Canada is in line to lose C$11.9 billion on the Trans Mountain pipeline expansion, as rising project costs collide with falling demand for oil, according to a new analysis by Simon Fraser University’s School of Resource and Environmental Management.

The loss “is primarily due to a more than doubling of the Trans Mountain construction costs from the original $5.4 billion to $12.6 billion, combined with new climate policies just confirmed by the Supreme Court that will reduce the demand for oil,” said SFU professor and study lead author Thomas Gunton in a release.

“Private sector companies such as BP and Shell are responding to declining demand by shifting investments from oil to green energy, and the federal government should follow their lead,” he added.

After the Trudeau government bought taxpayers a pipeline for $4.5 billion in 2018, “the SFU study points out that Ottawa has not provided the public with an evaluation of the costs and benefits that led to that decision,” CBC writes. “The researchers suggest the government would be better off shelving the project entirely and using the funds to invest in alternative energy projects.”

The federal government disputed the SFU findings, repeating its belief claim hope that it will eventually be able to sell the pipeline off to a private investor. “The government does not intend to be the long-term owner of Trans Mountain Corporation,” Finance Minister and Deputy Prime Minister Chrystia Freeland’s office told CBC in an email. “It intends to launch a divestment process after the expansion project is further de-risked and after engagement with Indigenous groups has concluded.”

Richard Masson, an executive fellow at the University of Calgary’s fossil-friendly School of Public Policy and former CEO of the Alberta Petroleum Marketing Commission, told CBC that oil demand has nearly returned to pre-pandemic levels. “I think some of the assumptions they made would be strongly challenged by industry,” he said, adding that “production hasn’t grown as much as we would like it to because we’ve been constrained on having a lack of pipeline capacity.”

But two fossil demand scenarios published last November by the Canada Energy Regulator told a different story, and CBC says that same report lends credence to the Gunton team’s conclusions.

“The regulator’s Energy Futures Report shows a need for Keystone XL, the Trans Mountain expansion, and Enbridge’s Line 3 pipeline under its reference scenario, which assumes ‘a lack of future domestic and global climate policy action’,” the national broadcaster writes. “However, under what the regulator calls its evolving scenario, Canada brings in new greenhouse gas-reducing measures to meet its stated climate targets. Canadian oil and gas production declines, and there could be enough export capacity with either Enbridge’s Line 3 or the Trans Mountain expansion.”

While the CER “doesn’t make a case for or against any pipeline in its scenarios,” CBC adds, it says the evolving scenario “does project that, in some years, crude oil available for export is significantly lower than total pipeline capacity.”

The SFU team notes that the CER’s predecessor, the National Energy Board, failed to factor in rising construction costs, the Keystone XL cancellation, stronger federal climate policies, or a weaker oil market when it approved Trans Mountain in 2016, then again in 2019.

“The study suggests the pipeline expansion will create excess capacity that isn’t needed and will increase the risk of environmental damage,” CBC writes. And “the ballooning price tag for construction means the tolls charged to shippers for using the pipelines, which were agreed upon in 2017, will not come close to covering the capital costs.”