Parts of the Trans Mountain Pipeline project are in storage outside Hope, BC, on June 6, 2021.COLE BURSTON / AFP / Getty Images
Ottawa’s purchase of Trans Mountain pipeline expansion project expected to be no longer profitable due to construction higher delays and costs, says parliamentary budget director Yves Giroux in a new report.
The Liberal government bought 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 being sold at a discount due to the lack of capacity needed to ship to export markets.
The purchase has often been criticized by environmentalists and the federal NDP as contrary to the Liberals’ stated desire to reduce Canada’s carbon emissions.
A 2020 PBO report projected that once operational, the government could sell the project with a profit of about $ 600 million. Wednesday’s report said the forecast has since shifted to a projected loss of $ 600 million.
“Based on new developments from the previous report, specifically the increase in construction costs and the delay in the date of entry into service, PBO considers that the 2018 government decision to acquire, expand, operate and “Finally, divesting Trans Mountain ‘s assets will result in a net loss to the federal government,” the PBO said.
The latest report updates this forecast using the same methodology, but incorporates two important developments with the project that occurred since the previous report: Much higher construction costs and a year of 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 project cost had risen to $ 21.4 billion from $ 12.6 billion and would not be completed 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 canceled indefinitely, the federal government would have to cancel more than $ 14 billion in assets. .
Adrienne Vaupshas, spokeswoman for Finance Minister Chrystia Freeland, said in an email statement that the pipeline expansion project is of national interest and commercially viable.
“The federal government intends to start a divestment process after the project is further eliminated and after economic participation with indigenous groups has progressed,” he said.
Keith Stewart, senior energy strategist at Greenpeace Canada, noted that Prime Minister Justin Trudeau issued a press release in 2019 promising that “every dollar” earned by the federal government with the pipeline project will be invested in the clean energy transition of Canada.
“The federal government is losing money on the pipeline whose profits they promised to pay for green energy,” he said, recommending that the government dump the project and shift the remaining budget to green energy projects.
Stewart said the federal project is “actively undermining” the government’s climate policies and that the final cost and projected losses could be even greater.
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