Indigenous investors interested in buying the financially troubled Trans Mountain pipeline can expect to lose money on the deal and face “the likely prospect of being saddled with a stranded asset,” according to an independent economist and longtime critic of the project.

From the moment the Trudeau government bought the pipeline from Houston-based Kinder Morgan in 2018, a succession of federal officials have maintained that Ottawa would eventually offload the project to a private, ideally Indigenous, buyer. And last week, the Globe and Mail reported that discussions with several Indigenous business consortia are still in progress.

“Indigenous ownership of the Trans Mountain pipeline system is still on the table, with federal officials holding in-person talks with prospective ownership groups as recently as February,” the Globe writes. But the process has been lagging, with one financial advisor saying the government has never come forward with a “concrete proposal” to Indigenous communities.

“Uncertainty over how a deal would be structured—as well as the soaring costs—has resulted in fatigue, with some First Nations essentially dropping out of a process they see as stalled,” the Globe says.

Meanwhile, the cost of completing the project has skyrocketed from Kinder Morgan’s original projection of C$7.4 billion to the latest estimate of about $31 billion. After that massive an investment, “no way the pipeline is going to recover costs,” Morningstar analyst Stephen Ellis told Bloomberg News last month.

Ellis said the government “will probably get no more than $15 billion when it goes to sell Trans Mountain—and possibly much less,” the news agency wrote. Independent economist Robyn Allan, a former president and CEO of the Insurance Corporation of British Columbia, puts that “taxpayer-funded loss” closer to $25 billion, and the picture is not much better for an eventual buyer.

“Commercial ownership, whether Indigenous or other third party, was never a realistic prospect for Trans Mountain,” Allan told The Energy Mix in an email this week. “Once the project cost exceeded $7.4 billion, the government began facing a significant loss because of the preferential toll rates baked into the 20-year contracts with Alberta’s oil shippers. With each cost increase, the burden on taxpayers mount. With the most recent increase, we are now looking at a cumulative taxpayer-funded loss of about $25 billion.”

The Globe explains that “because of existing contractual agreements with oil shippers, only 20 to 25% of the rising capital costs of the project can be passed on to oil companies in the form of increased tolls,” the rates fossils would pay to use the pipeline.

So if an Indigenous consortium or some other buyer did take over the project, Allan said this week, it wouldn’t end well for them. “With Trans Mountain’s huge debt burden, coupled with the need to reduce the use of fossil fuels, any owner of Trans Mountain faces the likely prospect of being saddled with a stranded asset.”

In a report last October for West Coast Environmental Law, Allan concluded that Trans Mountain wasn’t a financially sound venture when the federal cabinet decided to buy Canadians a pipeline in 2018, and it wasn’t commercially viable when its estimated completion cost was a mere $21.4 billion.

By then, Finance Minister Chrystia Freeland had pledged that no new public funds would be spent on the pipeline megaproject, and spokesperson Caroline Thériault said funding to complete the pipeline would come from third-party financing. She cited financial analyses by BMO Capital Markets and TD Securities that declared the project financially viable.

“Finance Canada defines viability differently than Canadians do,” Allan replied at the time. “Finance simply asks if operating costs can be covered from the revenues received by oil product shippers. They stop short of protecting the interests of Canadian taxpayers because they do not incorporate the payment of interest and the repayment of debt owed to us.”

She added that key assumptions in the BMO and TD assessments supported the conclusion “that the project is not viable since an unrealistic time horizon—one that requires 10 decades of assumptions on revenues, expenses, and project utilization—is being relied on.”

That was after the two big banks assumed Trans Mountain would have a 100-year time span to repay its mounting debts, not the 20 years Kinder Morgan had calculated before it sold off the pipeline to a willing federal buyer.

After the Crown-owned Trans Mountain Corporation released the updated cost estimate in mid-March, at least one potential bidder vowed to continue negotiations.

“We are not going away, just because it’s $30.9 billion. We are entering into the early stages of negotiations,” Stephen Mason, managing director of Calgary-based Project Reconciliation, told The Canadian Press. The group “is working to facilitate the purchase of a major equity stake in the pipeline for the 129 First Nations along the route,” the news agency wrote.

Mason said any eventual buyer “will only pay what the commercial value is and what the tolls will support,” adding that initial revenue from pipeline would allow its eventual owners to invest in future energy innovations.

“That corridor is a valuable corridor to move what will be the next generation of energy, whether it be in the form of ammonia or pure hydrogen. That corridor is very expensive real estate,” he told CP. “As I’ve had conversations with chiefs, you want to own this now. Because as soon as that switch flips that we’re now moving hydrogen… the cost to get in will be way too high.”

But the Globe says meetings to discuss potential acquisitions with federal officials took place before the stunning mid-March cost announcement.

“Even before that update came out, independent analyses, including one last June from the Parliamentary Budget Officer, had shown Ottawa would lose money on the project,” the news story states. Now, with federal messaging still relying on the earlier TD Securities and BMO Capital Markets assessments, an analyst said potential buyers are beginning to abandon a process that appears to be going nowhere.

“The Indigenous communities at this point have basically gone tone deaf, because it’s gone nowhere,” Axxcelus Capital Advisory CEO Paul Poscente told the Globe. “There’s never been a concrete proposal put in front of the Indigenous communities by the government that owns the asset. And that’s obviously a necessary first step.”