Construction of the Trans Mountain pipeline is seen underway in Kamloops, B.C., Tuesday, Sept. 1, 2020. A new report from the parliamentary budget officer says the federal government could end up losing money on the Trans Mountain pipeline if it further tightens its climate policy. THE CANADIAN PRESS/Jonathan Hayward

Construction of the Trans Mountain pipeline is seen underway in Kamloops, B.C., Tuesday, Sept. 1, 2020. A new report from the parliamentary budget officer says the federal government could end up losing money on the Trans Mountain pipeline if it further tightens its climate policy. THE CANADIAN PRESS/Jonathan Hayward

Future value of Trans Mountain pipeline rests on Liberals’ climate plans, PBO says

The increased capacity wouldn’t come on line until the end of 2022

The federal government could end up losing money on the Trans Mountain pipeline if it further tightens its climate policy and decreasing demand for Canadian oil, the parliamentary budget officer says.

The federal government bought the pipeline, and the unfinished work to increase its capacity by twinning it, in August 2018 for $4.4 billion.

The Liberals haven’t been able to find a buyer for the pipeline from Alberta to the West Coast. They are instead paying for its expansion, which the most recent estimate says will cost $12.6 billion.

The increased capacity wouldn’t come on line until the end of 2022.

The budget officer said the pipeline remains profitable based on expected cash flows, estimating the government could make $600 million above its purchase price.

But Yves Giroux warned in his report Tuesday that everything could change based on circumstances both beyond and within the government’s control, including changes to climate policy that would reduce demand for the petroleum products the pipeline moves.

Giroux also provided a scenario for the Liberals’ promise to reach net-zero emissions by 2050, estimating that doing so could lead to a $1.5-billion loss on Trans Mountain.

And that estimate led environmental groups to argue the government should spend less on the pipeline and more on tackling climate change.

“This pipeline is only profitable in a worst-case climate scenario, where the world takes no new action on climate change,” said Keith Stewart with Greenpeace Canada. “That is not a future that we should be betting over $12 billion of public money on.”

The report Tuesday was an update on the PBO’s report from early 2019 that pegged the cost of the pipeline and planned expansion project at between $3.6 billion and $4.6 billion, meaning the government might have overpaid for the project two years ago.

READ MORE: Canada Energy Regulator projects there may be no need for Trans Mountain expansion

The Liberals have argued the costs were worth it to save a project that looked doomed when Kinder Morgan and its investors got cold feet in the face of legal opposition and political uncertainty.

Despite a series of legal wins to the pipeline’s construction, and government money going into it, a sale hasn’t happened.

It’s unlikely the Liberals will ever find a buyer because the PBO report adds to arguments that Trans Mountain isn’t economically viable, said NDP finance critic Peter Julian.

He called on the Liberals to shift spending from the pipeline to climate change projects like green energy infrastructure.

“It was a mistake for Mr. Trudeau in 24 hours to come up with ($4.4 billion) and throw that at the company,” he said during a virtual press conference.

“It would be a bigger mistake to … keep pouring money — taxpayers’ money — into this project, even though it is almost in all the scenarios that are realistic, it is going to be a money-loser.”

Giroux’s report last year estimated the government would lose upwards of $2.5 billion if the expansion didn’t go ahead.

In his report Tuesday, Giroux estimated that a one-year delay in getting the expansion online would translate into a $400 million loss. A 10 per cent drop in construction costs would put the profit margin at $1 billion, or $200 million if costs rise.

In a statement, Giroux said the precarity of the outlook lay with federal policy.

“The profitability of the assets is highly contingent on the climate policy stance of the federal government and on the future utilization rate of the pipeline,” he said.

Amara Possian, Canada campaign director for 350.org (named for a “safe” level of carbon dioxide in the atmosphere) said the PBO report makes clear the government now faces a clear choice.

“Acting on climate change and Trans Mountain don’t mix and we all need to be asking the prime minister what’s more important: saving this pipeline or tackling the climate crisis?”

Jordan Press, The Canadian Press


Like us on Facebook and follow us on Twitter.

Want to support local journalism during the pandemic? Make a donation here.

Climate ChangeLiberalsTrans Mountain pipeline

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Alberta’s chief medical officer of health Dr. Deena Hinshaw announced 16 additional deaths Thursday. (Photo by Chris Schwarz/Government of Alberta)
No easing of Alberta’s COVID-19 measures Thursday, 678 new COVID-19 cases

The province also hit 1,500 COVID-19 deaths since the beginning of the pandemic

World Juniors’ referee Mike Langin makes a called during the Canada vs. Slovakia at the 2021 World Junior Championship at Rogers Place in Edmonton, Dec. 27, 2020. (Photo by Matthew Murnaghan/Hockey Canada)
Former Sylvan Lake man lives his dream at World Junior Championships

Mike Langin was one the 25 Canadian officials who worked during the tournament

Alberta Premier Jason Kenney said the Canadian government should consider sanctions on the U.S. if they refuse to reconsider the decision to cancel the Keystone XL Pipeline. (THE CANADIAN PRESS/Sean Kilpatrick
Keystone XL officially cancelled, Kenney vows to fight on

U.S. President Joe Biden cancelled the presidential permit for the pipeline on first day of office

Alberta’s chief medical officer of health Dr. Deena Hinshaw said province’s test positivity rate for COVID-19 is steadily declining. (Photo by Chris Schwarz/Government of Alberta)
669 new COVID-19 cases in Alberta, 21 additional deaths

COVID-19 test positivity rate down to 4.5 per cent

Alberta Chief Medical Officer of Health Dr. Deena Hinshaw reported an additional 456 COVID-19 cases over the past 24 hours. (photography by Chris Schwarz/Government of Alberta)
Five new COVID-19 deaths in Central zone, two in Red Deer

Province reports 456 new cases of COVID-19

A scene from “Canada and the Gulf War: In their own words,” a video by The Memory Project, a program of Historica Canada, is shown in this undated illustration. THE CANADIAN PRESS/HO - Historica Canada
New video marks Canada’s contributions to first Gulf War on 30th anniversary

Veterans Affairs Canada says around 4,500 Canadian military personnel served during the war

Gov. Gen. Julie Payette takes the royal salute from the Guard of Honour as she makes her way deliver the the throne speech, Wednesday, September 23, 2020 in Ottawa. THE CANADIAN PRESS/Fred Chartrand
Gov. Gen. Julie Payette resigns, apologizes for ‘tensions’ at Rideau Hall

Payette, who is the Queen’s representative in Canada, has been the governor general since 2017

Grounded WestJet Boeing 737 Max aircraft are shown at the airline’s facilities in Calgary, Alta., Tuesday, May 7, 2019. WestJet will operate the first commercial Boeing 737 Max flight in Canada today since the aircraft was grounded in 2019 following two deadly crashes. THE CANADIAN PRESS/Jeff McIntosh
Passengers unfazed as WestJet returns Boeing 737 Max to service on Calgary flight

After a lengthy review process, Transport Canada cleared the plane to return to Canadian airspace

(Photo submitted)
Community Futures brings back Social Media Challenge for 2021

This time the challenge is for non-profits and community groups

Lucas Berg, left, with the backpacks filled with essential items he donated to the Red Deer Mustard Seed Jan. 19, 2021. (Photo submitted)
Central Alberta teenager donates filled 20 backpacks to Red Deer Mustard Seed

Lucas Berg, 14, of Ponoka County says he ‘just wants to help people’

A conveyor belt transports coal at the Westmoreland Coal Co.’s Sheerness mine near Hanna, Alta., on Tuesday, Dec. 13, 2016. Coal mining impacts are already occurring in Alberta’s Rocky Mountains even as debate intensifies over the industry’s presence in one of the province’s most beloved landscapes. THE CANADIAN PRESS/Jeff McIntosh
As Alberta debates coal mining, industry already affecting once-protected Rockies

UCP revoked a policy that had protected eastern slopes of the Rockies from open-pit coal mining since 1976

In this Dec. 18, 2020 photo, pipes to be used for the Keystone XL pipeline are stored in a field near Dorchester, Neb. TC Energy Corp. is planning to eliminate more than 1,000 construction jobs related to its decision to halt work on its Keystone XL pipeline expansion project. THE CANADIAN PRESS/Chris Machian /Omaha World-Herald via AP
TC Energy cutting more than 1,000 Keystone XL construction jobs as Biden pulls permit

Some 200 kilometres of pipe have already been installed for the expansion

Kyla Gibson with her boyfriend Gavin Hardy. (Photo used with permission)
Sylvan Lake couple lose ‘fur babies’ to house fire

‘They were our world and nothing will ever replace them,’ Kyla Gibson said of her three pets

Most Read