North American Oil & Gas Pipelines

MAY 2018

North American Oil & Gas Pipelines covers the news shaping the business of oil and gas pipeline construction and maintenance in North America, including pipeline installation methods, integrity management innovations and managerial strategies.

Issue link: http://digital.napipelines.com/i/976284

Contents of this Issue

Navigation

Page 9 of 43

10 North American Oil & Gas Pipelines | MAY 2 018 napipelines.com views. Rather than achieving great- er clarity, the project is now facing unquantifiable risk. Previously, op- position by the Province of British Columbia was manifesting itself largely through BC's participation in an ongoing judicial review. Unfortunately, BC has now been asserting broad jurisdiction and re- iterating its intention to use that jurisdiction to stop the Project. BC's intention in that regard has been neither validated nor quashed, and the province has continued to threaten unspecified additional ac- tions to prevent project success. Those actions have created even greater, and growing, uncertainty with respect to the regulatory landscape facing the project. In addi- tion, the parties still await judicial decisions on chal- lenges to the original Or- der in Council and the BC Environmental Assessment Certificate approving the project. These items, com- bined with the impend- ing approach of critical construction windows, the lead-time required to ramp up spending, and the im- perative that the company avoid incurring significant debt while lacking the nec- essary clarity, have brought KML to a decision point. Trans Mountain has spent C$1.1 billion (approximately half of which has been spent since the KML IPO) and made unprecedented efforts to develop the Project since its ini- tial filing with the National Energy Board in 2013. As a result of exten- sive engagement, a comprehensive regulatory process and detailed en- gineering and design, the project has changed in several, substantive ways during the intervening five years, including: thicker wall pipe in environmentally sensitive areas such as watercourses and aquifers; avoidance of several fish bearing streams; changes to the detailed route of the pipeline in consider- ation of community needs and con- cerns and environmental impacts; Burnaby tunnel construction, to avoid neighbourhoods and mini- mize impacts; changes to Burnaby Terminal tank design in response to risk assessments; and, enhance- ments to marine safety that will benefit all marine users. In addition, in an unprecedent- ed negotiated commitment, Trans Mountain agreed to provide finan- cial benefits from the project, if completed, to British Columbia for a newly-formed BC Clean Commu- nities program to be accessed by communities for local projects that protect, sustain and restore BC's natural and coastal environments. "Given the importance of the project to Canada and Alberta, to Indigenous communities, our ship- pers, our contractors and working Canadians, we are committed to trying to find a way forward, work- ing with stakeholders between now and the end of May on measures that may allow us to advance this critical project, but only if it does not subject KML shareholders to un- due risk," Kean said. "If we cannot reach agreement by May 31st, it is difficult to conceive of any scenario in which we would proceed with the project." The announcement prompted re- sponse from both opponents and proponents alike. The Montreal Economic Institute (MEI), Canadi- an Federation of Independent Busi- ness (Toronto) (CFIB) and Canadian Building Trades Unions (CBTU) all called on Prime Minister Justin Trudeau and the federal govern- ment to intervene. "The provincial government in BC is disregarding the rule of law and putting politics above the na- tional interest. It can't be allowed to continue," said Dan Kelly, CFIB president and CEO. "There is a lot at stake here beyond this one project, including Canada's reputation as a reasonable place to do business." CFIB joined four other associa- tions last month in a letter call- ing on the government of British Columbia to create the certainty for the project to proceed. "Our let- ter seemed to fall on deaf ears and Premier Horgan's reaction to yes- terday's announcement suggests that hasn't changed," Kelly added. "The last several months has seen unfortunate state- ments and behavior by cer- tain individuals and this project is too important to our country and our econo- my to see this happen," said Robert Blakely, COO of the CBTU. "That is why, it is far time, that Prime Minister Justin Trudeau calls on Pre- mier of British Columbia, the Premier of Alberta, CEO of Kinder Morgan Canada, and all other relevant stake- holder, at the same table and move this project forward in a positive way for Canada, once and for all." The MEI showed in a publication last October that the fall in oil and gas investment and the abandon- ment of projects may get worse in Canada, due to the erosion of our competitiveness with the United States in terms of regulation and taxation. The new regulatory ob- stacles — including the new rules to evaluate industrial projects un- veiled by Ottawa in February — add uncertainty. "This is very worrisome news, es- pecially after the suspension and then the abandonment of the En- ergy East project. The government must absolutely get things back on track, and soon. Because right now, the message that investors are re- ceiving is: We're not open for busi- ness," says Germain Belzile, senior associate researcher at the MEI. "From this perspective, abandoning the Trans Mountain project would be catastrophic." "While we are prepared to accept the many risks traditionally presented by large construction projects, extraordinary political risks that are completely outside of our control and that could prevent completion of the project are risks to which we simply cannot expose our shareholders." — Steve Kean, KML Chairman and CEO

Articles in this issue

Archives of this issue

view archives of North American Oil & Gas Pipelines - MAY 2018