'Up in the air' if long-term stake in Trans Mountain could pay off for Alberta

Premier Rachel Notley isn't ruling out Alberta becoming a long-term investor in the Trans Mountain pipeline expansion.

Federal government has called pipeline purchase a short-term solution

Alberta Premier Rachel Notley addresses the International Brotherhood of Boilermakers Lodge 146 in Calgary Wednesday. (Mark Matulis/CBC)

Premier Rachel Notley isn't ruling out Alberta becoming a long-term investor in the Trans Mountain pipeline expansion. 

The province has committed to invest up to $2 billion in the Kinder Morgan project to backstop any risk and cover potential cost overruns, and that investment would be payable only once the taps have been turned on.

"At that point, investment will be converted to equity," the premier told the International Brotherhood of Boilermakers Lodge 146 in Calgary Wednesday afternoon. "When this project is built, it'll be a very healthy profit-making venture. The risk is low, the payoff is huge."

The $2 billion — which Notley described as an investment, not a subsidy — is part of the federal government's plan to purchase the embattled project for $4.5 billion. 

She said the bump in anticipated revenue should be able to contribute to where those funds come from, as the money won't be payable until oil begins flowing. 

Entrepreneur Brett Wilson said while the investment wouldn't be his first choice, he prefers it to no pipeline being built at all.

"It's not my first choice to see government investing where private capital was willing to go, but if private capital can't get the job done because government policy doesn't line up with regulation, then maybe it is the only outcome," Wilson said, pointing to the fact that one of the province's strongest long-term assets are oilsands royalties. 

"I'd rather see a pipeline built than worry about who owns it afterward."

Steel pipe to be used in the oil pipeline construction of Kinder Morgan Canada's Trans Mountain expansion project at a stockpile site in Kamloops, B.C. (Dennis Owen/Reuters)

Notley said the government has had a number of experts go through the books over the past six weeks to confirm the venture will actually pay off for Albertans. She didn't say how long the province could hold on to that investment, while the federal government has stressed its financial commitment will be on a short-term basis. 

Economist Trevor Tombe said while it makes sense to backstop the project temporarily, long-term investment decisions should be left to professional — not partisan — groups.

He suggested the Alberta Investment Management Corporation (AIMCo) might have made a better stakeholder.

"I think having an investment fund run by independent arms-length investment managers … is a much better approach than having political decisions made about what companies we should and should not hold equity in," Tombe told CBC News.

"It tends to be rather difficult for governments to maximize returns when there are also political considerations on the table."

Not without precedent: analyst

However, Kevin Birn, an oilsands analyst with IHS Markit, said it's not actually without precedent for the government to participate in projects like this — like the Hibernia oil platform, Line 9 and various heavy-water treatment projects.

"If you look at the history of whether these things paid off … it's kind of up in the air," Birn said. 

However, he said Alberta is in somewhat of a unique situation in how it can benefit above and beyond what the federal government has to gain from the pipeline, given that the Alberta Petroleum Marketing Commission markets the Crown's oil royalties. 

"They sell oil. They may have an additional interest in signing their own agreements to ensure they can move their own barrels to market," he said.

B.C. has issued a legal challenge in an attempt to argue the province has constitutional authority to protect its coastal waters by limiting the flow of bitumen, and hundreds of protesters have been arrested for violating a court-ordered injunction to keep away from the company's terminal in Burnaby. 

Ottawa's purchase of the pipeline was intended to provide investors certainty that the project will move forward. The deal is not expected to close until August. 

The UCP called for an emergency debate in the House Wednesday to discuss the province's involvement in the project going forward. 

With files from Tony Seskus, Reid Southwick, Elissa Carpenter, The Canadian Press


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