Canada Suspends Pipeline Expansion Operations

Kinder Morgan Canada Limited (KML) on Sunday suspended most work on a $5.8-billion oil pipeline expansion that has become the focus of protests, a move underscoring uncertainty over major energy projects in Canada.

KML Chairman Steve Kean said he would scrap plans to nearly triple the capacity of the Trans Mountain pipeline, which takes crude from Alberta’s oil sands to a facility in the Pacific province of British Columbia unless the various legal challenges could be resolved by May 31.

The announcement was a blow to the Liberal government of Prime Minister Justin Trudeau, which approved the project and says it is in the national interest.

The project, considered crucial for an oil industry hit by transportation bottlenecks, is fiercely opposed by many municipalities, some aboriginal groups and environmental activists concerned about possible oil spills.

“We will be judicious in our use of shareholder funds. In keeping with that commitment, we have determined that in the current environment, we will not put KML shareholders at risk on the remaining project spend,” Kean said in a statement.

The firm is currently carrying out preliminary work and has not started construction.

Many in the energy industry are concerned about whether any new pipelines can be built in Canada, which sits on the world’s third largest proven reserves of crude and is the single largest exporter of energy to the United States.

Although the federal government has the power to approve major pipelines, the 10 provinces enjoy broad responsibility for resource development. That can result in deadlock when a province opposes a decision made by Ottawa.

“This is not good. I think the key point is it shows a lack of confidence in our political and regulatory system,” said Tim Pickering, president of Auspice Capital in Calgary, Alberta.