The future of Kinder Morgan Inc.'s proposed Trans Mountain pipeline expansion was dealt a setback Monday after a political party in the Canadian west-coast province of British Columbia that opposed the project looked set to form a new government.
The leaders of British Columbia's left-leaning New Democratic Party, or NDP, and the province's Green Party said they had reached a tentative agreement on cooperation that would let the NDP govern Canada's third-largest province for the next four years.
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An election in British Columbia earlier this month left the governing Liberals, which approved of the Trans Mountain expansion, one seat short of a majority, with 43 out of 87 seats up for grabs in the provincial legislature. The NDP won 41 and the Greens won three.
Details of the political agreement were to be unveiled Tuesday -- but Green Party leader Andrew Weaver told reporters in Victoria, British Columbia the pact "reflected" the Greens' opposition to Kinder Morgan's plan. "The issue of Kinder Morgan is one that I have been heavily invested in and was critical to us," said Mr. Weaver, who is a scientist by training.
John Horgan, the NDP leader, said he was confident his party would ratify the cooperation deal on Tuesday. He also opposed the pipeline project, valued at 7.4 billion Canadian dollars (about $5.50 billion) which would triple capacity to 890,000 barrels of crude oil a day on the existing 714-mile pipeline that carries crude oil from Alberta to British Columbia's Pacific coast.
The political developments in British Columbia reflect the growing amount of influence the environmental movement is wielding over energy policy in many industrialized-world countries.
It also a marks a blow for Canada's energy industry, which eyed the Trans Mountain expansion as a way to boost sales of crude oil to Asia and reduce its dependence on the U.S. market, which Canadian crude sells at a discount to global prices.
A representative for Kinder Morgan wasn't immediately available for comment. The company was looking to raise C$1.75 billion through an initial public offering of shares of its Canadian unit to be listed this week. Kinder Morgan said in a statement last week it was proceeding with the IPO even though the "political climate was not ideal."
In its prospectus filed with Canadian securities regulators, Kinder Morgan said the pipeline expansion could be delayed or stopped due to government intervention, or by the courts as opponents such as aboriginal groups attempt to thwart the project.
Kristopher Zack, an analyst at brokerage Desjardins Securities in Calgary, said in a note to clients a few weeks back Kinder Morgan could be the "most immediate casualty" of the changing political landscape in British Columbia. "Opposition to the TMX expansion could be yet another headwind mostly for Canadian heavy oil producers that have been eager to expand market access," he said.
Major energy companies, such as Royal Dutch Shell, have decided in recent months to exit Canada's oil sands, a region that has come to symbolize the risks in high-cost, carbon-intensive sources of oil amid lower prices and tougher environmental regulations.
Canadian Prime Minister Justin Trudeau approved the Trans Mountain expansion late last year as part of a compromise on pipeline development that included blocking the more controversial Northern Gateway pipeline proposed by Enbridge Inc.
Mr. Trudeau has had to perform a balancing act as he tries to fulfill his pledge to take meaningful action to fight climate change, while trying to stoke growth in a country that depends on the energy sector for nearly 10% of economic output.
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(END) Dow Jones Newswires
May 29, 2017 19:42 ET (23:42 GMT)