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Canada to sell pipeline stake to Indigenous groups through special vehicle

Bloomberg News

Canada plans to sell a stake in the Trans Mountain oil pipeline to Indigenous groups through a special purpose vehicle that will allow individual communities to buy into the enterprise.

The government will provide the groups with access to capital so they don’t have to risk any of their own money to participate, according to a letter from Deputy Prime Minister Chrystia Freeland’s office that was obtained by Bloomberg.

The communities’ equity interest in Trans Mountain will provide them with cash flows and allow them to jointly exercise governing rights, according to the letter, which was dated Aug. 2.

The plan partly clears up how Prime Minister Justin Trudeau’s government will decide which Indigenous groups are able to take a stake in the pipeline that his administration agreed to buy for about $3.4 billion in 2018. While some Indigenous groups have opposed the Trans Mountain expansion —which nearly triples the capacity of the line that crosses many of their territories on its route from Edmonton to Vancouver — others have banded together into bidding groups to try to acquire stakes in the pipeline to generate revenue for their communities.

Indigenous groups that take part in the special purpose vehicle won’t be excluded from participating in later rounds offering additional equity in Trans Mountain, the letter said. The government will soon begin discussions with Indigenous groups along the pipeline’s route and shipping corridor, according to the letter.

Freeland’s office didn’t immediately reply to a message seeking comment.

The cost of the Trans Mountain expansion project has more than quadrupled amid repeated delays and construction setbacks. While some of the swelling costs may be passed onto the oil producers who will use the line, analysts say taxpayers also may be left to bear a hefty writedown on the project.

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