A $20-billion loan for the Trans Mountain pipeline expansion authorized by the federal government was actually primarily advanced as equity, new filings reveal. The equity portion, experts say, represents a nearly $15-billion bailout.
Former Finance Minister Chrystia Freeland authorized a $20-billion loan to Trans Mountain Corporation’s parent company on Dec. 13, 2024, just days before she resigned from her cabinet post. But according to filings with the Canada Energy Regulator, rather than the parent company passing on the loan to Trans Mountain Corp., it converted most of the money to equity — effectively injecting the pipeline company with more than $14.7 billion in cash, which means there is no interest charged or obligation to repay it. Another $3.3 billion was provided as repayable debt.
Trans Mountain “mischaracterized” its new financing by calling it a loan when the majority was advanced as equity, according to Tsleil-Waututh First Nation’s March 27 filing to the Canada Energy Regulator.
This move was “designed to camouflage the company’s lack of financial integrity, reduce interest expense in Trans Mountain’s financial reporting by approximately $1 billion a year,” and ignore that the parent company, known as TMP Finance, still carries the debt and associated interest, the filing reads.
Finance Canada previously told Canada’s National Observer that the $20 billion in government financing was a loan that replaced loans provided from banks — not new money injected into Trans Mountain Corp. to make its books look healthier, as the Tsleil-Waututh filing suggests.
On Tuesday, Finance Canada said Trans Mountain will make money from the pipeline’s cash flow, which the parent company TMP Finance will use to repay “the full amount of the Canada Account loan, including principal and interest.”
Finance Canada did not say what the full amount Trans Mountain owes is or when it will pay back the full amount. However, according to filings with the regulator, TMC indicates that it has $12 billion in loans from TMP Finance, and it does not intend to repay any of it until 2043 when it’s aiming to repay $479 million. A further $416 million is targeted for 2044 — the year existing contracts expire. After those contracts expire, TMC expects to still owe over $11 billion to TMP Finance.
Unless the federal government has approved a write-down of its debt or some other accommodations, TMP Finance has an estimated $37.7 billion in debt on its books, according to Tsleil-Waututh Nation’s report.
“We can say definitively that Freeland, in particular, was never transparent or honest with Canadians about the financials of this project,” said Adam Scott, executive director of Shift: Action for Pension Wealth and Planet Health. “It's been smoke and mirrors for a long time, hiding the fact that this was always going to be a taxpayer bailout at a scale we really haven't seen before in Canada.”
Scott called it "appalling" that federal leaders are pitching various plans to build new pipelines to tidewater given the Trans Mountain expansion’s (TMX) costs have spiralled so far out of control and is not being used to its full capacity.
“It's a failure on the climate front. It's a failure on economics. It's a failure on Indigenous rights,” he said. “The Trans Mountain project is a real scandal, and it's a scandal we should not repeat.”
Impact on toll hearings
The $14.7-billion equity advance came to light as Trans Mountain and critics of the project are pushing for higher tolls to offset some of the $34-billion price tag while oil shippers want tolls as low as possible.
The federal government was already on the hook for the entire debt associated with TMX. It repeatedly funded the project and helped co-ordinate multibillion-dollar bank loans by guaranteeing the government would pick up the tab if TMX couldn’t repay the banks.
But the federal government had promised to stop putting public dollars into TMX and instead, leave the corporation to rely on the private sector for financing. This latest manoeuvre is “inconsistent” with that promise, said Thomas Gunton, a professor at Simon Fraser University, in a phone interview with Canada’s National Observer.
“This is exactly the opposite of that. The government has essentially paid off private sector loans in advance,” he said.
Gunton said while the project’s price tag and the amount of public money on the line stays the same, this manoeuvre could have implications for how much oil shippers will pay to use the pipeline.
By giving Trans Mountain Corporation $14.7 billion as equity — meaning there is no interest or obligation to repay — it keeps the interest charges off Trans Mountain’s books and the debt belongs to the government, said Gunton.
“The problem there is that it just makes Trans Mountain look more viable than it actually is,” he said.
This matters because Trans Mountain and companies that want to ship oil through the pipeline are currently embroiled in a dispute over how much it will cost to use it. Trans Mountain wants to set higher tolls because the construction costs ballooned out of control. But low tolls are unlikely to recoup the pipeline’s construction cost, meaning the dispute is essentially a fight over the level of subsidies Ottawa is offering the oil industry.
The Canada Energy Regulator (CER) will be looking at the tolls in November.
Even if Trans Mountain succeeds and the CER approves a toll increase, its lifetime revenues still wouldn’t even cover half of the pipeline’s now $34-billion price tag, Gunton said.
Filings to the CER also revealed that Trans Mountain’s revised forecast now predicts lower oil shipments.
‘Both a boondoggle and a bailout’
A spokesperson for Liberal Leader Mark Carney did not answer questions about whether a Carney-led government intends to sell the pipeline, or whether financial analyses Finance Canada says shows the pipeline is commercially viable, but has blocked from being publicly released, would be made available to offer Canadians more transparency about the beleaguered megaproject. Instead, the spokesperson said Trans Mountain fits within Canada’s climate goals, and Liberals would balance resource development with environmental and Indigenous rights concerns.
“A Mark Carney government will make Canada a clean energy superpower and diversify Canada’s export market opportunities by developing a national trade and economic corridor which will drive investment, create jobs, and build economic growth,” the spokesperson said.
The NDP environment critic Laurel Collins said the government could have invested the billions of dollars put into Trans Mountain to build an east-west electrical power grid to support decarbonization.
"The Liberals spent billions in Canadian tax dollars on this project despite the serious concerns of Indigenous rights-holders and the substantial risks to the environment, marine life and coastal communities,” she said in a statement. “And worse, they're hiding the actual cost of it from Canadians. They owe Canadians transparency."
Richard Brooks, climate finance director with Stand.earth, agrees transparency is needed.
“It's really clear this is both a boondoggle, and a bailout, and a classic case of financial mismanagement and intentional confusion,” he said, adding he believes the public is owed an inquiry into what went wrong.
“It's the dirty white elephant in the room,” he said. “Everybody knows it's a boondoggle, everybody knows there are major cost overruns … and nobody really wants to get at it because oil and gas is a very sensitive topic in the Canadian context — especially in the midst of a trade war with the US and an election.”
John Woodside & Natasha Bulowski / Local Journalism Initiative / Canada’s National Observer
Comments
It strikes me as seriously unlikely the feds under Carney will change tune on this anytime soon. Misdirection is key to the Liberal playbook and always has been.
This is the single biggest failure of the Trudeau government.
And of course in Carney’s first weeks as PM he is talking about building another pipeline on Canadian soil.
The idea that Liberals have ever cared about the climate is laughable, Trudeau’s government never planned on meeting its climate goals, and unless Carney changes tune dramatically, we are doomed to never meet them.
TMX is a complete disaster economically and environmentally. Carney is actually much more of an environmentalist and would never have got into that mess because it was an obvious economic failure. The oil companies can't afford to ship the heavy tar from Alberta in that pipe if they had to pay the real cost and Kinder knew it long ago, even at 7 billion let alone 42 billion.
And now with Trump recession coming and resultant oil markets, TMX will stop shipping anything. A huge opportunity has been missed. A major electricity pipeline crossing the country carrying renewable energy both ways depending on time of day and weather conditions, linked to huge wind and solar and battery installations could have been built for the same amount of taxpayer money and would now be operational.
If there is a saving grace to this brutally expensive debacle -- I'm wearing my rose-coloured glasses --it is that every bbl that could be shipped today, but isn't, will never be shipped. That is, at some point the oil sands will become, effectively, stranded assets (unless someone dreams up some new use for them) and those bbls not shipped when they could have been will never have the chance.
Potential shippers may be involved in a strategic ploy that they will earn more $$$, over time, if they can maintain a poor man's sob story through this process of objection to increased per bbl shipping tariff and wangle lower tariffs over the life of the project. Once tariffs are finally set, if my thinking has any basis in reality, TMX will carry increased amounts -- assuming the capacities of other routes out of Alberta are maxed out. $1 profit today beats $0 profit tomorrow.
It's no wonder so many people look askance at the LPC; but the CPC would be so much worse for the future of Canada (latest evidence is the divisive bollocks spewing from Preston Manning's mealy mouth of late). Please let us rediscover the days of intelligent people, with a progressive, national vision running for federal office rather than whiny, parochial, self-interested malcontents.
We do already have a methane gas pipeline to the east, and road and rail for tar to pave roads which is what the tar sands oil is good for. The good part of that is paving roads is a form of long term carbon capture. Maybe the oil lobby will get subsidized for that.
We would really need a National Enquiry into this boondoggle, but unless the NDP came to power, neither the Liberals nor the Conservative will ever consent to that.
However, the Liberals are and will be in position to demonstrate that they have been extremely supportive of Alberta and its oil enterprise. Obviously, they have learned their lesson and will never accept to sponsor any additional pipelines. Contrary to what Alberta says, all of Canada supports it, and not the inverse.
Sane minds must prevail and the Federal must sponsor "electricity" pipelines linking the country firmly together.