The Trans Mountain expansion project is now expected to cost $30.9 billion in yet another sign it is becoming a fiscal disaster for Trudeau’s government.

"Buying and building this pipeline will go down in the history books as one of, if not the, worst infrastructure decision a Canadian government has ever made,” said Greenpeace Canada senior energy strategist Keith Stewart. “It was always a disaster from a climate change perspective, but this is now an economic crime that has stolen $30 billion of public funds from real climate solutions."

On Friday afternoon, the Crown corporation disclosed that TMX’s estimated total cost is 44 per cent higher than the previous estimate of $21.4 billion from February 2022. It chalked the skyrocketing costs up to global inflation, flooding in British Columbia, archeological discoveries and a handful of other factors, like “challenging terrain between Merritt and Hope,” B.C., and “earthquake standards in the Burnaby Mountain tunnel.”

“How deeply ironic it is for this fossil fuel company that climate disasters have led construction costs to spiral out of control,” said Wilderness Committee campaigner Peter McCartney in a statement. “I don’t want to hear from any federal official that bold, transformative climate action is too expensive ever again.”

This new $30.9-billion price tag represents an astronomical increase over the initial construction cost estimate of $5.4 billion by Kinder Morgan, the pipeline’s original owner.

In a statement, Finance Minister Chrystia Freeland did not directly acknowledge the Crown corporation’s ballooning cost increase. Rather, she said Trans Mountain released an updated cost estimate and confirmed the project would be complete by the end of this year and operational by 2024.

“The federal government acquired (Trans Mountain Corporation) and the Trans Mountain expansion project in 2018 because we knew it was a serious and necessary investment — one that is in the national interest and will make Canada and the Canadian economy more sovereign and more resilient,” Freeland said.

The statement did not address where the additional $9.5 billion of financing would come from. Last year — after Freeland promised no more public funds would be committed to the project — the federal government greenlit a $10-billion loan guarantee to cover TMX’s cost increases.

Regardless of cost, Canadians already own TMX, and experts say the public will also end up on the hook for the $10-billion loan provided by Canada’s six biggest banks last year. Guaranteed returns on a loan that size are a great deal for the banks because even if Trans Mountain fails to pay back the entire amount, the federal government’s promise means there is no risk the banks will lose money. Loan guarantees like this are also fossil fuel subsidies, according to the World Trade Organization’s widely accepted definition.

“It was always a disaster from a climate change perspective, but this is now an economic crime that has stolen $30 billion of public funds from real climate solutions." @climatekeith #TMX

“At $30.9 billion, this pipeline has become perhaps the largest boondoggle in Canadian history,” said Canadian oil and gas program director with Sven Biggs in a statement. “For that kind of money, the federal government could have more than doubled the amount of renewable electricity generated in the country. Instead, we are going to be saddled with an unprofitable pipeline.”

According to an Ernst & Young (EY) report dated March 2023 and commissioned by Trans Mountain, from 2024 to 2043, Trans Mountain is expected to contribute $2.8 billion to federal, provincial and local governments through taxes.

That report also appears to confirm TMX is an outright money loser. It claims that from 2018 to 2023, TMX is expected to have contributed $26.3 billion in GDP — less than the cost to build it. Over the next 20 years, EY says the pipeline project will contribute $9.2 billion to Canada’s GDP through paying for operation expenses, including wages.

Economist Robyn Allan called the rising costs “nothing short of a disaster.” She said the EY report is “flawed” because it predicts economic benefits while ignoring certain costs. The report “tells us that their estimated contribution to GDP is less than the cost of the project, so how could that be a benefit?” she said.

“A project that is not profitable or commercially viable cannot by definition have a positive impact since it represents an economic drain,” she added.

Stewart told Canada’s National Observer it's almost unbelievable how high the costs on TMX have gone.

“The Ernst & Young report is essentially saying cost overruns are a good thing because they create more GDP,” he said. “But is a $30-billion pipeline really 'better' than a $5.4-billion one that does the same job?”

The report makes the case that the massive investment in TMX will generate GDP and jobs, but the government could spend $30 billion on just about anything and reap those same benefits, said Stewart.

“The question is whether or not you're increasing [GDP] for good things, or whether you could get better results by investing in something else,” he said, pointing to wind and solar.

“You could argue [that] at $5.4 billion, the economic benefit was worth the climate cost. You can't make that argument of $30 billion.”

Freeland confirmed Ottawa intends to sell the pipeline.

“As we committed to Canadians last year, no additional public money will be invested in this project as construction is completed,” she said. “The federal government does not intend to be the long-term owner of the project, and we will launch a divestment process in due course.”

When the federal government unloads TMX, Stewart predicts it — and taxpayers, by extension — will end up losing $20 billion or so on the sale so someone else can make profits on it, “because no one's gonna buy it at $30 billion.”

Last year, parliamentary budget officer Yves Giroux told Canada’s National Observer the federal government is “very unlikely” to recoup its initial $4.5-billion investment, and it will likely mean losses for Canadian taxpayers when the government eventually sells the pipeline.

Keep reading

A CEO of a company who bet on such a disastrous undertaking would have been fired long ago. Too bad Canadians can't sue the government for what was always (in my view) a really stupid decision.

Agreed that it was always a really stupid decision. But you are naive about companies and their CEOs.

Everybody is afraid of the oil industry. Rachel Notley had to go on a railcar buying spree to show her support for it.

We are very close to the point where the worm will turn - where a politician can get elected as a populist bashing oil, rather than it being a route to 3 seats in the house for the Green Party.

No, the Green Party isn't about to take off and get 100 seats, nor are the Liberals or Conservatives about to pivot. It's the NDP that can quite realistically make the leap of faith, rather like Trudeau leaping over the NDP 'decrim' position to suddenly stand foursquare for cannabis full legalization in 2015.

Harper stuck with the old world, which would have crushed Trudeau in the nineties or even early 2000s, with the frying-egg "brain on drugs" commercial. Instead, it confirmed he was Old News and Trudeau was in tune with a new world.

The same flip that happened with gay marriage and cannabis, where a minority grew for decades until it crossed 50% and stood up - that's about to happen with ditching fossil fuels and all their lovely money. Great things beckon for the politician who can sense the right moment and seize it.

And this just might be the issue that causes the flip.

The Libs will never admit buying the pipe wasn't just a stupid move but one done as a kneejerk reaction to Rich Kinder's threat to quit the project over legal delays, namely Indigenous opposition and lack of consultation. They were played like a banjo with simple cowboy chords.

The economic arguments fall down on economics. No Asian buyers willing to pay premium prices for a poor quality product have emerged despite years of claims otherwise. The stuff will head down the coast to California's heavy oil refineries and receive the same old 'discount' Alberta loves to complain about. And that's after another uptick in US EV sales threaten to cut into the profits. Environmental concerns will never be adequately addressed, least of all the risk it poses to the marine economy and coastal ecosystems.

The irony is that Trudeau bought the pipe to appease Alberta, but they hate him now more than ever. And supporters are getting fed up with the two-faced policies demonstrating weak climate action vs massive carbon subsidies and oil / gas project approvals that fly in the face of the IEA analysis that states categorically that no new carbon projects should be approved if you care about the planet.

Now we have a gold-plated pipe the public owns and which will be very hard to get rid of without massive write downs coupled with operating subsidies. Maybe the UCP will make an offer. You can be sure it will be flea market level.

Human stupidity seems to have no bounds when wealth and power are at stake. Economics always seems to misunderstand the wealth and power equation. Its theories never are able to account for that terminal disease afflicting humans.

From the Ernst and Young report one deduces that over the past 5 years the average salary paid has been $163,000 per year (wages and benefits paid/person full-time equivalents), which seems excessive. For the future, the estimate is about $100,000 per year.

"...we knew it was a serious and necessary investment — one that is in the national interest and will make Canada and the Canadian economy more sovereign and more resilient,” Freeland said.

Really Ms. Freeland !! ..more sovereign and more resilient?? your credibility as the Minister of Finance is taking a major write-down commensurate with the write-down we taxpayers will be facing.

And yet, there is no grumbling about removing Trudeau (I have the Chrétien-Martin tussle in mind). Even while the LPC brand, including Freeland, unfortunately, circles the drain, there is no one in the good ship Liberal offering any sort of future. At least not yet. I fear that's the result of too much concentration of governance in the PMO.

Unfortunately, it seems that Trudeau fils has come to believe all that the old friends of his father were telling him when they encouraged him to save the party/country/patronage opportunities around the time of his father's passing and after.

Is it really only Katy Telford who's holding the strings, now, or someone else/others in the party? I guess much of the old guard is dead or dying. What's Tom Axworthy doing these days? I mention his name only because of his role in providing a second wind to Trudeau père.

Foundationally, I struggle to truly understand what vision the current LPC has for the country. (I'm not similarly unclear as regards to CPC and have no interest in what they're selling). Anybody?