(Bloomberg) -- Justin Trudeau’s government is prepared to reimburse Kinder Morgan Canada Ltd. for any financial losses incurred by “politically motivated” delays in its proposed pipeline expansion to the Pacific coast.
Canadian Finance Minister Bill Morneau said Wednesday he will “indemnify” the C$7.4 billion ($5.6 billion) Trans Mountain project, which faces fierce opposition from British Columbia’s provincial government. He added that Canada is prepared to backstop any other company willing to take on the project if Kinder drops out.
“We are willing to indemnify the Trans Mountain expansion against unnecessary delays that are politically motivated,” Morneau said in Ottawa, referring to British Columbia Premier John Horgan. “His stated intentions are to do whatever it takes to stop the project.”
The federal government is racing against a May 31 deadline imposed by the company for Canada to resolve the legal and political uncertainty around the project. Morneau said discussions with Kinder are ongoing and that he thinks the project is commercially viable without government support.
Kinder Morgan Canada, a unit of the Houston-based pipeline operator, said last month it was halting all work on the project and ceased to commit more resources given the opposition from the province, as well as some indigenous and environmental groups.
“While the discussions are ongoing, we are not yet in alignment and will not negotiate in public,” Kinder Morgan Canada Chairman Steve Kean said in a statement. “We remain steadfast in our previously stated principles: clarity on the path forward, particularly with respect to the ability to construct through British Columbia.”
Horgan said he’s not causing any risks and was issuing permits as they were asked for by the company. He also noted it’s been about a month since Trudeau summoned him and his Alberta counterpart, Rachel Notley, to Ottawa for a meeting to try and resolve the impasse
“I’m doing what I said I would do and defending the interests of British Columbians,” he said in Vancouver. “Now if they have a plan, they should tell Canadians what it is.”
Notley, meanwhile, said Alberta will be in a position to retaliate against its neighbor by the end of the day, once the provincial legislature passes a bill giving it powers over energy shipments.
“I am ready and prepared to turn off the taps,” the premier told reporters in Edmonton. “We will be ready and able to move forward with short notice as needed.”
Morneau said the federal government insurance policy would also apply to any other company willing to step in if Kinder Morgan backed out.
“If Kinder Morgan is not interested in building the project, we think plenty of investors would be interested in taking on this project, especially knowing that the federal government believes it is in the best interest of Canadians and is willing to provide indemnity to make sure it gets built,” the finance minister told reporters.
The shares of Kinder’s Canadian unit rose 3.3 percent to C$17.31 at 1:32 p.m. in Toronto. They had been down 1.5 percent this year before today, trailing the 3.6 percent gain in the S&P/TSX Energy Index.
Asked whether the federal government could take an equity stake in the project, Morneau said he hasn’t come to any conclusions as he considers his options.
The project would expand an existing pipeline from Alberta’s oil sands to the Vancouver area, where crude would be loaded onto tankers. The federal government has claimed jurisdiction over the inter-provincial project and has said it will consider legal and financial options to see it built.
The project was approved in late 2016 but suffered a setback this year when the British Columbia government proposed limiting any increase in shipments of diluted bitumen amid concerns about ocean spills.
Horgan, who took power in July, had pledged to employ “every tool” available to thwart the expansion. Since then, the province has hired a former Supreme Court judge to advise in its legal fight against the project and has also proposed restricting future shipments of oil-sands crude.
“I’m very very confident this pipeline will get built,” Trudeau repeated at a news conference in Calgary Tuesday.
©2018 Bloomberg L.P.