Trudeau’s Oil Pipeline Is a ‘Net Loss’ for Taxpayers, Watchdog Says

Canadian taxpayers will lose money from Prime Minister Justin Trudeau’s decision to nationalize a pipeline after costs escalated amid delays in expanding the system, according to the country’s budget watchdog.

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(Bloomberg) — Canadian taxpayers will lose money from Prime Minister Justin Trudeau’s decision to nationalize a pipeline after costs escalated amid delays in expanding the system, according to the country’s budget watchdog.

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A project to expand the Trans Mountain Pipeline, Canada’s sole conduit for crude from Alberta’s oil sands to the Pacific Ocean, has faced repeated delays and cost increases since Trudeau’s government bought the system from Kinder Morgan Inc. in 2018. 

In February, Trans Mountain announced a 70% jump in expansion costs to C$21.4 billion ($16.55 billion) partly due to delays, the effects of the pandemic and flooding last year. While the government said it would spend no additional public money on the pipeline, it guaranteed a C$10 billion loan for it in May. The company said when the cost increase was announced that the “business case supporting the project remained sound.”

The net present value of the system is now C$3.9 billion, C$600 million lower than the purchase price, the Parliamentary Budget Officer said Wednesday in an updated costing report. 

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“Based on the new developments since the previous report, specifically the increased construction costs and the delay in the in-service date, PBO finds that the Government’s 2018 decision to acquire, expand, operate, and eventually divest of the Trans Mountain assets will result in a net loss for the federal government,” the watchdog said.  

Trudeau’s government stepped in to buy Trans Mountain to ensure work on increasing its capacity to 800,000 barrels a day from 300,000 would be completed after Kinder Morgan threatened to cancel the project amid fierce opposition in British Columbia. Canada’s oil producers have struggled for years with a shortage of export pipelines, lowering the price they receive for their oil and hindering growth in Alberta’s oil sands. Trudeau sought a difficult balance between saving a project that was crucial for Canada’s oil industry while, at the same time, pledging to help fight climate change. 

The project to raise the system’s capacity, which is currently underway, continues to face opposition and active protests along its route, including from some Indigenous communities. Should work be halted after this month and canceled, the government would need to write off more than C$14 billion in assets, resulting in a “significant financial loss,” the PBO said.