(Adds comment from investment sector, policy expert)
By Julie Gordon and David Ljunggren
VANCOUVER/OTTAWA, April 10 (Reuters) - Alberta on Tuesday doubled down on its pledge to financially support a troubled pipeline expansion, saying the province could buy the project outright from Kinder Morgan Canada Ltd as Canada's federal government reiterated it was "100 percent" behind the build.
Texas-based Kinder Morgan said on Sunday it would scrap plans to nearly triple the capacity of its Trans Mountain pipeline, which extends from Alberta to British Columbia's coast, unless various legal and jurisdictional challenges could be resolved by May 31.
The ultimatum prompted swift responses from Alberta and Ottawa, with both levels of government signaling interest in spending public funds to ensure the project proceeds. Shareholders backed the gamble.
"We are considering a number of financial options to ensure that the Trans Mountain expansion is built, up to and including purchasing the pipeline outright if it was to come to that," Premier Rachel Notley said in a statement provided to Reuters.
Notley was not immediately available to clarify whether she was referring to both the existing pipeline operations and the C$7.4 billion ($5.9 billion) expansion project or just the latter. She had previously said Alberta could take a stake in the project.
Prime Minister Justin Trudeau's Cabinet held meetings on Tuesday to discuss its options for the controversial project, which is desperately needed by industry but fiercely opposed by the province of British Columbia, along with certain municipalities and aboriginal groups.
The issue is a major political challenge for Trudeau, who approved the expansion in 2016. Critics have said he needs to be more forceful with both the West Coast province and protesters who have repeatedly blocked Kinder Morgan work sites.
"We've been saying for the last two days we're prepared to look at many options, and that has not changed," Natural Resources Minister Jim Carr told reporters in brief remarks following the meeting.
"The government is 100 percent behind this pipeline."
Carr had previously said Ottawa was looking at whether to take a stake in the project.
But the industry was less enthusiastic.
"We need foreign businesses like Kinder to be saying we are an enviable place to do business in, not a place that I had to sell my asset to the government," said Rafi Tahmazian, a portfolio manager at Canoe Financial.
Kinder Morgan Canada said it was consulting with the government and would not comment until those talks are complete. Its shares stabilized on Tuesday, closing up 3.66 percent at C$16.71 after shedding 12.6 percent the day before.
Whether or not governments step up with financial backing, the company's struggles are another black mark for Canada, which used to be a prime destination for foreign investment, said Robert Skinner, executive fellow at The School of Public Policy, University of Calgary.
"We used to wear this as a badge of honor - that we were not like the tin-pot regimes around the world where they carry kalashnikov (rifles)," he said. "Canada, ironically, has become a high political risk investment zone for oil and gas." ($1 = 1.2601 Canadian dollars) (Additional reporting by Leah Schnurr in Ottawa; Editing by Peter Cooney, Jonathan Oatis and Richard Chang)