Kinder Morgan may scrub BC crude pipeline: Update

Updates throughout with comment from Kinder Morgan, political leaders

Kinder Morgan will scrap its planned 590,000 b/d Trans Mountain crude pipeline expansion from Alberta to the southern British Columbia coast if it cannot win an assurance by 31 May that the project can continue through BC, which vehemently opposes it.

"We have determined that in the current environment, we will not put [Kinder Morgan] shareholders at risk on the remaining project spend," chief executive Steve Kean said.

Kinder Morgan is suspending nonessential spending on the project until the matter is resolved, one way or the other.

The line, one of three major Alberta crude takeaway pipeline projects along with TransCanada's 830,000 b/d Keystone XL and Enbridge's Line 3 replacement to restore 370,000 b/d of capacity, has seen protests ramp up recently at the Burnaby, BC, terminus. Local officials have railed against the line, and provincial premier John Horgan rode a wave of anti-Trans Mountain sentiment into office last summer.

Among other things, the BC government has suggested capping the amount of diluted bitumen moving through the province at existing levels, which outlaw the flow of the very oil sands crude targeted by the project.

"Previously, opposition by the province of British Columbia was manifesting itself largely through BC's participation in an ongoing review," BC said in a statement this weekend. "Unfortunately, BC has now been asserting broad jurisdiction and reiterating its intention to use that jurisdiction to stop the project."

Kinder Morgan, which has focused more on permitting and less on construction spending in recent months, said BC's heightened interference combined with the approach of yet another crucial warm-weather construction window, the lead-time required to boost spending and the avoidance of borrowing money in an uncertain environment have forced it to set a deadline.

"We cannot move the seasons in Canada," Kean said today on a conference call, noting that the project is moving into a phase that would require C$200mn-C$300mn/month ($157mn-$235mn/month) in spending.

The move puts the onus on the federal government, which has approved and voiced support for the project, to either quash BC's opposition using a variety of legal tools or to allow the pipeline to die.

"I cannot speak for what they have considered," Kean said. "Their approach has been very outspoken and supportive."

Prime minister Justin Trudeau yesterday took to Twitter to reaffirm support.

"Canada is a country of the rule of law, and the federal government will act in the national interest," he said. "Access to world markets for Canadian resources is a core national interest. The Trans Mountain expansion will be built."

One avenue could be a federal declaration that the project "works for the general advantage of Canada", giving the federal government authority to quash provincial resistance. A bill to do just that is pending in the Canadian senate.

Alberta premier Rachel Notley also tweeted her support for Kinder Morgan yesterday, calling on Ottawa to back up its approval with action.

"A federal approval of a project must be worth more than the paper it is written on," she said.

BC's Horgan issued a statement that did not address Kinder Morgan's decision directly, but said that BC will "do everything we can to protect our land and waters, our coastal communities and our local economies".

In addition to BC's political resistance, it is also part of a lawsuit challenging Kinder Morgan's 2016 federal approval. A judicial rebuke of the permit, or even a decision that requires more conditions, also could kill the project, Kean said today.

"We cannot build a project in a courthouse," he said.