‘Built on Quicksand, Clear as Mud’: Trans Mountain Costs Are Impossible to Track, IEEFA Warns

The financial arrangements behind Canadian taxpayers’ involuntary acquisition of the controversial Trans Mountain Pipeline are “built on quicksand and clear as mud”, the Institute for Energy Economics and Financial Analysis reports this week, in an assessment that urges the Trudeau government to be more transparent about what the project is costing now and how it’ll be paid for in the future.

“The government of Canada has structured the acquisition of the Trans Mountain Pipeline, its planned expansion, and ongoing operation in a way [that renders] it impossible to determine how much taxpayers are paying now and will pay in the future,” write IEEFA Director of Finance Tom Sanzillo and Financial Analyst Kathy Hipple in the executive summary of the report. The government’s accounting approach “may also impair the government’s ability to market and sell the completed pipeline in the commercial market and to report transparently to the public on its financial performance.”

While the Trudeau government frames the Trans Mountain expansion as an economic development project that needn’t conform to standard measures of commercial success or failure, “the government has an obligation to tell its citizens how much the Trans Mountain Pipeline project is costing,” they add. “In fact, a careful, ongoing accounting is of even greater importance given: the controversial nature of the project, the lack of commercial standards, the size and complexity of the acquisition, construction and operations, and the risks involved with a resale of the pipeline in a low-priced, volatile global oil and gas market.”

Hipple warned that “people should be concerned, not only about the ongoing fiscal implications of the Trans Mountain Pipeline project, but also about how much of the $6 billion and counting investment will ultimately be recovered when the government sells the finished pipeline.”

In a release, IEEFA points to the complexity of a project that involves multiple federal agencies and public or private companies. “The Canadian government has already routed payments to fund and develop the pipeline through a maze of government agencies with different missions, reporting mechanisms, and accounting standards,” the release notes.

“By the time an outside observer tracks where this money is going, it will be difficult to determine who borrowed what from whom, how much is owed by which government agency, who is paying it back, and how much—if any—will be repaid,” the report warns. “This situation can be remedied, but it will take thoughtful executive action and leadership to address. The executive needs to design a tax-dollar monitoring project that brings all of the debt, financing costs, revenues, and expenses into one set of books.”

IEEFA lays out an accounting blueprint that would get at how much Canadian taxpayers have already spent on the project, how much spending is ahead in the form of construction and subsidies, which federal agencies are responsible for paying off the project’s debts and on what terms, the existing pipeline’s current and future revenue and expenses, and how any eventual net revenue will be used.

“What is needed is a clear monitoring plan that has the support of the executive and legislative branches of the Canadian government that would provide the public with a regular report on how much is being spent, and, ultimately, how much the project will cost,” IEEFA asserts. “Absent such a transparent approach, government or corporate officials may offer figures that will be inherently misleading. The public debate on a sensitive and controversial issue could ultimately be reduced to a frustrating array of charges and counter-charges without a rigorous monitoring plan in place.”