Five things you should know about Morneau’s Trans Mountain buyout
Now that you, as a Canadian taxpayer, are a pipeline owner…
For months, Texas-based pipeline giant Kinder Morgan has been hinting their pipeline and oil tanker proposal on the B.C. coast was not worth the risk.
Many of the risks disclosed to investors — from the opposition of a new B.C. government to construction efforts being met with resistance to new legal risks by the First Nations who hold rights and title to the land they want to build through — were looming large in front of them. Responsible for protecting their shareholders, they decided to walk away.
But CEO Steve Kean had one last ace up his sleeve. He issued an ultimatum to the Canadian government, and they took the bait. Now, he’s laughing all the way to the bank with a $4.5 billion public buyout.
Bill Morneau, the negotiator of this deal on behalf of Trudeau’s desperate Liberal government, got brilliantly played by a group of former Enron executives. Now, we’re all on the hook.
That means you, yes you, are a soon-to-be partial owner of a leaky 65-year-old pipeline — and the proponent of a still uncosted oil tanker expansion project. Here are five things you should know about Morneau and Trudeau’s buyout deal:
1. With $4.5 billion, Morneau got played
As the Globe reported, the existing Trans Mountain line system is worth well under $4.5 billion dollars. The federal government was so visibly desperate in their effort to salvage the expansion project, they found themselves in weak bargaining position. So we, the taxpayers, paid a premium for this aging infrastructure.
Kinder Morgan has been earning $200 million a year from the existing pipeline, so it will be decades before this “investment” has been paid off.
2. The uncosted expansion
There’s a reason taxpayers are taking over the expansion, too — because the private sector doesn’t want it.
Remember, the $4.5 billion only pays for the old pipeline. The cost for building a new and bigger one is a whole other story.
Kinder Morgan last estimated the expansion costs at $7.4 billion, but the company hasn’t revised its estimate in over a year because of all the uncertainty. So yes, we can guess it’s quite a bit higher now. Ottawa promises construction will ramp up this summer. Assuming they can’t find a buyer, taxpayers would be on the hook for every penny.
Minister Morneau has so far refused to tell taxpayers how much he’d be willing to spend to build this dead-end oil tanker project.
3. If a private company buys it, we’re still on the hook
Of course, as Morneau keeps repeating, his ideal scenario is to find another buyer to build and operate the pipeline. That’s Ottawa three-part plan to flip a pipeline project: purchase the fixer-upper with taxpayer money, attempt to quash B.C. and First Nations resistance, and then sell at a profit!
But remember, even if the federal government manages to sell this “dog with fleas”, taxpayers are likely to lose out, again. We have Morneau’s indemnity promise to thank for that.
As announced Tuesday, Canadian government is still committed to bailing out any other company that gives up on the Trans Mountain expansion. Courts rule that Trudeau’s government failed to uphold its Constitutional responsibilities to First Nations in their rigged consultation process? No worries! The project’s approval may now be invalid, but the next company can walk away with taxpayer money to compensate them for Trudeau’s unlawful review process.
Minister Morneau also has yet to announce how much taxpayer money he’s offering to indemnify potential buyers.
4. Polluter pays… except now the polluter is the Canadian government
Pipelines spill. The existing Trans Mountain line has spilled 83 times since the NEB made them start keeping track. The latest, albeit small spill literally happened this week.
Under Canada’s new polluter pays legislation, the operators of pipelines like Trans Mountain have to keep $1 billion on hand in case of an accident. And if a major spill occurs, the price tag could be quite a bit higher than that. All of which means, in addition to devastating and lasting effects to our local economy, waterways and health in the event of an oil spill — we’ll also be on the hook as taxpayers for the costs of attempted clean-up.
5. If the Paris Agreement succeeds, markets dry up
And fast.
The business case for the Trans Mountain expansion has never made sense in a carbon constrained world. This project — for which the Trudeau government is now the proponent — is an economic bet on catastrophic levels of global warming. Kinder Morgan has admitted this.
If the Paris Agreement succeeds, global oil demand starts shrinking, and this expansion has no market. (And if oil production and consumption keep going up, and the Paris Agreement fails… well, we’ll have bigger problems.)
As taxpayers, we should expect our government have more clear headed decision-making. Or, at least to be as smart as multinational oil companies like Shell or big banks like HSBC that have read the signs are backing out of new investments in Alberta’s oil sands.
If Justin Trudeau cared about our environment and economy, he’d be investing in equipping Canada’s fossil fuel workers with the skills they need to transition to sustainable energy jobs. He’d be helping putting hundreds of thousands of people to work in energy efficiency, wind and solar — which create many times more jobs per dollar invested than oil extraction.
Instead, his government is on track to sink untold billions of taxpayer dollars on a pipe dream. He’s not just blurring but breaking the line between oil and state. He’s stepping in to finance reckless oil expansion that prudent business people will not touch.
And he’s doing it all on the dime of taxpayers like you and me — not to mention the future generations of Canadians that will be saddled with the deficit and climate debt Trudeau’s leaving in his wake.
I hope they have to stay in office and face the repurcussions, and pay from their own pockets as well.
How can we prevent this calamity?
What if China buys it? What can we do then? A railway company is developing dry pallet from bitumen, so it can be transported.I think it is CN. How come that our government does’t know bout that?
That should read “saddled with the deficit”.
True dough is worried about leaving 160 billion bbls of bitumen in the ground, all the while ignoring ??trillions of solar energy reflected off into space. He’d better start harvesting some of those rays to compensate for the bitumen that WILL be left in the ground. The Trans Mountain Pipeline is worn out and its product is about to become a Stranded Asset!
Wrong on most every point. Oil consumption continues to climb is on track to exceed 100 million barrel daily in 2019. The worries about this pipeline are so overblown it’s pathetic .
As for jobs in the unreliables like solar and windmills , surpassing those generated by oil and gas …well that is a pipedream.
Building a pipeline will generate construction jobs ,but the real ongoing jobs are in the activities required to keep that line filled.
No society can maintain the standard of living without primary industry ,we are blessed to have this huge resource in Canada .
As for your worries ( lol) about the cost blah ,blah ,blah. It morons like your organization driving up the costs.
All the big companies that have left ,this is normal …they rush in when prices are high, and rush out when prices are low,! I’ve worked in this industry for 50 years ,and have witnessed the phenomenon several times! You may have noticed for every asset sold there was a buyer. Sad I know! Lol,!
This is an absolute BETRAYAL by the Liberal government. How ludicrous for Canadians to bale out Enron executives and the Koch brothers of Texas…disgusting waste of Canadian tax payers money…shame on the Liberals I hope they will suffer the consequences. I find it ironic that they are willing to close down part of the Juan De Fuca salmon fishery to give the Orcas more of a fighting chance…Excuse me? What about the dire consequences of wiping out the marine life of our west coast in the case of an oil spill? Orcas, salmon, bird life, mammals,…it would be absolutely devastating!! They are still cleaning up the Kalamazoo river where Kinder Morgan had their last catastrophic spill.
What about the Exxon Valdeze…they still have oil soaked beaches to contend with and that isn’t even bitumen.
LOL Tony. #1 renewable energy is cheaper than than fossil fuels. #2 renewable energy is clean, it is good for the environment. The only impediment to a future of cheap, clean energy is Tony and the Koch brothers.
How come you guys are so much smarter than everyone else? Do you actually have any investments? Any in alternative energy? Which companies?
Which political party will have a credible chance of moving the transition to renewable energy forward ..and what can we and allied organizations do to support them???? I an NOT voting liberal or PC ..worried about NDP and the Greens have 1 MP!
Conveniently ignoring environmental implications in favour of hitching your wagon to a sunset industry for short term gain. But I guess you have already labelled the “enviros” as loonies and don’t buy into the science of climate change.
And unreliables? Combine them with storage technologies and that changes markedly. And there are other up & coming technologies to harvest the energy from the sun. Like biofuels from algae and the newest one: extracting CO2 from the atmosphere & combining it with water using solar energy to synthesize gasoline.
Morons? Look in the mirror.
Trudeau & co. would be better served to invest the money in helping Alberta into the future of clean energy.
“Now that you, as a Canadian taxpayer, are a pipeline owner…” This is incorrect. The purchase hasn’t been completed. “The company [Trans-Mountain] has said it is now pursuing construction work, due to the government’s offer which covers construction costs on the expansion] until the sale is completed later this summer.”
https://www.nationalobserver.com/2018/06/11/news/nathan-cullen-accuses-canada-buying-lemon-kinder-morgan-after-estimated-size-oil
You say “LOL Tony”? There’s nothing to laugh about that troglodyte.
It should, indeed!
Would you please let Royal Dutch Shell know what a terrible mistake they made pulling out of the tar sands and putting the proceeds into renewables!
The buyers were all Canadian minor players btw!
“As for jobs in the unreliables like solar and windmills , surpassing those generated by oil and gas …well that is a pipedream.” Another who doesn’t get it: when a non-renewable resource would put a renewable resource at risk then it’s a no-brainer…for those who have a functioning brain. Diluted bitumen pipelines in the Fraser watershed, or any other salmon bearing watershed, is a truly self-serving and insane proposal. LEAVE IT IN THE GROUND! It’s crap. IT CAN’T BE CLEANED UP. Otherwise refine it yourselves if you don’t think so.
Mr. Cramps How are worries about the pipeline “pathetic”? Details please. Making a statement without substantiating it with logic is just farting in the wind; to be expected from someone 50 years in the industry i suppose. You’ve been sniffing the fumes too long buddy.
The only pipedream here is believing we can continue on with business as usual as far as energy production is concerned. Or are you one who believes climate change is a chinese hoax to ruin our economy?
And your comments on “unreliable” solar and wind are just plain wrong, those industries are actually leading O&G in job creation:
https://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/green-energy-sector-jobs-surpass-oil-sand-employment-total/article21859169/
But don’t let pesky facts get in the way of your narrative.
A very important omission from this list are the role of Kinder Morgan creditors and their influence on the Trudeau Liberals. My understanding is that KM is deeply in debt … and our tax $ are going to profit financial institutions who are even more powerful than the fossil fuel industry but seldom mentioned. Let us not forget their tanking of the world economy ~ 2008 and how it was they who mostly got bailed out – except in Iceland.
I think you might be an oil lobbyist Tony. We have many resources in Canada but the oily people want their oily money safe and secure and increasing in value. It is not likely to happen. Even the Saudis are building massive solar banks for electricity production. We are moving into a different world and thankfully the oil lobby is losing its clout.
What about carbon engineering in Squamish. Same cars, same gas stations, while removing carbon from the atmosphere. How about a few billion for that. Makes a lot more sense!
Right on, Terry!
Sorry Tony Kramps I’ve been in and out of MacMurray since ‘75 so not quite as long as you and recently did a stretch in Kazakhstan working on a $90bil project that will pump a million barrels a day at a current cost of 28$/ bbl as opposed to bitumen which with the premium is probably $80/bbl! Combined with the fact that the dilbit has been going south not east and by 2020 the US will be the largest producer due to fracking and that the Loop and giant tankers will further reduce the competitiveness of the tar sands, it’s just not viable! I’d support putting the cash into refineries in Alta but pumping 6x the volume of refined product thru a 50 year old pipeline for a maybe Chinese market is not where I want my tax dollars going. I have a lot of friends and acquaintances who work in the patch and am fully aware of the human factor involved but the economics just don’t make it viable!
True Dough likes to send our dough. Let’s hope he gets to leave his A/C office in the 45C temp in Ottawa to have the dough head bake in some sense on ppm situation!