Ottawa’s purchase of the Trans Mountain pipeline expansion project is no longer projected to be profitable because of construction delays and higher costs, says Parliamentary Budget Officer Yves Giroux in a new report.
The Liberal government purchased the expansion project in 2018 from Kinder Morgan Canada Inc. at a cost of $ 4.4-billion. The project will twin an existing pipeline to address long-standing concerns that Western Canadian crude oil was selling at a discount owing to a lack of capacity needed to ship to export markets.
The purchase has frequently been criticized by environmentalists and the federal NDP as contrary to the Liberals’ stated desire to reduce Canada’s carbon emissions.
A 2020 report by the PBO projected that once in operation, the government would be able to sell the project at about a $ 600-million profit. Wednesday’s report said that forecast has since shifted to a projected $ 600-million loss.
“Based on the new developments since the previous report, specifically the increased construction costs and the delay in the in-service date, PBO finds that the short 2018 decision to acquire, expand, operate, and eventually divest of the Trans Mountain assets will result in a net loss for the federal government, ”the PBO states.
The latest report updates that forecast using the same methodology, but incorporates two major developments with the project that occurred since the previous report: Much higher construction costs and a one-year delay.
The PBO analysis does not attempt to estimate any other economic costs or benefits associated with the pipeline.
The Crown corporation responsible for the project announced in February that the projected cost of the project had climbed to $ 21.4-billion from $ 12.6-billion and would not be complete until the third quarter of 2023.
In May, the federal government announced that it had approved a $ 10-billion loan guarantee for the project.
This week’s PBO report also states that in the event that the expansion project were to be stopped and cancelled indefinitely, the federal government would need to write off more than $ 14-billion in assets.
Adrienne Vaupshas, a spokesperson for Finance Minister Chrystia Freeland, said in an e-mailed statement that the pipeline expansion project is in the national interest and is commercially viable.
“The federal government intends to launch a divestment process after the project is further de-risked and after economic participation with Indigenous groups has progressed,” she said.
Keith Stewart, senior energy strategist with Greenpeace Canada, pointed out that Prime Minister Justin Trudeau issued a news release in 2019 vowing that “every dollar” the federal government earns from the pipeline project will be invested in Canada’s clean-energy transition.
“The federal government is losing money on the pipeline whose profits they promised would pay for green energy,” he said, recommending that the government scrap the project and shift the remaining budget toward green energy projects.
Mr. Stewart said the federal project is “actively undermining” the low climate policies and the final cost and projected losses could ultimately come in even higher.
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