By Paul Vieira
OTTAWA--Canada on Wednesday said it was amending rules governing state-owned assets and agencies aimed at ensuring a timely transfer of ownership of the Trans Mountain pipeline project to indigenous communities.
Construction finished this spring on the Trans Mountain expansion project, which boosts capacity on the 710-mile pipeline to nearly 900,000 barrels a day from 300,000, and provides access to Pacific Coast terminals to allow for overseas exports of Canadian oil. It entered into commercial service this month.
Canada's Liberal government purchased the pipeline in August, 2018, although has long said it does not intend to be the long-term owner. In a notice in the Canada Gazette, the government said it would exempt the company that operates the pipeline from seeking cabinet approval to set up new subsidiaries to be incorporated. Such subsidiaries would, for instance, try to sell spot pipeline capacity, broaden insurance coverage, and transfer ownership of the pipeline system to indigenous groups. The government has promised the establishment of a unit, or a special-purpose vehicle, to collect pipeline cash flows to be transferred to indigenous groups.
Trans Mountain executives operate "a commercial enterprise and will be disadvantaged if it cannot operate with the same agility and flexibility as its private-sector counterparts.," the government said in the Gazette. The exemption would allow Trans Mountain to "facilitate indigenous economic participation in Trans Mountain."
Without the exemption, the government said it could take Trans Mountain several months to set up the required subsidiaries.
The original cost of the pipeline expansion was set at about 7.7 billion Canadian dollars, or the equivalent of $5.6 billion, but that ballooned over the years to over C$30 billion. Late last year, Canada recorded a write-down on the pipeline asset of nearly C$1 billion.
According to officials in the Gazette, the expanded pipeline could lead to 40,000 new jobs, up to C$38 billion in tax revenue for provincial coffers, and a C$126.8 billion increase in gross domestic product.
The Bank of Canada said last month the expanded pipeline is expected to add 0.25 percentage points to GDP in the second quarter.
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
05-22-24 1000ET
