The new estimate of C$21.4 billion ($16.8 billion) includes the cost of enhancements, changes, delays, financing, as well as the impacts of the pandemic and last year’s floods in British Columbia, according to a statement released Friday by Trans Mountain Corp., which was bought in 2018 to save the expansion project from being scrapped.
“A C$9 billion increase is just huge,” Richard Masson, executive fellow at the University of Calgary’s public policy school, said on BNN Bloomberg Television. “Some of these costs flow through to the shippers through higher tolls. A lot of them don’t. So it’s going to lower the overall economic value of this and mean less money as we try and sell it as taxpayers to some private-sector entity.”
It’s the second time since early 2020 that the cost estimate was raised by about 70%.
Canada’s energy industry for years has struggled with a shortage of pipelines to ship crude from Alberta’s oil sands, which hold the world’s third-largest reserves. Trudeau has sought a difficult balance between saving a project that was crucial for the country’s oil industry using taxpayers’ money, at the same time as pledging to help fight climate change.
His government on Friday said that it will spend no additional public money on the project, and that Trans Mountain Corp. will instead secure the funding necessary to complete the project with third-party financing, either in the public debt markets or with financial institutions.
The government has engaged both BMO Capital Markets and TD Securities to provide advice on financial aspects of the project, according to a statement on the Department of Finance’s website.
In order to quell opposition to the project that will increase shipping capacity from about 300,000 barrels a day to more than 800,000, Trudeau’s government has been in talks with First Nations that are willing to own as much as 100% of the pipeline. Trudeau’s government bought the pipeline after Kinder Morgan threatened to halt the expansion because of fierce opposition in British Columbia, including from some indigenous groups along the line’s path that fear it will be a threat to their environment.
Completion of the project is now expected in the third quarter of 2023, compared with a previous estimate of as early as this year.
“Notwithstanding the cost increase and revised completion schedule, the business case supporting the project remains sound. Canada will benefit from the economic and tax contributions made by the project once it is in operation,” Trans Mountain said in the statement on its website.
Mark Little, chief executive officer of Suncor Energy Inc., said the pipeline is still viable despite the added costs.
“While like everyone we are disappointed in the increased costs and schedule of the Trans Mountain project, we remain fully supportive of this world-class infrastructure project which is vital to Canada’s long-term economic success and energy security,” Little said in an emailed statement.