Ottawa’s plans to buy Kinder Morgan's (TSX: KML) Trans Mountain pipeline project took a major step forward after a U.S. national security review gave a green light to the planned government purchase.
The deal to have the Canadian federal government buy the Trans Mountain project was contingent on getting clearance from the U.S. Committee on Foreign Investments, also known as CFIUS.
The deal was subject to a CFIUS review because the purchase agreement includes the acquisition of the Puget Sound pipeline, a short spur line off the Trans Mountain system that transports Canadian crude oil from Abbotsford, B.C., to refineries in Washington State.
A spokesperson for Canadian Finance Minister Bill Morneau's office confirmed that CFIUS had approved the planned purchase. There had been fears that the CFIUS review could pose a serious threat to the deal because, in some instances, the committee would defer the approval of a purchase to the President of the United States.
That raised the prospect of Donald Trump holding up the project to secure leverage in trade disputes with Canada.
The federal government announced at the end of May it had reached a deal with Kinder Morgan Canada to purchase the pipeline and related infrastructure for $4.5 billion, and that it could spend billions more to build the controversial planned expansion.
Ottawa said it was taking the unusual step of buying into the project in order to ensure the expansion's completion in the face of intense political opposition in British Columbia. The Trans Mountain expansion will build a new pipeline roughly parallel to the existing 1,150-kilometre line that carries refined and unrefined oil products from the Edmonton area to Burnaby, B.C.
The proposed expansion will nearly triple the line's capacity to 890,000 barrels of crude oil per day. Trans Mountain is the only pipeline carrying Alberta crude to the West Coast, and the hope is that most of the oil will end up in tankers bound for Asia.
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