Ottawa's planned purchase of pipeline elicits shock, disappointment

Canada to buy Kinder's Trans Mountain pipeline for $3.5 billion

Finance Minister Bill Morneau said purchasing the pipeline was the only way to ensure that a planned expansion could proceed.

Morneau says the federal government does not plan to be a long-term owner and is in negotiations with interested investors, including Indigenous communities, pension funds and the Alberta government, which will provide funding for any unexpected costs that arise during construction.

Federal Finance Minister Bill Morneau made the announcement from Ottawa and says the deal represents a sound investment.

Morneau said more spending would be needed to complete the expansion, but gave no precise financial details, and stressed he felt the project should be returned to the private sector. He described the $4.5 billion buy-out as a "fair price for Canadians", and said the commercial agreement is a "sound investment opportunity".

The Canadian Energy Pipeline Association (CEPA) is pleased that the Trans Mountain Expansion Project (TMEP) will be constructed.

According to the government, the lack of access to tidewater cost provincial oil producers an estimated $2.6 billion and cost the province an estimated $210 million in taxes, royalties and other revenue in 2017.

The pipeline connects oil sands facilities near Edmonton, Alberta, to tanks in Burnaby, near Vancouver on Canada's west coast. Morneau said cabinet approved the move, which now is before the company's shareholders.

"We are pleased to have worked with the federal government to ensure construction resumes, certainty is increased and Albertans and all Canadians enjoy the many benefits of having the project go forward", Notley said in a statement.

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With files from the Canadian Press. "We won't stop until the job is done!"

Ottawa has the constitutional authority to build interprovincial projects like pipelines, but B.C. Premier John Horgan has gone to court to get a judge to weigh in on whether B.C.'s jurisdiction for the environment would allow him to regulate what flows through the pipeline.

Alberta Premier Rachel Notley cheered the news on Twitter. "I think that's been reinforced by the fact that Kinder Morgan was able to build up through different open seasons to a high level of commitment (from shippers)", he said.

The project will duplicate an existing 1,150km pipeline, allowing it to ship up to 890,000 barrels of oil a day from landlocked Alberta to the Pacific coast of neighbouring British Columbia, in western Canada, for export overseas. But over the past 30 years, the Canadian government has launched a major privatization effort, selling Air Canada, Canadian National Railway and Petro-Canada.

The pipeline has become a flash point for a wider debate in Canada over the environmental impact of tapping Alberta's oil sands, which critics view as a particularly polluting energy source.

Conservative Leader Andrew Scheer is accusing Justin Trudeau of "trying to buy his way out of a problem" after the government announced a deal to buy the Trans Mountain pipeline assets from Kinder Morgan for $4.5 billion.

That said, if it takes federal ownership to construct a project that Kinder Morgan was unable to do, that may be sign of a broader failure in Canada - not a win.

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