I would like to know what is the fate of the Trans Mountain pipeline, which the Canadian government bought for billions of dollars. Will it be sold? Who will operate it? What will be the consequences of this pipeline for the environment?
Richard Champagne
The federal government continues to claim that its purchase of the Trans Mountain pipeline “will generate a positive return for Canadians”.
He even promises to invest “every dollar earned in clean energy projects”.
Let’s say that you have to wear the same shade of glasses as the government’s, that is to say pink, to share this analysis. Because everything indicates that the project will, on the contrary, lead to massive losses for the Canadian state and therefore for all taxpayers. Monumental waste in sight, from a financial, political and environmental point of view.
Little throwback. In 2018, the government of Justin Trudeau took the decision, as bold as it was contested, to buy the Trans Mountain pipeline for $4.5 billion from the American company Kinder Morgan. The pipeline carries oil from around Edmonton, Alberta to Burnaby on the Pacific coast of British Columbia.
At the time, Kinder Morgan began building a second pipeline that essentially follows the route of the first to triple capacity and help Alberta get its oil to international markets.
But British Columbia and environmental groups oppose this expansion. The project bogs down and Kinder Morgan grows impatient (some analysts actually believe the company realized the project was unprofitable and was looking to get rid of it anyway).
By acquiring the pipeline, the federal government says it wants to ensure that the work is completed.
But the construction comes up against many problems. Some Aboriginal communities contest the project in court, environmental issues require that the route be diverted, construction problems arise in difficult terrain.
Then the COVID-19 pandemic hit, paralyzing construction sites. In 2021, another blow: this time, it is the floods in British Columbia that disrupt operations.
“Someone once joked that the last thing that could happen would be a plague of locusts. We have really gone through the extremes, ”commented to the Calgary Herald the former boss of the crown corporation Trans Mountain Corporation, Ian Anderson, when he retired last March.
Things, however, are progressing. In its last annual report, which dates from last September, the Canada Development Investment Corporation estimated that 70% of the expansion work had been completed1.
The problem is that construction costs, initially estimated at 7.4 billion, jumped to 12.6 billion, then to 21.4 billion. The planned completion of the works has been postponed from 2022 to the third quarter of 2023.
The federal government has always said that it would eventually sell Trans Mountain.
“We intend to initiate a divestment process once the expansion project has de-risked and engagement with Indigenous groups has ended,” Prime Minister Justin Trudeau’s office reiterated to us.
Who could buy the pipeline? Despite opposition from some indigenous communities, others have indicated their intention to acquire a stake.
The organization Project Reconciliation reiterated last year to aim for 100% Aboriginal shareholding and says it considers it possible despite cost overruns2.
The question is to know under what conditions the transaction would take place.
One of the federal problems is that the rates that can be charged to oil companies to use the pipeline are regulated and cannot keep up with the escalating construction costs.
Robyn Allan, an independent economist who is interested in the project, calculates that the federal government would have to write off $17 billion in assets before a potential buyer can consider an acquisition.
In 2022, the Parliamentary Budget Officer also concluded that the project was a net loss for the government.3.
As for environmental risks, pipelines are known to be prone to leaks, but there is no perfectly safe way to deliver oil. Above all, we can raise the contradiction represented by the fact of investing in new oil infrastructures that will operate for decades while we are trying to free ourselves from fossil fuels in order to limit global warming.