Feds' pledge to financially back Trans Mountain pipeline won't eliminate all risk: Carr - Canadanewsmedia
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Feds' pledge to financially back Trans Mountain pipeline won't eliminate all risk: Carr

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OTTAWA—The federal government is willing and prepared to financially back the Trans Mountain pipeline expansion, whether or not Kinder Morgan is the company that ends up building it.

In Ottawa Wednesday morning, Finance Minister Bill Morneau laid out the Liberals’ three guiding principles as talks continue with Kinder Morgan about the fate of the cross-provincial project.

Specifically, the federal government is:

  • Prepared to indemnify the project from any financial loss;
  • Willing to offer this financial security to any company who wants to build the pipeline, should Kinder Morgan back out;
  • Ensuring the financial backing is fair and beneficial to Canadians.

"If Kinder Morgan isn’t interested in building the project we think plenty of investors would be interested in taking on this project, especially knowing that the federal government believes it is in the best interest of Canadians and is willing to provide indemnity to make sure that it gets done," Morneau said, noting that he is “confident” an agreement will be made.

Though, this step won’t address all of the business risk surrounding the much-debated pipeline project, rather it will take out the “political risk,” according to federal Natural Resources Minister Jim Carr.

In an interview with Don Martin, host of CTV’s Power Play, Carr said the federal move is about addressing “the delays as the result of the political risk,” the project has faced as a result of B.C.’s opposition.

Carr acknowledged that the indemnification won’t address other “normal” business risks to the project’s future, which with Kinder Morgan could include Indigenous blockades or environmental protests.

“We knew that we had to take some of the uncertainty out of the project, so one way to do that is to indemnify it… but only to take out the political risk,” Carr said. “This is an unusual risk.”

He also doubled down on the federal call-out of B.C. NDP Premier John Horgan over his pledge to stop the project from being built.

Earlier Wednesday, Morneau placed the blame for the current "exceptional situation" on Horgan’s shoulders, calling the delay deliberate and "politically motivated."

Morneau would not say how much money the federal government is willing to put into ensuring the $7.4-billion pipeline is built.

He said it is the federal government’s responsibility to resolve the dispute between Alberta and British Columbia over the pipeline that would move oil from Edmonton, Alta. to Burnaby, B.C.

 

"It’s not reasonable to expect a private sector actor to deal with disputes between governments. We’ve found a way, we believe, to deal with that political risk and should Kinder Morgan not want to move forward with that approach to dealing with it, we think there’s other private sector actors who would be willing to move forward," Morneau said Wednesday.

In an interview on CTV’s Power Play, B.C. Green Party Leader Andrew Weaver balked at the federal government’s approach.

“It’s outrageous that we’re actually having this conversation that somehow that there’s a duty for the taxpayers to bail anyone out. We know in any project there’s risks, investors know when they invest in a company there are risks associated with that,” Weaver said. “The problem here is that Trudeau and his government have been reckless in their promising, they’ve been chest beating, they have not been on the ground here.”

Weaver denied Horgan and the B.C. NDP — who are working in a coalition with the Greens to govern — have done anything to stall Kinder Morgan.

The federal government is continuing talks with Kinder Morgan, the developers of the Trans Mountain project, after the Texas-based company put the project on pause, demanding reassurance by May 31 that it can go ahead despite B.C. opposition.

The government’s announcement came hours before a brief meeting of Kinder Morgan’s shareholders in Calgary. The meeting lasted around 15 minutes and shareholders were met on their way in by supporters.

 

In a statement, Kinder Morgan Chairman and CEO Steve Kean said the company appreciates Morneau’s “acknowledgment of the uncertainty created by the B.C. government’s stated intentions to ‘do whatever it takes to stop the Trans Mountain Expansion Project.’”

Kean said the company will not be negotiating in public.

Political, activist reaction:

During a press conference Wednesday, Alberta NDP Premier Rachel Notley hailed the federal government’s pledge and took aim at her federal counterpart for his opposition to the pipeline.

Responding to federal NDP Leader Jagmeet Singh’s tweet Wednesday– in which he said the pipeline should not be built, deriding the Liberals for giving the U.S. company a "blank cheque while dumping all the risks on Canadians,"– Notley said: “I think Jagmeet Singh is absolutely, fundamentally, uncontrovertibly incorrect in every element of that tweet.”

 

Notley said her government is working closely with the federal government to see the pipeline construction resume this summer.

By day’s end the Alberta legislature is set to pass a bill that could restrict the flow of oil and gas to B.C. by giving the provincial energy minister discretion regarding natural resources being exported from Alberta.

According to the Canadian Press, Horgan is defending his government’s position, saying he is standing up for the interests of British Columbians. He is expected to address reporters later today.

In a statement, federal Conservative natural resources critic Shannon Stubbs took aim at the prospect of using tax dollars to backstop Kinder Morgan.

“Kinder Morgan never asked for taxpayer money or a federal backstop. They simply want certainty, clarity, and a solution to the ongoing challenges and delays. Nothing the Finance Minister said today will ensure that the Trans Mountain Expansion actually gets built,” Stubbs said.

In an emailed statement, Greenpeace spokesperson Mike Hudema said the risks to the project go beyond financial, citing the ongoing legal challenges and on-the-ground resistance.

"Signing a taxpayer-backed blank cheque with Kinder Morgan’s name on it is the definition of throwing good money after bad and Canadians shouldn’t be on the hook for the big losses this project will likely incur," Hudema said. "The federal government should cut their losses not double down on them."

Trudeau was in Calgary Tuesday to announce transit funding and was met by pro-pipeline demonstrators yelling "Build KM," and "build that pipe."

After an emergency meeting with the feuding British Columbia and Alberta premiers last month, Trudeau first said financial talks were being initiated, and pledged legislative measures that have yet to be tabled.

Earlier this month, the federal government announced it would be intervening in the British Columbia government’s court reference on the Kinder Morgan pipeline, to assert the federal government’s jurisdiction.

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Kinder Morgan could win all the battles and still lose the war

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Of the 16 judicial challenges that the Trans Mountain pipeline project has survived so far, none is as important as one handed down this week by the B.C. Supreme Court.

The court actually ruled in two separate lawsuits, one filed by the City of Vancouver and the other by the Squamish Nation. But, make no mistake − it is the second that is so consequential and portends well for the company in terms of the legal matters still outstanding.

To understand why the Squamish case is so important, one has to go back to a Federal Court of Appeal decision in 2016 regarding Enbridge’s proposed $7.9-million Northern Gateway pipeline. Approved by the National Energy Board and the federal cabinet, the court found that Ottawa failed to properly consult First Nations communities along the planned route. That ruling effectively killed the venture there and then.

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Kinder Morgan was always aware of the concerns expressed by aboriginal groups in northern B.C. that there had been insufficient consultation around the Gateway project. Both Enbridge, and the federal government at the time, had been publicly criticized for the poor job they had done in trying to get First Nations groups educated about both the overall project and the measures being undertaken to mitigate potential risks. Kinder Morgan was determined not to make that mistake, determined that inadequate conferral would not be something that killed its project. It pushed the federal government on this front, too.

That First Nations groups would one day launch court actions to try and stop it was a given. And the Squamish, among other aboriginal groups, complied.

Of all the lawsuits levelled against the project, Kinder Morgan was still most nervous about the ones involving First Nations. Courts at all levels had, in recent years, sided heavily in favour of Indigenous groups, when it came to areas such as land rights and consultation.

There’s always been a feeling that if anything was going to threaten Trans Mountain, it would be a legal ruling that sided with a First Nations group opposed to the project – which is why Justice Christopher Grauer’s decision this week is so consequential.

While going to great pains to make it clear what his two rulings were not about – whether the project should go ahead, whether it is in the national interest or whether it presented unacceptable risks to the environment – he said in the case of the Squamish that he was satisfied that the consultation that took place as part of the NEB’s assessment process was adequate.

“I find that … consultation and accommodation sufficient to satisfy section 35 of the Constitution Act, 1982, had occurred, was reasonable and entitled to deference,” Justice Grauer ruled in dismissing the Squamish’s petition.

Of course, this is not the end of it. It never is with this project. There is still the reference question that the B.C. government is sending to the courts on jurisdiction. And the Federal Court of Appeal is soon expected to render a decision in a massive case, involving, among others, several First Nations groups along the coast and the B.C. Interior. It also centres around the question of consultation, and whether there was enough of it prior to the NEB and the federal cabinet approval of the pipeline expansion.

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It doesn’t necessarily follow that because the B.C. Supreme Court has ruled that consultation was sufficient, the federal appeal court will, too. But most legal observers believe that Justice Grauer’s decision certainly bodes well for Kinder Morgan, which must be anxiously awaiting the federal court’s verdict. Whether the company still has the stomach to go ahead with this endeavour is another matter.

If the company sells the project to Ottawa and walks away, which it could, it would be a seminal moment in the history of resource development in this country. Despite what federal Finance Minister Bill Morneau might say, there does not appear to be a lot of suitors waiting in the wings to take over this project should Kinder Morgan decide to wash its hands of it. (And increasingly, that is a view that many are subscribing to).

In the end, the project could end up surviving every court challenge thrown its way and still not proceed. Why? Because people may not have the appetite for the on-the-ground fight that still lies ahead. First Nations groups may lose their legal challenges, but win in the court of public opinion, especially after images of protesting aboriginal elders being carted away by Mounties or the army start being broadcast around the world.

Kinder Morgan could win all the battles and still lose the war.

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Police lay charges in alleged Calgary-based, $20-million Ponzi scheme

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Two Calgarians have been charged with fraud in connection with an alleged Ponzi scheme that netted more than $20 million from investors.

Following a decision by the Alberta Securities Commission (ASC), police claim Arnold Breitkreutz, 70, and Susan Way, 67, defrauded hundreds of Albertan investors by using their funds “contrary to what investors were told.”

Police say the pair took in over $27 million dollars in 2014 and 2015 and used the funds to pay off other investors instead of being used for mortgage lending.

“This has been an extremely complex investigation involving substantial resources, interviews and time,” Sgt. Doug Johnston with the RCMP Federal Serious and Organized Crime unit said in a release. “We are pleased to be able to conclude this investigation with charges and extend our gratitude to the various agencies who provided support to the RCMP.”

The ASC decision back in March found Breitkreutz and Way ran a Ponzi scheme through Breitkreutz’s company, Base Finance. The RCMP began looking into Breitkreutz, Way and Base Finance in 2015 after the ASC brought the Ponzi scheme to law enforcement.

The commission said Breitkreutz, Way used Base Finance to deceive investors into thinking they were putting their money into mortgages held by the company, rather than in a loan to an undisclosed entrepreneur involved in U.S. oil and gas developments, according to the regulator panel’s decision.

Between 2004 and 2015, the operators of Base Finance raised more than $137 million from upwards of 250 investors.

Breitkreutz and Way have both been charged with fraud over $5,000 and theft over $5,000.

“Conditions of their release include not to contact certain investors, to report to the RCMP regularly, to surrender their passports and remain in Canada, and not to deal with land or money or securities of others,” police said in a release.

The pair will appear in court on May 28 in Calgary.

RRumbolt@postmedia.com

On Twitter: @RCRumbolt

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Trump administration seeks WTO panel to resolve wine dispute with Canada

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The Trump administration said Friday it requested that the World Trade Organization set up a dispute settlement panel to rule on its claim of Canada‘s “discriminatory” trade practices involving U.S. wine.

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The dispute with Canada relates to policies at the provincial level that limit grocery store access to American wines. The marketplace for alcohol in several big Canadian provinces is controlled by government-run enterprises and liquor control boards, and in some cases they own and operate state-run retail networks.

Friday’s action specifically relates to the province of British Columbia, where liquor authorities in 2015 amended rules to allow regular grocery stores to start selling wine and liquor but in doing so separated U.S. and other imported wine from B.C.-only product. Even so, American wine industry executives say the U.S. industry continues to have market access issues in other Canadian provinces, including Ontario and Quebec.

Last year, the U.S. held consultations with Canada on the wine issue, but those talks failed to resolve the matter. The request for establishment of a WTO dispute panel is the next step in the settlement process.

The trade action was jointly announced by U.S. Trade Representative Robert E. Lighthizer and Agriculture Secretary Sonny Perdue, who requested that the WTO set up a dispute settlement panel to look at “unfair regulations” that govern the sale of wine in grocery stores in B.C.

According to the announcement, B.C.’s policy of excluding imported wine from grocery store shelves gives “substantial competitive advantage” to B.C. wine. “These regulations appear to breach Canada’s WTO commitments and have adversely affected U.S. wine producers.”

Canada is the largest single country market for U.S. wine, according to the Wine Institute, a trade organization representing more than 1,000 wineries and related businesses in California. California-produced wine is the No. 1 table wine category in B.C., and the retail value of U.S. wine sales to all of Canada last year was almost $1.1 billion.

“Wine Institute greatly appreciates the Trade Representative’s continued efforts to end these discriminatory practices and hold Canada accountable for their WTO obligations,” said Robert Koch, president and CEO of the Wine Institute. “Canadian consumers should have the same access to the vast array of the world’s great wines.”

Koch said his organization will continue to push “for equal treatment of imported and domestic wine by all Canadian provinces. Policies supporting B.C., Ontario and Quebec that provide favorable distribution and retail access, discounted excise taxes, and local bottling requirements for the benefit of domestic producers are contrary to Canada’s commitments to the WTO.”

The 2015 regulations adopted in B.C. allowed grocery stores in the province a so-called “wine on shelf” option to sell wine anywhere within the store but only BC-produced wine on grocery store shelves. Also, U.S. and other imported wine was only allowed to be sold in B.C. grocery stores where there was a separate so-called “store within a store” option.

“The B.C. policies would allow for imported wine to be in grocery stores within these completely separate [‘store within a store’] stores,” said Charles Jefferson, vice president of federal and international public policy for the Wine Institute. “But today I’m not aware of any grocery stores that have actually set up those kinds of arrangements.”

Yet, Jefferson said it’s “very hard to speculate” about the financial impact of the B.C. regulations on U.S. wine producers. “It’s really hard to see what the potential impacts are other than we know we’re being excluded from those consumers who are in the grocery store,” he said.

U.S. wine has an estimated 10 percent share of the B.C. marketplace.

“The practice of discriminating against U.S. wine is unfair and cannot be tolerated any longer,” Perdue said in a statement. “Our wine producers rely on export markets and they deserve fair treatment, especially by our northern neighbors in British Columbia.”

Lighthizer stated, “Discriminatory regulations implemented by British Columbia are unfairly keeping U.S. wine off of grocery store shelves, and that is unacceptable. Canada and all Canadian provinces, including B.C., must play by the rules. The Trump administration will continue to hold our trading partners accountable by vigorously enforcing U.S. rights under our trade agreements and by promoting fair and reciprocal trade through all available tools, including the WTO.”

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