By Paul Vieira 

Kinder Morgan Inc.'s plans to expand its Trans Mountain crude-oil pipeline faced fresh risks as Canadian Prime Minister Justin Trudeau and the premier of oil-rich Alberta added to a debate fueled by the possibility a new political alliance in the country's west.

Comments Tuesday from Mr. Trudeau and Alberta Premier Rachel Notley could set the stage for a fierce national debate pitting the need to develop Canada's commodities to help foster growth against the growing influence of the environmental movement.

Mr. 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.

Kinder Morgan now faces a setback after two anti-pipeline political parties in British Columbia -- the left-leaning New Democratic Party, or NDP, and the environment-focused Green Party -- said they had reached a tentative cooperation agreement that would let the NDP form a government in Canada's third-largest province. An election earlier this month left the Liberal Party, which has governed the province since 2001, one seat short of a majority in the British Columbia legislature. The Greens have pledged to support the NDP over a four-year period.

Details of the pact were expected to released later Tuesday, and the Green Party said the agreement reflects its opposition to Trans Mountain. In a statement, British Columbia Premier Christy Clark said she is considering her next steps amid the new political alignment.

Mr. Trudeau said Tuesday that the Trans Mountain project remains in the best interest of Canadians. "Regardless of a [possible] change of government in British Columbia or anywhere, the facts and evidence do not change," he said at a press conference in Rome, where he met with Italy's prime minister. He added he stands by his earlier decision to approve the expanded energy corridor.

Mr. Trudeau has had to perform a balancing act as he tries to fulfill his pledge to fight climate change, while trying to stoke growth in a country that depends on the energy sector for nearly 10% of economic output.

Ms. Notley warned the NDP-Green alliance Tuesday that it has no legal right to delay or block the Trans Mountain expansion, given Mr. Trudeau's previous approval. As envisaged by Kinder Morgan, the expansion would triple capacity to 890,000 barrels of crude oil a day on an existing 714-mile pipeline that carries crude from landlocked Alberta to British Columbia's Pacific coast.

Alberta's economy has suffered in recent years amid the slump in commodity prices, and energy producers in the province regarded the Trans Mountain expansion as a way to boost sales of crude oil to Asia and reduce its dependence on the U.S. market, where Canadian crude sells at a discount to global prices.

"We will use the means at our disposal to ensure that the project is built," Ms. Notley said in a statement.

Major energy companies, such as Royal Dutch Shell, have decided in recent months to exit from the Alberta oil sands, which has come to symbolize the risks in high-cost, carbon-intensive sources of oil amid lower prices and tougher environmental regulations.

Houston-based Kinder Morgan intends to proceed with construction, a spokesman said, adding, "We have all the necessary approvals."

Political developments, however, are weighing on the newly listed shares of Kinder Morgan's Canadian assets, which were priced at C$17 apiece as part of an initial public offering. The shares, which began trading Tuesday on Toronto's main stock market, fell as low as C$15.75 before recovering to C$16.25 at midday.

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.

Write to Paul Vieira at paul.vieira@wsj.com

 

(END) Dow Jones Newswires

May 30, 2017 13:36 ET (17:36 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
Enbridge (TSX:ENB)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Enbridge Charts.
Enbridge (TSX:ENB)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Enbridge Charts.