A First Nations-led group that wants to buy a 51-per-cent stake in Ottawa’s Trans Mountain oil pipeline says the federal government will need to underwrite the construction risk of the $9-billion expansion project.
The Project Reconciliation group aims to bring at least 200 First Nation and Métis communities in Western Canada together to back a bid for majority ownership of the existing pipeline and the expansion – an investment of $6.9-billion, to be financed through an issue of bonds.
But with hurdles still ahead – including potential legal challenges from Indigenous communities that oppose the project – the group’s business plan seeks assurances the project can be built.
"We’re hoping the federal government will consider underwriting the risk – it’s in the national interest,” said Shane Gottfriedson, the B.C. director of the group.
A former chief of the Tk’emlups First Nation in Kamloops, Mr. Gottfriedson told reporters in Victoria on Wednesday the proposal would provide annual financial benefits to participating Indigenous communities, and build a “sovereign wealth fund” that will invest in green, low-carbon infrastructure projects.
The federal government is expected to announce by June 18 whether it will approve the Trans Mountain pipeline expansion. At some point after that, it will issue a request for proposals to find a buyer for the existing pipeline and the expansion project.
Finance Minister Bill Morneau has said the timing and details of the sale of the pipeline depend on when it is “de-risked,” but did not indicate what conditions were necessary to achieve that. Ottawa still has an Indigenous consultation process under way, and the B.C. government is heading to the Supreme Court of Canada seeking the right to block expanded shipments of crude oil. As well, coastal Indigenous communities that oppose the expansion may go back to court if Ottawa approves it a second time.
Construction has been stalled since last summer, when the Federal Court of Appeal quashed the original approval, partly on the basis that Ottawa failed to adequately consult affected First Nations.
Mr. Gottfriedson said his group has talked with the federal government about buying a stake in Trans Mountain. Several Indigenous-led groups have also expressed interest.
“We are anxiously waiting for the June 18 decision to come down so we can look at continuing to move forward,” he said. “We’re at the mercy of their timeline. The good thing about First Nations is, we’re not going anywhere.”
While the immediate risk to the construction of the Trans Mountain expansion project is largely the threat of legal action, the fossil-fuel sector is also grappling with concerns about climate change.
International investors want fossil-fuel companies to disclose long-term risks to their operations and value from climate change and the global effort to reduce emissions.
In an open letter to would-be Indigenous investors, the Union of B.C. Indian Chiefs warned of the potential for the costs of the Trans Mountain project to escalate, and the long-term risk to it posed by climate change.
“You should take a hard look at both the short-term profitability and long-term viability of this project,” it said.
In a climate-risk statement released this month, TC Energy Inc. – formerly TransCanada – said a successful effort to combat climate change could have a detrimental long-term effect on its asset values.
The company looked at four scenarios, one of which assumes the world limits the increase in average global temperatures to less than two degrees above pre-industrial levels, which is the goal of the Paris Agreement.
That scenario would introduce “uncertainty about the long-term resilience of traditional energy markets and the subsequent implications for energy infrastructure companies.” After 2030, policies would materially reduce the demand for fossil fuels, which could force the company to accelerate depreciation of its pipeline assets or impose abandonment surcharges on its shippers, TC Energy said.
The Trans Mountain expansion project would nearly triple capacity of the existing pipeline to 890,000 barrels a day. Ottawa paid Kinder Morgan Canada $4.5-billion for Trans Mountain last year in a bid to get the project completed. The industry and the Alberta government have been adamant that opening up exports to Asia would help stem the economic malaise and job losses in the province.