The controversial Trans Mountain pipeline extension project, now under construction in western Canada after nationalization, is no longer viable as costs have skyrocketed, the House Budget Watcher said on Wednesday.
In a report, the Parliamentary Budget Officer’s office said a review of the project’s finances concluded “that the government’s 2018 decision to acquire, expand, operate and ultimately divest Trans Mountain’s assets resulted in a net loss for the federal government will lead .”
Ottawa bought the pipeline from Kinder Morgan for CA$4.4 billion (US$3.4 billion) four years ago to salvage the troubled expansion project.
But its current value is just CA$3.9 billion, the PBO estimates, after construction costs rose to $21.4 billion — triple the original price — and its completion was pushed back a year to late 2023.
The negative rating is based on the pipeline’s future cash flows over 40 years less construction costs.
In response, Adrienne Vaupshas, spokeswoman for Deputy Prime Minister Chrystia Freeland, told AFP the project was “in the national interest and will make Canada and the Canadian economy more sovereign and resilient.”
She cited independent analysis from BMO Capital Markets and TD Securities, which concluded that the project remains economically viable despite the higher costs.
The sale of the pipeline, Vaupshas added, will only proceed after further consultations with indigenous groups have taken place and the risks involved have been reduced.
The project aims to replace an aging pipeline built in 1953 to ship 890,000 barrels a day of oil from landlocked Alberta to the Pacific coast for shipment to new markets in Asia and elsewhere.
Before the government took over the project, it was stalled by legal challenges and protests from indigenous groups and environmental activists.
On Wednesday, Environmental Defense called the project a “financially dangerous candy” that will result in “more carbon emissions for the planet.”
“As the cost of the project continues to rise, the government should cut its losses and halt construction of the expansion pipeline — before any more of our dollars are wasted,” the group said in a statement.
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