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Ottawa offers financial backstop for Trans Mountain pipeline amid continued pushback in BC

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OTTAWA — The Liberal government on Wednesday unveiled a financial backstop for the Trans Mountain pipeline, offering to reimburse developer Kinder Morgan Canada Ltd. for financial losses that derive from B.C. Premier John Horgan’s “attempts to delay or obstruct the project.”

Finance Minister Bill Morneau did not place a cap on how much would be provided to Kinder Morgan Canada if it fails to complete construction of its $7.4-billion pipeline expansion, but said Ottawa would only backstop any “financial loss that derives from (B.C.) Premier Horgan’s attempts to delay or obstruct the project.”

The government did not provide details around how it would distinguish between “politically motivated” losses and losses tied to market forces.

Morneau did not specify what kind of financial mechanism would be put in place to help Kinder Morgan recoup any costs, saying discussions were ongoing. He said such an indemnification against financial loss “would still be in place for another party,” and suggested that other private sector players might be interested in taking over Trans Mountain if Kinder Morgan decides to scrap the already-delayed pipeline. 

The move — putting public dollars behind a privately-driven infrastructure project — is the starkest evidence yet that Ottawa is keen to ensure the project reaches completion, just as it enters its most capital-intensive phase.

Kinder Morgan Canada stock was up 3 per cent to $17.27 on the Toronto Stock Exchange on Wednesday morning.

Ottawa’s decision to intervene comes after Kinder Morgan Canada, the Canadian division of its Houston-based parent, announced on April 8 that it would halt all non-essential spending on the Trans Mountain pipeline barring assurances that it would not face further political resistance to the project. The company set a May 31 deadline to decide whether it would move ahead, and called on the B.C. government to stand down from its opposition to the pipeline.

The move prompted Prime Minister Justin Trudeau to consider “legislative and financial” actions to push Trans Mountain ahead, following an emergency meeting between the B.C. and Alberta premiers, who have sparred for months over delays to Trans Mountain’s construction.

B.C. Premier John Horgan has said he would use all the tools at his disposal to block the project. In mid-April his government filed a reference to the provincial appeals court to determine whether British Columbia had legal authority to restrict shipments of oilsands bitumen across its territory.

That prompted Kinder Morgan Canada CEO Steve Kean to say the project “may be untenable for a private party to undertake” during a conference call last month. He had earlier said the company would require assurances it could “efficiently construct through British Columbia without the threat of additional or new requirements being imposed, or proposed, or announced, that would create further uncertainty.”

Richard Roberts, an analyst at Scotiabank based in New Orleans, LA., said in a phone interview Tuesday the backstop would “provide some level of assurance” for Kinder Morgan, but said various other risks could still hobble the pipeline.

“I still think they would need some more clarity from B.C. that they’re going to be allowed to do it,” he said.

The announcement comes as Trans Mountain enters the most capital-intensive phase of construction, making future delays increasingly costly, according to analysts. The company has already pushed back its completion date for the project by a year to December 2020.

“They’ve kind of gotten to the point now that it’s going to become very big dollars very soon,” Robert said. In April Kinder Morgan said it has already spent $1 billion on the project and plans to spend another $1.8 billion this year.

Observers have speculated over what would happen to the project if Kinder Morgan’s demands aren’t met, including whether Ottawa and Alberta would buy a position in the project, effectively nationalizing the formerly private asset.

Alberta Premier Rachel Notley told reporters in April the province was considering a range of financial options to assist the project, “up to and including purchasing the pipeline outright if it were to come to that.” Ottawa, for its part, made no such claims.

Even so, such a move would still require an operator like Calgary-based Enbridge Inc. or TransCanada Corp. to take the reins, a move that David Galison, a Toronto-based analyst at Canaccord Genuity Corp. who covers Enbridge, says is unlikely considering that Kinder Morgan would first have to deem the project not worth the risk. However, Canadian midstream players likely would be keenly interested in a pipeline project that is already fully subscribed and has passed regulatory review. 

“I’m sure that Enbridge would love to be able to take on a fully permitted project from Kinder Morgan,” said Galison, adding that the company would likely require solid assurances from Ottawa and from regulators that it could move ahead with the pipeline.

In a statement, Enbridge said it’s focused on the execution of its Alberta-to-Wisconsin Line 3 Replacement Program and other projects, “and we are not engaged in conversations about buying the Trans Mountain Pipeline or taking over the project as operator.”

Kinder Morgan’s decision to fold Trans Mountain into a Canada-based subsidiary was widely seen as an attempt to distance the company from the highly contentious asset, as well as reduce its significant project backlog.

“They’ve ring-fenced the risk around this,” said one person familiar with the project who asked not to be named.

It is unclear whether a new operator would be forced to re-apply for any National Energy Board approvals or whether building permits would be passed along to the new owner.

“The bottom line is that the NEB would have to review any requests from a regulatory oversight perspective,” said James Stevenson, the NEB’s head of communications on the Trans Mountain project. “And what that review would look like would depend on the details.”

Scotiabank’s Roberts said Kinder Morgan has every reason to move ahead with the project, which accounts for roughly half the Houston-basedcompany’s current backlog. But the company could still follow through on its ultimatum and abandon the project if snags persist, he said.

“I don’t think it’s posturing at all… they need assurances that they can get from point A all the way to point Z.”

The Trans Mountain expansion would nearly triple current capacity on the pipeline to 890,000 barrels per day, bringing heavy oil and refined products from northern Alberta to a Vancouver port.

• Email: jsnyder@nationalpost.com | Twitter:

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Pipeline protesters defy eviction order, say they'll meet with officials

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Kwitsel Tatel, left, speaks to media during a press conference at Camp Cloud near the entrance of the Kinder Morgan Trans Mountain pipeline facility in Burnaby, B.C., on Saturday July 21, 2018. THE CANADIAN PRESS/Ben Nelms

BEN NELMS/The Canadian Press

Protesters at an anti-pipeline camp in Burnaby, B.C., say they will meet with officials to discuss safety measures, but they will not comply with a city-issued evacuation order.

The City of Burnaby says there are safety concerns surrounding “Camp Cloud,” including a two-storey wooden watch house and a fire that protesters describe as sacred and ceremonial.

Protest organizer Kwitsel Tatel says the participants will not leave, nor will they extinguish their fire.

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Tatel suggests the structures around the camp’s sacred fire could be modified, if only to refocus the attention away from the physical camp and back to the anti-pipeline protest.

She adds that snuffing out the fire would constitute a breaking of both B.C. Supreme Court and Coast Salish law.

The protesters say the city’s notice, which was issued on Wednesday and expired early Saturday, was written without adequate consideration of a recent court decision or consultation with camp residents.

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2 Uncle Ben's rice varieties recalled in eastern Canada

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Mars Food Canada is voluntarily recalling select Uncle Ben's rice products, including its Fast & Fancy Broccoli and Cheddar, and Country Chicken flavoured rice, after learning about possible salmonella contamination in the seasoning pouches in both products. The recall only affects products sold in eastern Canada.

In a statement, the company said it is conducting the recalls "out of an abundance of caution."

"We are working with a limited number of impacted retailers in eastern Canada to have the product removed from store shelves," it said.

The company said while the majority of affected products have already retrieved, customers should check any packages of rice featuring any of the lot codes listed here. It says affected products should not be consumed.

The recall comes amid a flurry of food product recalls affecting Loblaws and Ritz products. The Canadian Food Inspection Agency said Saturday it is recalling Ritz bits sandwich crackers and No Name chicken nuggets for risk of salmonella contamination.

The breaded nuggets, offered at Maxi, Provigo, AXEP and Intermarché grocery stores in Quebec, were sold in boxes of 907 grams with the best before date "2019 MA 15."

The recalled Ritz crackers were sold in packs of 180 grams, 30 X 42 grams and 42 grams. The best before dates are November 2018 to March 2019. 

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Fiat Chrysler chooses Jeep exec Mike Manley to replace ailing CEO Marchionne

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Fiat Chrysler Automobile announced Saturday that CEO Sergio Marchionne's health had suddenly deteriorated following surgery and that its board of directors had chosen Jeep executive Mike Manley to replace him.

Marchionne, a 66-year-old Italian-Canadian, joined Fiat in 2004 and led the Turin-based company's merger with bankrupt U.S. carmaker Chrysler. Manley, 54, had been heading the Jeep brand since June 2009 and the Ram brand from October 2015.

The announcement, at the end of an urgently convened board meeting, marked the end of the Marchionne era, which included the turnaround of failing Fiat, the takeover of bankrupt U.S. automaker Chrysler and the spinoffs of the heavy machinery and truck maker CNH and supercar maker Ferrari.

Fiat Chrysler said in a statement that due to his deteriorating health Marchionne "will be unable to return to work."

Marchionne, 66, had already announced he would step down in early 2019, so the board's decision, to be confirmed at an upcoming shareholders' meeting, will "accelerate" the CEO transition process, the statement said.

Chrysler CEO Sergio Marchionne, left, is seen with Jeep brand President and CEO Mike Manley at the Jefferson North Assembly Plant, in Detroit. (Carlos Osorio/Associated Press)

The British-born Manley had been one of Marchionne's closest collaborators at the group, and in a previous role had been responsible for product planning and all sales activities outside of North America.

Marchionne was reported to have had surgery for a shoulder problem about three weeks ago in Switzerland.

Fiat is considered a close-knit family, and FCA chairman John Elkann said he was "profoundly saddened to learn of Sergio's state of health. It was a situation that was unthinkable until a few hours ago, and one that leaves us all with a sense of injustice."

Elkann didn't give details of Marchionne's health problems, adding that his "first thoughts go to Sergio and his family." He asked everyone to respect Marchionne's "privacy and that of all those who are dear to him."

Elkann is a grandson of the late Gianni Agnelli, the longtime Fiat dynasty chieftain.

The boards of Ferrari and CNH Industrial, which makes heavy machinery and trucks, were called urgently to meet on Saturday in Turin, Fiat's headquarters.

Ferrari announced that Louis Camilleri, an Egyptian-board Maltese and longtime executive at Philip Morris International, the tobacco company, was chosen to replace Marchionne as CEO of the sports car maker. 

A Fiat Chrysler sign is seen outside the Chrysler World Headquarters in Auburn Hills, Mich., in this file photo. (Carlos Osorio/Associated Press)

Known for sleeping only briefly each night, Marchionne, who is also a lawyer, was holding multiple leadership roles in the companies, notably as CEO of FCA — Fiat Chrysler Automobiles, as well as CEO and chairman of Ferrrari.

In early June, Marchionne made his last major presentation as CEO of Fiat Chrysler. On that occasion he announced there would be a major investment thrust to make more electrified cars, although traditional engines will continue to dominate production. He unveiled FCA's plans through 2022.

Brands that have been driving the company's revenues include Jeep SUVs, Ram trucks and the premium brands, Maserati and Alfa Romeo. Those brands were expected to account for 80 per cent of revenues by 2022, compared to 65 per cent currently.

The passenger-car brands of Fiat and Chrysler have been less profitable.

At the June appearance, Marchionne also predicted Fiat was about to eliminate its debt.

Next corporate results are set to be released on July 25.

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