Kinder Morgan Inc.'s plans to expand its Trans Mountain crude-oil pipeline faced fresh risks as Canadian Prime Minister Justin Trudeau and the premier of oil-rich Alberta added to a debate fueled by a new political alliance in the country's west.
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Comments Tuesday from Mr. Trudeau and Alberta Premier Rachel Notley could set the stage for a fierce national debate pitting the need to develop Canada's commodities to help foster growth against the growing influence of the environmental movement.
Mr. Trudeau approved the Trans Mountain expansion, valued at $7.4 billion Canadian dollars, late last year as part of a compromise on pipeline development that included blocking the Northern Gateway pipeline proposed by Enbridge Inc.
Kinder Morgan now faces a setback after two anti-pipeline political parties in British Columbia -- the left-leaning New Democratic Party, or NDP, and the environment-focused Green Party -- formally signed a cooperation agreement Tuesday that would let the NDP form a government in Canada's third-largest province. An election earlier in May left the Liberal Party, which has governed the province since 2001, one seat short of a majority in the British Columbia legislature. The Greens have pledged to support the NDP over a four-year period, giving the NDP enough seats to form a government.
Details of the pact indicated that in exchange for Green support, an NDP government would oppose the Kinder Morgan pipeline expansion project by employing "every tool available." John Horgan, the 57-year-old NDP leader who is poised to become premier of British Columbia, said at a press conference in Victoria, British Columbia, he would explore what legal options are available and ensure "permitting and other issues are as exhaustively reviewed" as possible.
"There's an awful lot we can do to stop the shipping of diluted bitumen off our coastal waters," added Andrew Weaver, leader of the Green Party.
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British Columbia Premier Christy Clark, whose government approved the Trans Mountain expansion, said she plans to recall the legislature early in June and seek a vote to continue. She added it "certainly seems like there will be" a new government in the province.
Mr. Trudeau said Tuesday the Trans Mountain project remains in the best interest of Canadians.
"Regardless of a [possible] change of government in British Columbia or anywhere, the facts and evidence do not change," he said at a press conference in Rome, where he met with Italy's prime minister. He added he stands by his earlier decision to approve the expanded energy corridor.
Mr. Trudeau has had to perform a balancing act as he tries to fulfill his pledge to fight climate change, while trying to stoke growth in a country that depends on the energy sector for nearly 10% of economic output.
Ms. Notley warned the NDP-Green alliance Tuesday it has no legal right to delay or block the Trans Mountain expansion, given Mr. Trudeau's previous approval. As envisaged by Kinder Morgan, the expansion would triple capacity to 890,000 barrels of crude oil a day on an existing 714-mile pipeline that carries crude from landlocked Alberta to British Columbia's Pacific coast.
Alberta's economy has suffered in recent years amid the slump in commodity prices, and energy producers in the province regarded the Trans Mountain expansion as a way to boost sales of crude oil to Asia and reduce its dependence on the U.S. market, where Canadian crude sells at a discount to global prices.
"We will use the means at our disposal to ensure that the project is built," Ms. Notley said in a statement.
A new NDP government "would definitely have the tools to throw a wrench in the works and cause delays for the pipeline," said Kathryn Harrison, a politics and environmental policy expert at the University of British Columbia. She added Mr. Trudeau faces a political dilemma should he try to use his legal power to push through construction of the expanded pipeline. "It's not just a few people who oppose the pipeline. It's the province now."
Houston-based Kinder Morgan intends to proceed with construction, a spokesman said, adding, "We have all the necessary approvals."
Political developments weighed on the newly listed shares of Kinder Morgan's Canadian assets, which were priced at C$17 a piece as part of an initial public offering that raised C$1.75 billion. The shares, which began trading Tuesday on Toronto's main stock market, fell as low as C$15.75 before closing the session at C$16.24, or down 76 Canadian cents.
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(END) Dow Jones Newswires
May 30, 2017 19:10 ET (23:10 GMT)