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Kinder Morgan Plans to Self-Finance as Opponents Warn Commercial Lenders Off

With at least one pipeline opponent travelling to Europe to warn bankers off the “significant legal, financial, and reputation risks” of investing in Kinder Morgan’s Trans Mountain pipeline expansion, the company’s executive chair told investors it doesn’t matter: Kinder won’t need lenders to complete its C$7.4-billion project.

Secwepemc resistance activist Kanahus Manuel was in Europe last week to warn “banks financing the project” that the American firm had misled them “about the risks of expanding its Trans Mountain pipeline, almost half of which runs across ‘unceded’ Secwepemc territory,” the Guardian reported.

Manuel based that assessment on a report by the Indigenous Network on Economies and Trade that details the perils it says the company has downplayed in its dealings with banks. A key risk is the company’s plan to lay 518 kilometres of its new pipeline across territory that has not been legally ceded to the British Columbia or Canadian governments.

For the right to proceed, Kinder Morgan is relying in part on permits given to the builders of the original Trans Mountain pipeline, at a time when the law denied the Secwepemc the right to protest its construction.

The Houston-based pipeliner “either does not understand the diverse realities of Indigenous rights in Canada, or they are wilfully ignoring the consequences of those rights for the project,” the report asserts. “Either way, it should be a major red flag for investors, lenders, and other financial backers.”

However, in a quarterly earnings call and accompanying media release posted on investment website seekingalpha, Kinder Morgan deflected the charge that it has ignored Indigenous title.

Approvals it received from the National Energy Board, the federal government, and the former B.C. government “followed many years of engagement and consultation with communities, Aboriginal groups, and individuals,” the company wrote.

Kinder Morgan admitted its project was behind schedule, conceding it would likely be completed nine months later than planned. Affidavits against protesters that Kinder Morgan filed in earlier court encounters in 2014 asserted that each month of delay in its scheduled progress on the pipeline cost the company $5.6 million in expenses and $88 million in future revenue foregone.

But in a release accompanying the latest earnings report, Richard Kinder, the company’s major shareholder and executive chair, boasted of its positive balance sheet, which may blunt any headway Manuel makes with bankers in Europe or elsewhere.

After apologizing to shareholders for an earlier reduction in the company’s regular dividend, Kinder announced a “substantial” increase in payouts to KM investors. More significantly for Manuel’s effort to turn financiers off Kinder Morgan debt, its chief executive announced that the company no longer needs them. Kinder committed the company to “continuing to fund all growth capital through operating cash flows, with no need for external funding for growth capital.”

On that basis, CEO Steve Kean said KM had “recently received permits from British Columbia granting access to nearly half of the Crown land parcels that we need in British Columbia. Pending receipt of some further permits and approvals, clearing and other construction activities will commence this year in Alberta and the B.C. northern interior.”

But other coverage suggested the U.S. company’s Canadian pipeline venture has not yet entirely run out of obstacles.

While Manuel’s mission may prove moot, other Indigenous opponents have made the easily-communicated point that if the unbuilt Energy East pipeline was subject to a carbon test, which contributed to TransCanada Corporation’s decision to abandon it, so should the unbuilt Trans Mountain expansion.

Another report in the National Observer added to the murky atmosphere surrounding the Trudeau cabinet’s apparent willingness to accept different standards in its treatment of the two proposals.

In the days before the federal cabinet approved the pipeline, the Observer noted, a report from government scientists judged the project’s potential approval to be “problematic, if not irresponsible given the lack of science needed to inform robust risk assessment.” Its authors were particularly concerned about how diluted bitumen carried through the pipeline would behave if it spilled in the ocean—a subject on which there is “almost no publicly available scientific information”.

As the Observer reports, the scientists’ letter to cabinet attracted sudden, energetic blowback from officials in Natural Resources Minister James Carr’s office, criticizing the credibility of the scientists’ conclusions as the cabinet weighed its decision.

Meanwhile, two separate court challenges to the pipeline built around nearly identical legal arguments, again rooted in Indigenous rights, forced lawyers for the Province of British Columbia to simultaneously argue both sides of the same point.

The minority NDP provincial government, elected earlier this year and supported by the small Green Party caucus, has asserted its opposition to the expansion. And its lawyers argued in early October before the Federal Court of Appeal that the federal government had failed to adequately consider the risk of bitumen spills, so that its permit to build the pipeline should be set aside.

But now, the province plans to contest its own argument in upcoming litigation brought against it by the Squamish First Nation before the B.C. Supreme Court. There, it will argue that the project’s joint federal-provincial environmental assessment did adequately consider the same risks.

B.C. Environment Minister George Heyman “says the Attorney General has been told by both in-house and independent lawyers that he must defend the actions of the previous Liberal government in court, or risk losing the ability to regulate the pipeline in the future,” the Observer reports, adding that lawyers it consulted disagreed with that opinion.