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.

“At $30.9 billion, this pipeline has become perhaps the largest boondoggle in Canadian history,” said Canadian oil and gas program director with Stand.earth 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.

By Natasha Bulowski, Local Journalism Initiative Reporter

Original Published on Mar 11, 2023 at 13:34

This item reprinted with permission from   Canada's National Observer   Ottawa, Ontario
Comments are Welcome - Leave a reply below - Posts are moderated

Comments are Welcome - Leave a reply below - Posts are moderated