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Government's plan to bail out Kinder Morgan ignores major legal risks

Wednesday, May 16, 2018

VANCOUVER, BC, Coast Salish Territories – Environmental lawyers expressed concern over this morning’s announcement about the federal government’s plans to provide financial support for the Kinder Morgan Trans Mountain pipeline and tanker project.

In a press conference this morning, Finance Minister Bill Morneau confirmed that the federal government is willing to indemnify the Kinder Morgan Trans Mountain pipeline and tanker project against any losses related to the BC government’s actions to protect the coast and communities from the project. No details were provided about the potential level of financial support that would be available, though the MInister repeatedly stated that negotiations with the company were ongoing.

“It sounds like the government is essentially ready to hand over a blank cheque to Kinder Morgan from Canadian taxpayers, to support a risky, collapsing project in an expiring industry. But no matter how much money the government pours into this project, it still faces significant risks – particularly the legal risks associated with the ongoing court challenges that could derail the project completely,” said Eugene Kung, Staff Lawyer at West Coast Environmental Law.  

“The federal government’s proposal demonstrates a fundamental disconnect from the situation on the ground and from basic economics.”

According to Minister Morneau, the government backing would only apply to delays related to BC’s actions, not those associated with other financial, legal or business risks. Morneau also noted that if Kinder Morgan decides not to proceed with Trans Mountain, the indemnity would still be in place for another company that may wish to take over the project.

“I am concerned about the government’s grasp of the breadth of risks this project is facing.” said Kung “Focusing solely on political risk from BC misses some of the most significant legal risks resulting from the lack of free, prior and informed consent from Indigenous Peoples. The pipeline is a bad investment, and today’s announcement opens the door for Kinder Morgan to pull an ENRON on Canadian taxpayers.”

Minister Morneau also repeated the myth that the pipeline’s tidewater access would result in a higher price for Canadian oil, and stated that the pipeline would allow Canadian oil producers to fetch “prices we think we should get.”

“That’s not how oil markets work.” said Kung. “I am concerned to hear this coming from our finance minister.”

During the press conference, Minister Morneau reiterated the government’s desire to “respect the rule of law” as a way of providing certainty to investors, describing the BC government’s plans to safeguard against oil spills as “unconstitutional.” The question of BC’s jurisdiction to enact regulations restricting the transport of diluted bitumen is currently before the BC Court of Appeal in a recently launched constitutional reference case.

“If the federal government respects the rule of law, they should respect their constitutional duties to consult, accommodate and seek consent, to honour treaties with Indigenous nations, and uphold the conditions that were placed upon the project when it was approved,” said Kung.


For more information, please contact:

Eugene Kung | Staff Lawyer