On Friday, February 7, 2020, the CEO of Trans Mountain pipeline, Ian Anderson, announced that the costs of building the pipeline expansion have “soared from an initial estimate of $7.4 billion to $12.6 billion.”

That seemingly straight-forward statement is replete with misconceptions.For one thing, the pipeline’s “initial estimate” was not $7.4 billion. In the National Energy Board hearings, Kinder Morgan estimated the cost of building the pipeline expansion at $5.4 billion. So the real leap in costs is from $5.4 to $12.6 billion.

For another thing that new figure of $12.6 billion isn’t the full cost to Canadians. To get that you have to add in the $4.4 billion of taxpayers money spent on buying the pipeline in the first place. So the real cost to Canadians is $12.6 billion plus $4.4 billion for a whopping $16 billion.

For a third thing, we paid $4.4 billion for the existing 67-year-old pipeline as the cost of getting to zero to build the expansion. But the value of the pipeline is now likely far below what we paid. In its June 2019 report, the Parliamentary Budget Office estimated that the value of the pipeline, when we agreed to buy it, was $2.8 billion.

Buying an old and leaky pipeline in order to take over a private sector project that had hit the rocks was hardly smart. But overpaying for it to the extent that the Liberals did was an act of political desperation.

The news coverage downplays the reality that Ian Anderson, CEO of Trans Mountain Corp., the Crown corporation in charge of the project, happens to be the former president of Kinder Morgan Canada. Trans Mountain’s parent, Canada Development Investment Corporation, bought Kinder Morgan’s assets with a $5.2 billion loan from Export Development Corporation. This was considered a “non-budgetary transaction.” As such, it did not need to be a line item in Finance Minister Bill Morneau’s budget. Nor did it need to be debated or voted by Parliament.

The costs to the people of Canada, even when one subtracts the $1 billion that Kinder Morgan had spent before we bought it, are far higher.

Kinder Morgan (originally named Enron Pipelines Ltd) was born from the ashes of Enron, where founder Richard Kinder was a senior executive. The duping of the Government of Canada is best understood when one considers Enron’s business ethics.

In March 2018, Kinder Morgan demanded that the government give them a “guarantee” the project would be built and to fulfil that guarantee by May 31, 2018 – or the Houston Texas based company would walk. The obvious answer to this tactic was “the matter is before the courts. No guarantee is possible.”

'Buying an old and leaky pipeline in order to take over a private sector project that had hit the rocks was hardly smart. But overpaying for it to the extent that the Liberals did was an act of political desperation,' writes @ElizabethMay

While blaming the government and demanding obstacles be removed, months earlier Kinder Morgan had made two moves that make it transparent it had no interest in completing the project.

  • First, having told the National Energy Board that the financial soundness of the whole pipeline proposal was ensured by the overall financial health of Kinder Morgan in Texas, Kinder Morgan pivoted, re-organized the corporate structure and created Kinder Morgan Canada as a subsidiary.

  • Second, it took the money raised for the equity required by Canadian banks to secure their investment, $1.5 billion, and used it to pay down debt held by the parent company.

Instead of heeding those signs, the Liberals paid a price exceeding the old pipeline’s value in order to take on a project that Kinder Morgan had clearly decided would not fly.

The Liberals wanted more than anything to prove they could get the pipeline built. One can only imagine the glee of the Texas oil men when they realized they could sell the old pipeline for nearly twice what it was worth.

When Kinder Morgan kidnapped its own project to demand a guarantee — or else — they were not looking for ransom. They wanted to shoot the hostage. Being able to blame a third party when they abandoned the project could avoid penalties under long-term contracts Kinder Morgan had signed.

But the reckless behaviour with public funds does not end with the announcement in May 2018 that the Government of Canada was buying the pipeline for $4.4 billion.

On Aug. 30, 2018, the Federal Court of Appeal struck down the pipeline permits ruling that not only did the Liberal government violate Indigenous rights leading to the quashing of the permit, Kinder Morgan itself violated indigenous rights. In other words, the vendor contributed to the devaluing of the asset, and we should never have paid $4.4 billion without re-negotiating the price.

Yet, without any explanation, Finance Minister Bill Morneau cut a cheque for $4.4 billion to Kinder Morgan the very next day, Aug. 31, with no closing date for purchase and sale of the pipeline.

We overpaid not once, but twice.

What is most galling to me is that our public funds are being used to brow-beat First Nations along the route into signing benefit agreements. One elected council member of a First Nation that is fighting the project told me recently that they are being “bombarded” by the now government-owned Trans Mountain with offers of millions of dollars to agree to the project.

Those are public dollars being used to coerce acceptance of a project most Indigenous nations do not want to accept. And yet every time a First Nation accepts a benefit agreement, politicians celebrate it claiming Indigenous people want the project. That is the case in some instances, but it seems like the latest form of oppression and colonialism: Refuse to listen to Indigenous objections, convince people the project is inevitable and use our money to bribe and coerce.

As Chief Allan Adam of the Fort Chipewyan Nation explained his decision to agree to the Teck Frontier mine:

“We’ve been fighting industry for how long? And we’ve spent well over $1 million in court fees with nothing tangible in return… So what am I supposed to do? Am I supposed to continue on fighting as a chief while others sit on the fence and say nothing and do nothing?

“I don’t want to do this. I didn’t want to make this decision but I had no choice. I had to make sure my nation was protected, and that our people are going to benefit from it for the future.”

Now, we have federal dollars flowing into a Crown Corporation. Anderson boasts that he runs it as though it were in the private sector. Any notion that concern for Indigenous rights will be greater now that the people of Canada own the pipeline can be set aside as fanciful.

The Trans Mountain pipeline remains a project outside market forces. The arguments for it rest on misconceptions and propaganda. It will not get a higher price at “tidewater.” Bitumen is inevitably expensive to produce with low value in the marketplace. As the carbon bubble bursts, these expensive “assets” will be the first to be stranded — uneconomical and unusable. Pursuing it blows our Paris commitments while squandering public funds.

It is not too late to ask the question: what could be done with the further $13 billion? Could we not do more for the Alberta economy in cleaning up toxic abandoned wells and mines, as well as tailings ponds in northern Alberta? Could we not fund green and renewable energy? Ensure clean drinking water for every First Nation? Ensure we have an electricity grid to move 100% renewable energy from province to province?

How much is too much? In my view, a single penny more is too much.

Keep reading

Escalation of Commitment and Sunk Cost Fallacy
"Escalation of commitment is a human behavior pattern in which an individual or group facing increasingly negative outcomes from a decision, action, or investment nevertheless continues the behavior instead of altering course. The actor maintains behaviors that are irrational, but align with previous decisions and actions.
"Economists and behavioral scientists use a related term, sunk-cost fallacy, to describe the justification of increased investment of money or effort in a decision, based on the cumulative prior investment ('sunk cost') despite new evidence suggesting that the future cost of continuing the behavior outweighs the expected benefit.
"In sociology, irrational escalation of commitment or commitment bias describe similar behaviors. The phenomenon and the sentiment underlying them are reflected in such proverbial images as 'throwing good money after bad' or 'in for a penny, in for a pound', or 'It's never the wrong time to make the right decision.'

"We were knee deep in the Big Muddy, and the big fool said to push on."

"What Is a Sunk Cost Trap?
"Sunk cost trap refers to a tendency for people to irrationally follow through on an activity that is not meeting their expectations. This is because of the time and/or money they have already invested. The sunk cost trap explains why people finish movies they are not enjoying, finish meals that taste bad, keep clothes in their closet that they’ve never worn and hold on to investments that are underperforming. The sunk cost trap is also called the Concorde fallacy after the failed supersonic Concorde jet program that funding governments insisted on completing despite the jet’s poor outlook.
"How a Sunk Cost Trap Works
"Investors fall into the sunk cost trap when they base their decisions on past behaviors and a desire to not lose the time or money they have already invested, instead of cutting their losses and making the decision that would give them the best outcome going forward. Many investors are reluctant to admit, even to themselves, that they have made a bad investment. Changing strategies is viewed, perhaps only subconsciously, as admitting failure. As a result, many investors tend to remain committed or even invest additional capital into a bad investment to make their initial decision seem worthwhile."

Sounds like the Great Depression is only a mindset away. And given climate reality, that's the best we can hope for.

Puts me in mind of behaviour of victims of abuse. But it's hard to see a captured government as a victim, isn't it.
The thing about a movie that's no good, or a meal that doesn't meet flavor expectations, is that it's hard to imagine things on that scale pushing the entire world over a precipice.

But when that capitalization was gone, and the new company incorporated in Canada took over, with no deposit having been paid, all the major Canadian banks were exposed. So Trudeau bailed out the banks. Just as Harper did in 2008, for a different reason.
Nope: Enron-Reincarnated had'im by the cojones. There'd be no more campaign funds from the banks.
That's my theory.

Thank you Elizabeth May. Could you please write a follow up column explaining to readers what the basic problem is at the heart of Parliament or government that leads to such colossally irresponsible decisions and expenditures being made? It appears the government is pondering repeating a dreadful irresponsible error by pushing forward the Teck mines project - this in a month where the shares of an EV maker, Tesla, became one of the top-valued stocks on the markets and money seems to be pouring into renewable energy businesses and shares. I read that development as investors voting with their dollars on where things are and should be going.

How is it that our elected fellow citizens have their ears open only to this one industry (fossil fuels) despite the inevitable, highly foreseeable, and already established damage this is doing to almost every other industry Canada relies on (tourism, agriculture, fishing, forestry, transport to name a few), let alone Canadian citizens (of course, including indigenous peoples). How is it that the Trudeau government, which seems to have some idea of right and wrong, compared to the prior Harper era, is willing to humiliate and evict First Nations peoples, or poison them in their homes, while claiming to value the nation-to-nation relationship with them above all, and while declaring a climate emergency?

Since I learned about climate science and its predictions (via several university courses and extensive reading), I have been unable to escape an escalating and mind-dominating level of dread about my children's futures, and I am desperate that our decision-makers in Ottawa, as well as in numerous provincial capitals, start backing up their words with urgent action, such as the approaches you suggest in your conclusion here, and such as your Green party platform outlined. How can so many elected individuals across our land, most with children, all having been children once themselves, continue caving in to the fossil fuel industry and its inexplicably squeaky wheels and extorting handmaidens (like Kenney, Moe, and Ford), rather than prioritizing action to save a survivable and stable future and climate for their own children? Not to mention, bringing in energy systems which would reduce harms to our air, land, and water quality, compared to fossil fuels?

Please forgive Canadians if we can only conclude that the majority of politicians, especially those in the Liberal and Conservative parties, value money more than they value their children's security and wellbeing. With the IPCC reports having been published globally, freely, for decades, headed up by a Summary for Policymakers each time, inaction cannot conceivably be excused by ignorance. And if we have to choose between "ignorant" or "corrupt", when trying to understand the decisions and actions of our elected fellow citizens, must we not demand a different political system, and perhaps, preferably, a wholesale change of elected officials, for some with both conscience and intellect?

Thank you. It is frustrating that voices of reason and morality, like yours, continue to be voices in the wilderness. Perhaps that's why our so-called leaders seem not to care very much about protecting our wilderness.

Excellent questions........but I suspect the answer to most of them is even less palatable to Canadians than facing the fossil fuel end game is. Capitalism. Late stage capitalism, most of it predicted by Marx, and studiously ignored in the west for the last 150 years.
Capitalism is about expanding markets...profit drives the system, and profit has to be found somewhere. On a limited planet, by now much resource theft has already occurred. We can't devestatate Nigeria twice........it made Shell rich in the 90s, cost Ken Saro Wiwa his life, but the Niger delta, once teeming with life, is a dead zone now. Soon parts of northern Canada will be the same.......dead zones unable any longer to support life. Think parts of our boreal forest, removed as 'overburden' by the ta rsands extractivists.

Capitalism....we steal other people's land and water base, for our profit....and for a few decades there was so much back country we didn't have to acknowledge what we were doing. Our indigenous people knew, because it was their birthright we were 'resourcing'.

And people like you and me know it now......but the sunk cost thinking Geof Pounder talks about above, keep many wanting to double down on what is no longer possible. Plus....it doesn't feel good to acknowledge you've been part of a earth killing theft cullture. Joni MItchell told us years ago, in her song 'I was raised on robbery', but we didn't think she was singing about all of us.
Capitalism. We need desperately to find a substitute for it.......another way of being on the earth that doesn't have to exploit land and water and demonized 'others'. But we're all so addicted to capitalism as normal that we can't imagine any other system. So we vote in right wing old line thinkers like Ford or Kenny.....hoping they'll bully life into repeating our lost 'prosperity'.

Stand with the Wet'suwet'an. But it will be hard, Because to completely stand with them you have to imagine happening to you and yours what they've endured at our capitalist hands for over a century. And then you have to believe a non-exploiting alternative is possible.

Finally, you have to have the courage to speak in the face of politicians of the far right...and their angry supporters. The violence and use of force just below the surface of capitalist markets is out in the open now. They are fighting for their life.......for their god given right to make profit off other people's land.

Who knows what they'll do to maintain their climate destroying ways to the very end? Though that's easier for us to imagine, than a world without exploitation and violence.

And that vision is damn scary.

“It is not too late to ask the question: what could be done with the further $13 billion?” E.M.
That's a similar question I raised four days ago in this comment section.
"I don't know exactly but how much would it cost the federal government to shut down the oil sands and pipeline and create new employment and training in clean energy for Alberta's oil workers? Probably a lot more, especially if we added in the clean up of the mess left by the oil and gas industry. But if that's what the majority of Canadians want, would they pay the price? Anyone know if this calculation has ever been done?" P.K.

You've asked the good question. But for that to happen we'd have to give up on 'profit' and start thinking about 'prosperity'...we'd have to begin imagining a world of enough rather than a world of excess.

And we'd likely have to forego our trips to tropical beaches and imagine relaxations that don't involve jet travel.....we'd all have to 'work'....like real work, not the PR, sell folks something they don't need jobs that pass for work now.

Fixing the mess that's already all around us would take collective will...........and a vision of something other than sugar plum fairies. A Green New Deal is the best plan I've heard for a way forward......but we can't seem to imagine jobs paid for by taxes, that make the society more liveable. We want jawbs paid by corporations that keep on rippin and shippin.............that way thar...we can clip our coupons, blame goverment, and avoid any hard thinking or doing. Cuban beaches are great, they'lll be even better when T-rump succeeds in taking back that socialist little island.

While in Canada, Kenny and Ford are the best we can imagine. Imagine that!!

Thank you, Elizabeth May, for your hard work, commitment and willingness to stand and give voice to what many Canadians value. Thank you to the readers who have written thoughtful comments and questions. We need to create more space for public discussion and debate that is based on critical thinking; and at the same time we need to actually change our behaviour. I appreciate reading Mary Nokleby’s comments because I too often wonder, how much is enough?

How to change our behaviour when everything is based on the capitalist model? It is clear that we have to change our economic system for our survival and the survival of our planet - to a model that recognizes they are the same thing. Kate Raworth has put forward an option: Doughnut Economics. You don’t have to be an economist to understand it and people are working to put the ideas into action.
https://www.kateraworth.com/videos/ "Let’s talk about human well-being and what it takes to achieve that,..and let’s talk about the planet and the life support systems needed to keep us alive.” Elizabeth May asks 'what could be done with a further 13 billion?’ How about Canada adopting Doughnut Economics and actions?

It has been estimated in a major Globe and Mail investigative piece last year, and reiterated here in the Observer and other independent online journals such as The Tyee and the Watershed Sentinel by smart folks like Andrew Nikiforuk and Robyn Allan, that the abandoned and orphaned oil and gas wells, of which there are some 90,000, would cost somewhere between $60 billion and $230 billion to clean up.

Then there are the vast oil sands tailings ponds and not a small amount of toxic petro-deposits in the sediments of local rivers and lakes (therein the fish) where cleanup costs have not been properly estimated (at least not publicly) but which, it can be reasonably assumed, would be north of $300 billion.

Albertans and indeed all Canadians must become acutely aware of the moral and financial implications of the suggestion that these costs should be in any way assumed by public accounts. Further, Canadians should take any comment by oilers such as Jason Kenney with a huge grain of salt that Alberta sent over $600 billion in fossil-sourced funds to Ottawa as part of equalization and therein underpins most of the national economy when, in fact, the ecological liabilities and historical subsidies are discounted and the entire contribution specifically by the Alberta oil industry is lodged below four per cent of the national GDP.

Elizabeth May is one of the most articulate MPs in the House today. Her contributions always makes for intelligent discourse and factual, sometimes damning rebuttals to government and industry (they are too often one and the same) rhetoric and math.

Thank you Elizabeth.

"So the real cost to Canadians is $12.6 billion plus $4.4 billion for a whopping $16 billion."

Actually, $17 billion. But hey, what's the odd billion here or there?

There are 3+ probs here. 1 . Twinning an old pipeline to I guess keeping failure of a line. 2. Increasing or changing how bitumen is carried and 3. LNG. 4 but always #, Indigenous Rights and
ALL involves PEOPLES of EARTH's RIGHTS. Fossil fuels has been bad. Twinning an old pipeline is a failsafe (maybe yes, maybe no. LNG may & seems a pipedream. China Asia a market? Come on - Asia wise to NA 'cheap goods' - just a question of time. As a First Nations Woman I saw the put down just as all this crap puts down the workers & poor.
Ok getting a headache. Now our youth among the poor. Wake up! Its all for future!!! Hannora Mohawk Woman.

There are 3+ probs here. 1 . Twinning an old pipeline to I guess keeping failure of a line. 2. Increasing or changing how bitumen is carried and 3. LNG. 4 but always #, Indigenous Rights and
ALL involves PEOPLES of EARTH's RIGHTS. Fossil fuels has been bad. Twinning an old pipeline is a failsafe (maybe yes, maybe no. LNG may & seems a pipedream. China Asia a market? Come on - Asia wise to NA 'cheap goods' - just a question of time. As a First Nations Woman I saw the put down just as all this crap puts down the workers & poor.
Ok getting a headache. Now our youth among the poor. Wake up! Its all for future!!! Hannora Mohawk Woman.

I totally agree, such a shortsighted plan. Eventually the entire world will suffer. I won’t be here but my grandchildren will.

I was shocked to learn Kinder Morgan was an offshoot of Enron, a company that deliberately created false electricity shortages in California so they could drive prices higher and make their stock prices rise dramatically. At the end Enron was an entity built on lies and greed capitalism at its worst. So many employees had their lives destroyed, no jobs, no pensions, while executives received huge bonuses. Why is Canada’s even involved in a project that free enterprise had given up on? Just to keep Alberta and possibly Ontario happy? What an egregious waste of taxpayers money.

I don't believe Kinder Morgan sprang from Enron, it was not an Enron 'entity'... they were an investor group who bought up an Enron pipeline op..... that is what I gather from this Wikipedia piece....(read the first line of the "History" subsection of this referenced piece please)

You're right that there is not a traceable corporate line from Enron to TMX, BUT all the same players are there.

This is a characteristic of the parasitic corporate class in general, but in particular with regards to fossil fuel extraction.

The ongoing business model is to set up a shell company for each "play" or sometimes, even each well. Funnel the profits to the parent company. When the well or play begins to decline, sell off the shell company, which then declares bankruptcy as its execs float off on golden parachutes to their next rape-and-pillage project. The bankrupt company then avoids site cleanup, and the taxpayers end up with the tab.

You can rob with a bullet or a ball-point pen. The same bunch of sleazy exploiters move from scorched earth to scorched earth — all perfectly legally.

At some point, we need to "pierce the corporate veil" and put some of these people in jail.

This is the future and it will happen quicker than expected. Dinasours need to be left in the ground bought and paid for by us the tax payers. Seems like the Emperor really has NO new clothes. But the illusion is so hard to change with the old thought of old men. This video shows how the people are voting.

What could we do with $13 billion? We could transition Canada away from fossil fuels, completely, and into a hydrogen economy. Remote
communities could be self-sustainable. Even the tar sands people could participate. See Prof. Ian Gates, U. of Calgary. He was written up by CBC News, last fall. Many countries are coming to the realization that hydrogen can provide long-term (seasonal) storage of renewable energy, making the transition to 100% clean energy much easier in colder climates. The EU sees this. Look up, "Hydrogen Roadmap Europe", published last fall.