Recently, some have stated Kinder Morgan's (NYSE:KMI), (NYSE:KMP) Trans Mountain Pipeline expansion has become the same as the Keystone XL pipeline debacle. This assertion could not be further from the truth. There are major differences between the two efforts that make the comparison groundless. In this article, I will assess the current state of affairs regarding the Trans Mountain Pipeline expansion. After, I will point out the key attributes that differentiate the two endeavors, rendering the comparison ineffectual. I will then give my take on the situation.
Trans Mountain Pipeline Current Status
There is opposition to the Trans Mountain Pipeline
It's true, there is a lot of opposition from environmental groups and some municipalities with regard to Kinder Morgan's current plans to expand the Trans Mountain Pipeline as evidenced by a recently published article regarding the matter. The opponents to the expansion are steadfastly against augmenting oil exports in the area. The complaints by opponents include, increased tanker traffic on the coast may cause various problems, Kinder Morgan has not even gotten approval for the expansion and the company is already planning further expansion, there is no reason to put at risk the pristine Northwestern environment for the economic benefit of Kinder Morgan, and why should the risk be taken just so Oil & Gas companies can export petrochemicals to foreigners. These are all valid assertions that demand a valid cost/benefit analysis by the company.
City of Burnaby 2007 Oil Spill
The B.C. City of Burnaby, which is home to an oil-storage facility and loading dock that serves ocean-going tankers, has asked 1,700 questions seeking information about the company's emergency response plans. This may seem excessive to some, yet in actuality it appears perfectly natural since there was an oil spill on July 24, 2007 by Kinder Morgan.
Approximately 234,000 liters of crude oil was spilled. The cause of spill was a Kinder Morgan crude oil pipeline connecting the Burnaby Tank Farm to the Westridge Marine Terminal was punctured by a construction crew digging along the Barnett Highway. This has caused increased scrutiny by the city regarding the risk of potential oil spills and emission of toxic fumes. This is to be expected. Nonetheless, it is interesting we haven't heard anything about the town wanting to get rid of the current facilities in the city, have we? We'll get to that later.
Who said it was going to be a slam dunk?
The author of the somewhat hyperbolic piece in question starts off by stating:
"Once a viewed by industry as a slam-dunk proposal to open potentially vast new markets in Asia for fast-growing oil sands production, the expansion now faces some of the same resistance that has threatened the viability of rival projects, from TransCanada Corp.'s Keystone XL to Enbridge Inc.'s contentious Northern Gateway."
I beg to differ. No one ever stated it was going to be a slam dunk. Kinder Morgan has approached this in a very caring and methodical manner. The Kinder Trans Mountain team has continued to work to optimize the route and minimize impacts to people and the environment through a combination of technical and environmental studies, public consultation and on-the-ground fieldwork. The following map provides the proposed revised pipeline corridor and proposed alternative pipeline corridors currently being examined by the Trans Mountain team in conjunction with the key players along the route.
Look, no one ever said this was going to be a slam dunk. Nevertheless, if the author didn't say that, it wouldn't make such a great story now would it? The fact of the matter is Kinder Morgan pipelines have been in the area for over 60 years with no major incidents with the exception of the 2007 spill in Burnaby. Furthermore, hundreds of thousands of miles of pipelines form the backbone of the local economy and the environmental impacts of the current infrastructure have been nominal at best. Furthermore, the alternative option, rail transport, offers the same risks, maybe even more. Finally, this is only an expansion of current infrastructure already in place.
Even so, there is opposition and people are asking a lot of questions. Yet, this would seem to be standard operating procedure to me. I see the fact key players are asking a lot of questions as nothing out of the ordinary.
The Trans Mountain and Keystone XL situations are nothing alike
The fact that there has been a ton of questions from the key players regarding the Trans Mountain pipeline is not surprising to me one iota. Yes there is some opposition in areas along the corridor, yet, there is also many that are much in favor of the expansion. However, there is no comparing this to brick wall the Keystone XL pipeline hit. That is a whole new ball game.
The brick wall I am referring to comes in the form of a Presidential Permit. A Presidential Permit, which must be issued by the Obama Administration, is needed due to the fact the pipeline crosses the US/Canadian border. Since this pipeline crosses the border from Canada into the US it must receive a Presidential Permit from the Obama administration to move forward. Now, anyone worth their salt knows the Obama Administration has already officially rejected the Keystone XL pipeline out of hand back in 2012. The administration sent a report to Congress detailing why they decided against the pipeline. The report states four main reasons.
- Many estimates of the potential jobs created by the pipeline are way off.
- The pipeline would only result in a few thousand jobs.
- The overall economic impact would be minimal.
- By rejecting Keystone, we're not losing out on massive amounts of oil.
The Keystone XL Pipeline is dead in the water in my eyes until there is a change in the current administration, at best. I do not see President Obama signing the Presidential permit ever. This would go against his entire base and platform. That is a huge difference than answering a ton of questions by concerned citizens. Moreover, if they weren't interested in considering the matter, why are they asking questions in the first place? I think I know the answer.
One's bark is always worse than one's bite
What this axiom implies is, if someone's bark is worse than their bite, they are not as unpleasant as they seem, and their actions are not as bad as their threats. I surmise this may be the case with the current opponents and questioners. At this point everyone knows this is a huge deal for all major Canadian oil sands EP players. Most of the big companies have already signed on to use the expanded pipeline. Canadians know this is their country's bread and butter. Canada has always been a resource rich nation. The people of Canada know they can't use all the oil they have discovered in their country and they need to export it to keep the economy churning forward.
The key players along the expanded corridor just want to be sure the proper planning has been done and no short cuts have been taken. Furthermore, lest not forget, this is a negotiation. Who in their right mind was expecting the key players to just lie down and ask Kinder where to sign? Maybe the author of the piece I guess. But, as for me, this is par for the course, negotiations 101 as it were. Everyone knows this is big money and wants to be sure they are justly rewarded for the risk they are undertaking. I see no problem with this.
The squeaky wheel gets the grease
This squeaky wheel gets the grease means the loudest complaints get the most attention. The fact of the matter is you only hear from the opposition in most cases. As a writer, this is abundantly clear to me. Most of the comments on my articles are usually from people who disagree with my thesis. There may be several hundred people that read the article and say, oh that was a good read. But they aren't moved enough to actually post a comment. The same goes for everything else. You never see people out demonstrating that they back something until someone else comes out and protests that they want it stopped, do you? Think about it. I am telling you that is what is in play here.
The Bottom line
I see the expansion plan being approved in its entirety if Kinder can jump through all the hoops. Given, there are a ton of hoops out there. Nonetheless, at least there are hoops. The Keystone XL pipeline is dead in the water in comparison. So saying the Trans Mountain Pipeline is comparable to the Keystone situation is a false premise to begin with.
The key fact is Kinder has been operating in the area for over 60 years with no discernible environmental impacts with the exception of the Burnaby spill. Moreover, Kinder took great care in cleaning that up and implementing new procedures to ensure that would never happen again. Furthermore, Canadian residents know the immense oil sands discovery in their country necessitates expanded midstream infrastructure and operations in their area. They just want to be sure Kinder Morgan gets it right. The energy boom in Canada has provided Canadians with low energy costs, plenty of jobs, and economic stability. I suspect the true size of the opposition is actually a small minority of the population.
Case in point, in the article, the author reports that when citizens were asked in a Bloomberg News poll if they would approve of the contentious Northern Gateway pipeline, which involves routing new infrastructure through virgin territory, only 34% of B.C. residents wanted the federal government to block the Gateway. Remember, the Gateway pipeline would run through virgin territory vs. the Trans Mountain pipeline expansion which basically comes down to laying a new pipe next to an existing one. I submit these facts to you as proof the opposition is in the minority. They just so happen to have the loudest voices. The expansion proposal will be approved.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.