The federal government has approved a new, approximately C$10-billion loan guarantee for the Trans Mountain pipeline expansion, a move it says is common practice and does not reflect any additional public funding for the high-profile, over-budget oil pipeline.
The Trans Mountain pipeline is Canada’s only oil pipeline system from Alberta to the West Coast, The Canadian Press reports. The Trudeau government generously bought it in 2018 on taxpayers’ behalf for $4.5 billion after previous owner Kinder Morgan Canada Inc. threatened to scrap the pipeline’s planned expansion project in the face of Indigenous and environmentalist opposition.
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The construction project—which will essentially twin the existing pipeline, raising daily output to 890,000 barrels—is now 50% complete. However, in February, Trans Mountain Corp. revealed that the project’s price tag had ballooned to $21.4 billion, up from an earlier estimate of $12.6 billion.
At that time, Finance Minister Chrystia Freeland said there would be no additional public funding for the pipeline. She said Trans Mountain, a Crown corporation, would need to secure third-party funding to complete the project, either through banks or public debt markets. But analysts warned there was no chance private financiers would put up billions of dollars for the “out of control” project without a federal loan guarantee.
Now, news of the $10-billion loan guarantee, which was approved by the federal cabinet on April 29 through the Canada Account at Crown corporation Export Development Canada, has been criticized by environmental groups and opposition politicians who see it as Freeland going back on her word.
“This is a huge new subsidy from a government that promised voters last fall that it would eliminate fossil fuel subsidies,” said Julia Levin, national climate program manager at Environmental Defence Canada, adding critics have suggested that Trans Mountain’s skyrocketing price tag means the project is no longer economical. “It also comes just a few months after Minister Freeland told Canadians there would be no more public spending on TMX.”
“This is just more evidence that this pipeline is not viable, and that is way past time that the Liberal government allowed this project to be cancelled,” added Sven Biggs, Canadian oil and gas program director at Stand.earth. “In a world that is already reeling from forest fires, floods and the other very real impacts of climate change Canada needs leadership that is fully committed to taking on the greatest challenge we have ever faced.”
But “it was clear from the get-go they’re going to pay whatever it costs to get TMX through,” said NDP Charlie Angus.
But on Wednesday, the Department of Finance issued a statement saying the federal government has not spent any money to put the new loan guarantee in place.
The statement said Trans Mountain has secured up to $10 billion in third-party financing for construction costs from a group of Canadian financial institutions, and the government is providing a loan guarantee on behalf of the corporation as part of that process.
“This is a common practice which puts in place an insurance policy for the institutions that have invested in the project—it does not reflect any new public spending,” the statement said.
The government said there have been no changes to the cost estimate outlined in February and the estimated 2023 completion date for the pipeline project remains in place.
This report by The Canadian Press was first published May 11, 2022.
