The cost of the Trans Mountain pipeline expansion has mushroomed to C$30.9 billion, prompting a surprised fossil energy analyst to admit that taxpayers will have to pick up a very large tab as a result.
“The project’s new price tag is up from its previous estimate of $21.4 billion in early 2022,” CBC recalls. “A prior estimate had pegged the price at $12.6 billion.”
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The 44% increase came as a shock to Richard Masson, an executive fellow at the University of Calgary’s School of Public Policy.
“These things sometimes are unexpected, but the magnitude of this increase is very large and I don’t think anybody was expecting it,” he said, citing the atmospheric river that shut down the existing Trans Mountain pipeline in mid-November, 2021, as one factor driving up its cost.
But now, “Masson expects that the federal government will have to take a large write down on the value of its investment, adding he doesn’t believe Ottawa can recuperate all of the additional costs,” CBC writes.
“It’s going to be very costly at the end of the day for taxpayers,” he told the national broadcaster.
The latest cost figures come nearly five years after taxpayers shelled out $4.5 billion in May, 2018, after the federal government made the controversial decision to buy the pipeline. Its original owner, Houston-based Kinder Morgan, had threatened to shut down construction if it didn’t receive “clarity” on the project’s future prospects.
Fast forward to today, and Trans Mountain “is now the most expensive industrial project in Canadian history,” Dogwood B.C. wrote in its weekend newsletter. “What started as a $5.4-billion pipeline expansion has turned into a catastrophic boondoggle of immeasurable proportions—and one that will keep costing Canadian taxpayers for decades to come.”
While Finance Minister Chrystia Freeland promised early last year that there would be “no additional public money invested in TMC,” that didn’t stop Ottawa from handing the pipeline a crucial $10-billion loan guarantee three months later.
Now, “any investor checking the score can see building a pipeline is a fool’s game,” Dogwood writes. “While the average Canadian is struggling with inflation and increased interest rates, TMX is getting special treatment from our government and the banks are giving them rock bottom interest rates on their loan.”
Last June, nearly a year before the latest cost increase, Parliamentary Budget Officer Yves Giroux warned the federally-owned pipeline was already on track to lose $600 million. But he said it would cost Ottawa $14 billion to shut down the project and write off the assets.
The pipeline’s biggest financial problem, CBC explains, is that when its costs go up, it can only charge 20% of the increase back to the fossil companies that are lined up to use the pipeline.
On Friday, Trans Mountain Corporation CEO Dawn Farrell put the latest cost increase down to a commitment to quality construction.
“Canada has among the world’s highest standards for the protection of people, the environment, and Indigenous participation when building major infrastructure projects,” she said in a release. “By including these commitments into the Project design and development from the beginning, we have ensured the Project will provide economic benefits to Canadians well into the future.”
But Trans Mountain has triggered a continuing cascade complaints about permit violations, wildlife and habitat impacts, a shoddy safety record, and efforts to sidestep fire safety standards for a tank farm expansion adjacent to a major campus of Vancouver’s Simon Fraser University.
This should be front page news every day!