By Rebel News | Created at 2024-11-21 01:29:51 | Updated at 2024-11-24 00:23:34
3 days ago
Canada’s Budget Officer expects taxpayers to lose money, should the Trudeau government eventually sell the Trans Mountain Pipeline (TMX). The project has been plagued by delays, regulatory hurdles and soaring construction costs since 2019 when work first began.
Yves Giroux, the Parliamentary Budget Officer (PBO), told the Commons Natural Resources Committee they should audit the pipeline’s cost overruns, reported Blacklock’s.
TMX — Canada’s first pipeline to the coast in over four decades — carries crude from Alberta to the B.C. coast. It tripled the pipeline’s daily capacity by an additional 590,000 barrels.
“It’s likely the government will lose money on this,” Giroux said, adding a net loss is probable, given the uncertainty surrounding pipeline tolls.
A mid-2022 report by Giroux said the pipeline expansion would lose $600 million, based on an estimated cost of $21.4 billion. However, costs have swelled more than sixfold since it was first proposed in 2013 for $5.4 billion.
Greg McLean, the Conservative natural resources critic, asked for insight into the fluctuating cost overruns. "When the government bought this pipeline it was supposed to cost $7.4 billion for the expansion," he said.
Project costs torpedoed further to $12.6 billion in 2020, then $21.4 billion in 2022.
The Trudeau government initially paid Kinder Morgan $4.5 billion for the project in 2018 on the assurance of taxpayer profits, who have now invested $34 billion total to increase the line’s capacity.
"Where did the money go?" asked MP McLean. “We didn’t do an audit of what happened in the construction phase or whether funds were well spent,” replied Giroux, adding that this work was "more appropriate for an Auditor General.”
Parliamentary committees have yet to examine the pipeline's financing details, reported Blacklock's, after Liberal MPs on the Commons Natural Resources Committee rejected special hearings by a vote of 5 to 4 in 2018.
“Would you think that’s something that should bear some auditing?” asked McLean. “That is something this committee might well wish to look at given the billions of dollars at stake,” replied Giroux.
Mark Maki, chief executive at Trans Mountain Corp., justified the price tag while lauding TMX’s performance since completion on May 1. Maki notes TMX has overcome the discount importers have historically paid for Canadian crude by $10 per barrel in under half a year of operations.
“The pipeline is in operation,” confirmed Giroux. “It is being used to a large extent.”
The pipeline expansion will contribute an estimated $26.3 billion to Canada's GDP from 2018 to 2030, according to an economic analysis conducted by the corporation.
The Budget Officer assumes TMX will operate at near-full capacity over the next two decades. However, “the big unknown is what happens after these long-term contracts expire,” he clarified.
In addition, the Canada Energy Regulator (CER) does not know whether Trans Mountain Corp. can charge higher tolls to shippers, leaving the pipeline's revenues in flux.
“Having the rate case behind you will help with the certainty of what the revenue in the system is going to be,” Maki said, warning that it could be several years before the toll matter is settled.
However, Maki believes patience is key to finding the right buyer. “I think if we are disciplined sellers … we can get our capital back,” he said, pointing to the Department of Finance to get the job done.
In a 2022 submission, Finance Minister Chrystia Freeland told the Senate that “the project will likely allow the government to recoup its expenses."
“That’s not very likely is it?” asked Conservative MP Jeremy Patzer. “We don’t think [$38 billion is] the price a willing buyer would pay,” replied Giroux.
Losses could run to $2.7 billion with rising interest rates, Blacklock’s previously learned.
This is contrary to what Prime Minister Justin Trudeau told reporters in August 2023, that he anticipated no losses. “We are confident the business case for the Trans Mountain Pipeline remains solid,” said Trudeau. “The federal government is not in the business of running pipelines.”
Alex Dhaliwal
Calgary Based Journalist
Alex Dhaliwal is a Political Science graduate from the University of Calgary. He has actively written on relevant Canadian issues with several prominent interviews under his belt.
