Oilpatch skeptical about backup plan for Trans Mountain

The federal government may have other options, if Kinder Morgan pulls the plug on the Trans Mountain pipeline. But the energy sector is still waiting on Plan A to be unveiled. 

On a conference call with analysts, Kinder Morgan’s chief executive Steve Kean said that there were no signs that the political roadblocks were going to be removed.

“It’s become clear this particular investment may be untenable for a private party to undertake. The events of the last 10 days have confirmed those views,” he said.

Two senior officials told CBC News that if Kinder Morgan walks away, the federal government believes other energy companies might be willing to take on the project.

That seems unlikely to many in the oilpatch, since the problem with Trans Mountain is political not financial.

“There’s not a lot of people that would jump right into the same situation that Kinder Morgan finds itself in and say, ‘hey, I have the answer,'” said Greg Stringham, an energy sector analyst and former vice president with the Canadian Association of Petroleum Producers.

Stringham said that having a group of companies involved would diversify the risk so that Kinder Morgan wasn’t solely responsible, “but all that does is diversify the risk. It doesn’t remove the political problem.”

Kinder Morgan has begun negotiations with both the federal and provincial Alberta governments. Despite some prodding from analysts on the conference call, executives at the company would give no details as to what they want from the government.

The federal government says it expects other companies to step up if Kinder Morgan walks away from Trans Mountain. (Aaron Vincent Elkaim/Canadian Press; Erin Collins/CBC)

The company has already spent $1.1 billion on the project, but there is another $6 billion to be spent before it is up and running. One possibility is that the two governments could backstop that further investment. So, if the pipeline didn’t go ahead, the company would not be out of pocket billions. That would give Kinder Morgan’s shareholders a form of insurance, while shifting the risk to taxpayers.

However, what the industry is really looking for is a political solution.

“We need clarity on what exactly the government is proposing,” said Martin Pelletier, chief investment officer with Tristone Wealth Management.

“The industry is looking for concrete action by the federal government to ensure that there are are no further delays caused by the B.C. government.”


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