The Burnaby, B.C. terminal of Kinder Morgan's Trans Mountain pipeline. Courtesy of the Trans Mountain Expansion Project

The federal government will indemnify Kinder Morgan’s Trans Mountain expansion project against any “politically motivated” delays caused by British Columbia, Finance Minister Bill Morneau said on Wednesday.

Speaking hours before Kinder Morgan’s annual Calgary shareholders meeting, Morneau blamed B.C. Premier John Horgan for the “extraordinary” situation. “We believe that what Premier Horgan has done is unconstitutional,” he said.

“The extraordinary situation we find ourselves in here is a project that was federally and provincially approved is being thwarted on purpose by Premier Horgan,” Morneau added. “That specific risk is, for a private sector player, impossible to deal with. We see that as something we can indemnify.”

Kinder Morgan announced in early April it would suspend “non-essential spending” on the expansion due to continued opposition from B.C. The company said it would need to reach certain agreements to allow the project to proceed by May 31, or it would be “difficult to conceive of any scenario in which we would proceed” due to the project’s construction time frames.

In a written statement on Wednesday, Kinder Morgan Canada CEO Steve Kean acknowledged Morneau's comments, and reiterated the importance of meeting the end-of-month deadline. "We appreciate his recognition that a private company 'cannot resolve differences between governments,'" Kean said.

He added that "while discussions are ongoing, we are not yet in alignment and will not negotiate in public." 

B.C.’s NDP government has said it would use “every tool available” to fight the twinning of the Trans Mountain pipeline, which would nearly triple the capacity of the Edmonton-to-Burnaby pipeline to 890,000 barrels per day, up from 300,000 currently.

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The B.C. government has proposed regulations to restrict the flow of diluted bitumen through the pipeline until it has studied whether spills could be safely cleaned up, and in February said it would appeal a decision from the National Energy Board allowing Kinder Morgan to bypass certain Burnaby construction bylaws and move forward with the expansion. It also obtained intervener status in a legal challenge to the project last August.

Its efforts have drawn the ire of Alberta. The province's premier, Rachel Notley, announced a ban on importing B.C. wines in February, which she withdrew after Horgan said his government would ask the courts if it had the authority to limit the expansion of oil transport. In April, Alberta's energy minister introduced legislation that would give Alberta the ability to limit crude oil, natural gas and gasoline exports to B.C., which could create shortages and drive up gas prices in B.C.

Morneau said the federal government was taking these steps to protect “rule of law” and Canada’s reputation as a good place to invest.

“When there’s a project that’s economically important, that opportunity will be able to be achieved because it will be in Canadians’ best interest,” he said. “[This is] an approach that can be fair to Kinder Morgan shareholders at the same time as being fiscally responsible for Canadians.”

He said Ottawa will only indemnify losses specifically tied to delays caused by the province, and would not cover Kinder Morgan’s other business risks, but did not specify how much that might cost.

The federal government is currently in discussions with Kinder Morgan, but Morneau said if the company chose to walk away from the project he believes “plenty of investors” would be interested in taking up the project. He did not address how the expansion project could be transferred to another company when Kinder Morgan owns the original pipeline.

In British Columbia, there have been mass protests against the pipeline in Burnaby, which have resulted in criminal contempt charges against 187 protesters for breaching a court order granted to Kinder Morgan to keep protesters away from the work site. Among those charged were federal Green Party leader Elizabeth May and NDP MP Kennedy Stewart, who were arrested in late March for breaching a court order granted to Kinder Morgan to keep protesters away from the work site. Stewart pled guilty on Monday and is awaiting sentencing – which could include jail time – and May is expected to enter her plea on May 28.