The expansion of the Trans Mountain pipeline will not be profitable for the federal government, concludes the Parliamentary Budget Officer, who has just tabled an update on this project whose bill has now reached $21.4 billion. The Trudeau government rejects the findings and believes that this oil sands oil export pipeline “is in the interest of the country”.
In a report posted online Wednesday morning, it is pointed out that “the government’s decision in 2018 to acquire, expand, operate and then dispose of the assets of the Trans Mountain pipeline system will result in a net loss for the federal government “.
This “update” comes after an inventory drawn up in December 2020 by the Parliamentary Budget Officer (PBO). Yves Giroux then indicated that the project would be profitable, while emphasizing that climate policies, changes in the oil market and possible delays in commissioning could compromise this profitability.
This time, Mr. Giroux estimates that the Alberta oil export pipeline will not be profitable and could result in a loss of $600 million, due to a $1.2 billion drop in “present value”. since December 2020. To explain this decline, he points to an increase in construction costs, which rose from $12.6 billion to $21.4 billion. His report also recalls that the end of the work is now scheduled, at best, for “the end of 2023”.
The Parliamentary Budget Officer, who nevertheless specifies that his assessment was limited to “an examination of the financial cost of the expansion”, also indicates that the immediate abandonment of the project “would entail considerable financial losses for the government”, that it values at “over $14 billion”.
“interest of the country”
Responding to the PBO’s new report, Deputy Prime Minister Chrystia Freeland’s office argued Wednesday that the tar sands oil export project “is in the interest of the country.” According to her, “it will make Canada and the Canadian economy more sovereign and more resilient. Independent analysis from BMO Capital Markets and TD Securities has confirmed that the project remains commercially viable.
Moreover, “the federal government intends to initiate a divestment process once the risks associated with the expansion project have been further reduced and economic participation with Aboriginal groups has progressed.” There is also no question of canceling the construction, already underway, of the second pipeline, as demanded in particular by environmental groups.
For the Bloc Québécois, on the contrary, it is urgent to stop public investment in Trans Mountain, a project deemed “deadly” for the environment. “Let’s stop this financial abyss and instead commit these sums to the long-awaited and necessary ecological shift,” argued Bloc Québécois MP Monique Pauzé.
Same story on the side of the New Democratic Party, which deplored the billions of dollars of public funds spent “in a pipeline that compromises our climate targets and which is financially inefficient”. On the side of ecologists, the Environmental Defense group denounces the “disastrous” climatic impacts linked to the export, during the next decades, of oil from the tar sands.
$21.4 billion
After initially being valued at $7.4 billion, the bill for the Trans Mountain pipeline expansion project has reached $21.4 billion, according to an “update” released by Trans Mountain Corporation last February.
In a press release, Trans Mountain Corporation had indicated that this increase stems in particular from “improvements” and “modifications” to the project, but also from “delays”, the impacts of COVID-19 and the repercussions of the November 2021 floods. in British Columbia.
Despite a price that has now reached 290% of the initial bill since the takeover of Trans Mountain from the Texas oil company Kinder Morgan in 2018, “the profitability analysis of the project remains solid”, could we read in the press release from Trans Mountain Corporation . “Canada will benefit from the economic and fiscal contributions made by the project after it comes into operation. »
Deputy Prime Minister Chrystia Freeland also came to the defense of the project. She then pointed out that the injection of public funds into the project will not go beyond the $12.6 billion forecast in a previous cost update, in 2020. This means that Trans Mountain Corporation will have to get $8.8 billion in funding from the public debt market or from financial institutions.
The pipeline duo will transport 325 million barrels of oil from Alberta’s tar sands to a port near Vancouver each year. The project will therefore triple the flow of oil and increase the number of tankers loaded in the Vancouver area sevenfold, from 5 to 34 ships per month. These vessels will notably pass through the critical habitat of the southern resident killer whales, a population of cetaceans on the verge of extinction.
The Trudeau government had to go all the way to the Supreme Court to defend this development project in favor of the fossil fuel industry, due to opposition from British Columbia. The Supreme Court finally ruled in January 2020 that only the federal government can regulate the interprovincial transport of petroleum, in particular with a view to its export to foreign markets.