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The federal Canadian government said Tuesday it reached an agreement that will see the expansion of the Trans Mountain oil pipeline finally take place.

A Canadian Crown corporation will be set up to own the pipeline and manage the TMEP, which is now forecast to cost C$7.4 billion ($5.9 billion) to triple capacity to 890,000 b/d.

Late a year ago, the company sold 8mn shares at $25 per share, totaling $200mn, in the aim of funding the project's continued construction.

But British Columbia's social democratic government recently joined environmental activists' fight against the 1,150-kilometer (15-mile) pipeline, provoking a trade row with Alberta and leading Kinder Morgan to temporarily halt its construction until the dispute was resolved.

The purchase will be financed by Export Development Canada.

Alternatively, Ottawa could opt to cover any cost overruns incurred by the political and regulatory delays to ensure that Kinder Morgan can complete the project.

Canada needs projects like the expansion created to triple Trans Mountain's capacity to move crude oil and refined products from the Alberta oilsands and Edmonton refining complex to the West Coast, said Chris Bloomer, CEO of the Canadian Energy Pipeline Association. Finance Minister Bill Morneau believes Canada's authority to build the pipeline will be able to overcome any resistance, be it from protesters or the B.C. government.

Morneau predicted government ownership would be temporary, with efforts beginning immediately to arrange a resale to a consortium of pension funds, native communities and other investors that have already expressed interests. It isn't "the intention of the Government of Canada to be a long-term owner of this project", Morneau's department said in a statement. She added that there is bad news for Kinder Morgan because the company's "growth outlook is muted" without the expansion project.

Kinder Canada Chief Executive Officer Steven Kean said on a conference call the company hasn't yet decided how it will use the proceeds from the sale and it will consider options including acquisitions and stock buybacks. "The sale removes the significant risk attached to the TMEP expansion, eliminating at least C$6.4 billion - before potential cost overruns - of additional capital to complete the project and the uncertainty of construction scheduling and completion, given the opposition to the project from various stakeholders". Kinder Morgan Canada will continue to own the remaining assets, including crude storage, rail terminals and a condensate pipeline, and look to expand, he said.

The two sides had been in talks since the company set a May 31 deadline for the government to give certainty in the face of opposition from British Columbia, which is concerned about increased tanker traffic and possible oil spills along the Pacific coast.

"It allows us to move forward with the investments required to get the expansion completed and delivering the value that we know it can deliver to the Canadian economy".

Under the proposed federal plan, the Trans Mountain pipeline will be placed under the stewardship of a new Crown corporation and Ottawa will divest itself of the project at a later date.

"How much of a win is this for Canadians?"

Bloomberg contributors: Kevin Orland, Natalie Obiko Pearson and Naureen S. Malik.