Despite the Trudeau government’s assurance that the controversial Trans Mountain pipeline expansion is in the national interest, and will turn a profit for the taxpayers who became its involuntary owners last year, new disclosures show the project could run out of cash in the next few months and cost more to complete than Ottawa estimated, National Observer reports.
Details recently released by Canada Development Investment Corporation (CDEV), the federal Crown corporation that now owns and operates the existing pipeline and is running the expansion project, make it clear that “CDEV and its corporate entities still harbour a significant degree of uncertainty about the project’s timeline and long-term financing,” Observer writes. After years of pointed questions about when it will be completed, what it will cost, and how much of its cost overrun will be passed on to the fossils that ship their product through the completed line, CDEV is refusing to commit on either time or budget.
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“We’ll need more clarity on the project’s schedule before we can determine the costs,” CDEV Chair Steve Swaffield told the company’s annual meeting December 11. As for the charges to shippers that enable any pipeline operator to recover costs, “a revised toll will be made public closer to the in-service date.”
In a recent financial report, Observer adds, the Crown corporation admitted that “financial commitments have not been obtained to finance the entire project”. Instead, CDEV negotiated what amounts to a bigger line of credit with the federal government, from C$2.6 billion through the end of 2019 to $4 billion in 2020, which “should be suitable to fund construction costs for (the Trans Mountain pipeline expansion) through the first half of 2020,” the report says. After that, “it is imperative that continued and increasing financing sources are obtained in a timely manner” to avert “continued financial and completion risk for the project.”
CDEV Corporate Secretary Noreen Flaherty confirmed to Observer the credit agreement was meant to support pipeline work “in 2020”, adding that “CDEV does not expect that agreement to be of a sufficient size” to fund the pipeline through to completion.
In an Observer opinion piece, B.C. economist Robyn Allan says officials already knew the pipeline faced escalating costs on the day Finance Minister Bill Morneau announced the $4.5-billion purchase, with the intention of completing the work for $7.4 billion. She points to an internal briefing note, obtained under access to information legislation, showing that an engineering consulting firm was instructed at least a month before the purchase to produce costing and scheduling for an $8.4-billion project.
Overall, Allan estimates the current completion cost at $12 billion.
Which means that “taxpayers as owners are at serious risk,” she warns. “An increase in the cost to construct of this magnitude might not be a problem if Trans Mountain could pass all these costs onto the shippers who use the pipeline through higher toll rates. The problem is that Ottawa cannot do so, and this is where the huge, taxpayer-funded subsidy on the expansion project comes in.”
All told, she calculates federal subsidies to the project at $8 billion and counting.
The analysis prompted Stand.earth and the Dogwood Initiative to launch an online petition demanding the government disclose the true cost of completing the pipeline.
“The Trans Mountain pipeline is already a massive, multi-billion-dollar subsidy, and Canadians have the right to know how much the price has increased,” said Eugene Kung, staff lawyer with the West Coast Environmental Law Association. “Canadians were told this would be a profit-generating investment and the profits would be devoted to renewable energy. Instead, it’s operating at a consistent loss, and it isn’t even clear the government will be able to sell it without taking another loss of billions of taxpayer dollars.”
“With TMX, what we have ended up with is a complete lack of transparency around what has become Canada’s largest fossil fuel subsidy,” said Kukpi7 (Chief) Judy Wilson of the Union of BC Indian Chiefs. “We need a complete accounting so we can have a full discussion around the billions of public dollars spent on oil infrastructure during a time when Indigenous communities lack safe drinking water and critical work on reduction of carbon emissions is needed for a climate safe future.”
“We’re urging all federal parties to demand more official discussion around the financial reality of the Trans Mountain pipeline,” said Dogwood Campaigns Manager Alexandra Woodsworth. “Upward of nine billion dollars—and it could be more—would go a long way to supporting oil and gas workers in Alberta and helping build a clean economy.”
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