Five next steps needed to complete the Trans Mountain project
Despite Ottawa's pledge to buy the pipeline, finding private investors still key to project's success.
The federal government announced a plan Tuesday to spend $4.5 billion on buying the Trans Mountain pipeline and most of current owner Kinder Morgan Canada’s other assets in order to ensure a plan to twin the pipeline is allowed to proceed. Here are five things that have to happen next:
1. Shop for a buyer: Kinder Morgan Canada and the federal government will spend the next eight weeks jointly trying to find another buyer for the pipeline. Kinder Morgan has agreed to take part in marketing the project; Ottawa wants to avoid becoming a pipeline owner if at all possible.
2. Begin construction: Kinder Morgan is going to start construction on the pipeline as planned this summer, with Ottawa providing loan guarantees for any money the company spends on the endeavour between now and when the pipeline is sold. Construction costs going forward will be included in the $4.5-billion sale price if no buyer is found.
3. Seek shareholder approval: If no new buyer is reached by July 22, Kinder Morgan will present the $4.5 billion offer from Canada to its shareholders for a vote before the end of July. If shareholders approve the sale, the paperwork will be completed sometime in August or September. The purchase will see Canada buy the existing pipeline, the Westridge marine terminal in Burnaby, B.C., as well as pumping stations and rights of way along the routes. If Canada buys the pipeline, it will also acquire the personnel needed to continue with construction. That would be several hundred people ranging from executives and managers to construction employees.
4. Set up a new Crown corporation: The Export Development Bank of Canada will finance the plan and create a Crown corporation to run and manage the pipeline during Canada’s ownership period. The crown will use the expertise and management of the employees acquired from Kinder Morgan to get the pipeline built. Finance Minister Bill Morneau believes Canada’s authority to build the pipeline will be able to overcome any resistance, be it from protesters or the B.C. government.
5. Watch for future investors: During or following construction of the expanded pipeline, which is expected to take about 2.5 years to complete, Canada will monitor the markets and seek out future investors interested in taking on the entire project once it is done. Canada’s long-term plan is to finance the costs of construction through the paid contracts with oil producers to ship their oil through the pipeline, and recoup its investment through an eventual sale.