Mountain, is the right way to go."

"If this project doesn’t go through, it’ll hurt our people… (The Trans Mountain Pipeline) will provide a major leg out of poverty."

"Members of the United Steelworkers are proud that the pipeline will be utilizing Canadian-made, USW-built pipe. But it’s not just for Steelworkers. The Trans Mountain Pipeline will also offer family supporting employment to thousands of working people. We stand with them."

"I’m strongly behind Premier Notley on whatever she does to push this. I’m also calling on the federal government and their jurisdiction in this matter and to ensure that we don’t hold up the economy of all of Canada – and safe, clean Canadian energy – for political reasons in our province."

"Access to markets, including building trade infrastructure, is what we want to see government deliver. These infrastructure projects are trade enabling, and they will drive economic growth for decades to come. They will create jobs for Canadian families and generate tax revenues for governments confronting massive deficits."

"This decision will directly impact British Columbian families whose livelihoods depend upon well-paying jobs in the construction and energy sectors, and put at risk First Nations’ abilities to more fully participate in the economy."