Kinder Morgan: Should Canadian taxpayers invest in a bailout?

June 2018 pipeline (Chris Helgren:Reuters)

Protest against the Trans Mountain Pipeline. (Photo: Chris Helgren / Reuters)


On May 29, Canada’s federal government announced that it would purchase the Trans Mountain Pipeline from the American corporation Kinder Morgan—despite opposition from environmentalists and Indigenous people. “The Trans Mountain expansion project is of vital interest to Canada and Canadians,” Bill Morneau, the finance minister, told reporters after a cabinet meeting to discuss the deal. “Our government’s position is clear: It must be built, and it will be built.” An earlier article follows below.

Prime Minister Trudeau has instructed Finance Minister Bill Morneau to begin discussions about a bailout of Kinder Morgan’s Trans Mountain pipeline project from the Alberta Tarsands to Burnaby BC for the purpose of exporting bitumen to foreign markets.

Kinder Morgan announced on April 8 that it had stopped all essential work on the project, citing delays and risk associated with sustained, legal, economic and political opposition. Trudeau’s eagerness to invest in the $7.4 billion CAD is seen by pipeline proponents and critics alike as a “terrible idea.”

Kinder Morgan reports it has already invested 1 billion in the project. Trudeau argues the bailout is in the “national interest” but offers no evidence to show how taxpayers would benefit from pouring their dollars into a profitable mega corporation based in the United States. It seems obvious how KM shareholders and bosses would benefit.

Let’s do a little due diligence before putting a nickel into this massive corporation. Firstly, it is in the business of providing transmission infrastructure for the oil and gas companies to move product to refineries and to consumers. This business is the most destructive of the global environment. Secondly, Texas billionaires Richard Kinder and Bill Morgan, formerly of the massively corrupt and crooked Enron Corporation, built this business out of an Enron subsidiary.

Kinder Morgan’s management team, to this day, contains many prominent former Enron executives. Their business has an interest in or directly operates 137,000 kilometres of pipeline and 152 terminals

Kinder Morgan (KM) is a major borrower. It operates at a risky rate of 1/3 of its assets financed by debt. It has a reputation of running on the cheap. Hedgeye Risk Management on Wall Street accused the company of installing cheaply built pipelines, and underspending on maintenance and safety technology. For example, they are unwilling to provide British Columbia a guarantee of even a 24-hour response to oil spills in the province.

At the 2014 National Energy Board hearing in Ottawa, KM said it would provide 100 per cent of the financing for Trans Mountain. As oil prices fell it failed to find credit or a joint venture partner. The job of raising funds was shoved onto KM Canada. KM Canada raised $1.6 billion in an offering in 2017, but in true Enron fashion this money was taken by the US corporation to pay off its debts, rather than to finance the Canadian project.

Meanwhile, KM Canada has been extremely busy lobbying 19 different agencies to get technical tax changes for its benefit, support for increased tanker traffic, and support for its pipeline. KM has a history of paying little or no tax, just like Enron. In 2017, for example, they paid zero tax in Canada. Over the past three years their tax rate has been less than 1%. So, they contribute nothing to Canadian taxpayers, but seek a bailout.

One of the major benefits of such intense lobbying is that the NEB allowed only KM to increase pipeline tolls from $2.50 a barrel to $5.90 a barrel generating a cool billion annually in pipeline traffic in Canada. For BC especially, this means permanently high gas pump prices and the siphoning off of $100,000,000 annually from the BC economy to the benefit of this huge US dirty oil business. BC residents would pay the cost of the pipeline through higher gas and heating oil prices.

In the U.S., since 2000 KM has been hit with fines totalling US$162,000,000, with many cases still in progress, and no doubt, more to come. These involve repeated violation of environmental laws, energy market manipulation (just like Enron), pipeline safety violations and labour violations.

Incidentally, but importantly, eight Canadian institutional investors own $2 billion in KM. Sadly, both from an ethical perspective and from a prudent investment perspective, one of them is the Ontario Teachers’ Pension fund. It likes investing in a Trump enterprise. OTP, you should know better. You are going to get screwed. Richard Kinder, by the way is said to be worth $8 billion, enough to pay for the pipeline himself.

Not a single dollar of taxpayer money should be invested in this company. This project is crooked from start to finish. Stop the pipeline and throw KM out of Canada. Nationalize and operate its assets as part of a democratically developed plan to rapidly reduce oil dependence and build a green energy infrastructure instead.