OTTAWA/HOUSTON (Reuters) - U.S. energy firm Kinder Morgan’s C$4.5 billion sale of an oil pipeline to Canada’s government marked an extraordinary escape from months of fraught negotiations among warring camps of Canadian officials.
But even before the bailout, the company had little to lose - despite the C$1.1 billion it has spent so far on a plan to add a second pipeline from Alberta’s oil sands to British Columbia’s coast, according to a Reuters review of the project’s bank financing and oil-shipping contracts with producers reserving space on the proposed line.
The documents show Kinder Morgan cut creative deals with lenders and oil producers to shield itself from massive write-downs like the ones taken recently by rivals TransCanada Corp and Enbridge Inc in canceling controversial pipeline projects.
The arrangements, which have not been previously reported, gave Kinder Morgan unique leverage in threatening last month to walk away from the project by May 31 unless Prime Minister Justin Trudeau’s government guaranteed a path to construction over the objections of British Columbia officials, environmentalists and some aboriginal bands.
The company’s cautious financial planning and hard-ball politicking combined to create a no-lose bet on what might have been one of the oil industry’s riskiest plays, given the volatility of Canadian pipeline politics.
The firm’s ultimatum made rescuing its Trans Mountain pipeline expansion a national emergency for Trudeau, thrusting the prime minister into a constitutional crisis over the limits of federal power and a political crisis in refereeing a feud between Alberta and British Columbia.
Trudeau argued the project must go forward
