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

Grade 6 students at Eugene Reimer Middle School have been participating in the Equity Backpack Project. (Submitted photo)
Equity Backpack Project in Abbotsford addresses inclusion and anti-racism

Grade 6 teacher Nerlap Sidhu says she wants students to develop ‘strong sense of self’

Subm
Mission art gallery re-opens after 10 months

‘People are in need of some visual things just to take them away’

Ottawa serial killer Camille Joseph Cleroux died of natural causes at Abbotsford’s Pacific Institution on Sunday.
Serial killer housed at Abbotsford’s Pacific Institution dies of natural causes

Camille Joseph Cleroux announced dead on Sunday, known as notorious Ottawa serial killer

A peregrine falcon nest sits atop the walls of a quarry where the owner wants to restart operations. The province has now given permission for the nest to be removed. (Tyler Olsen/Abbotsford News)
Company gets OK to remove rare peregrine falcon nest from Abbotsford quarry

Province says it is satisfied with falcon population estimates and mitigation plans

A woman writes a message on a memorial mural wall by street artist James “Smokey Devil” Hardy during a memorial to remember victims of illicit drug overdose deaths on International Overdose Awareness Day, in the Downtown Eastside of Vancouver, on Monday, August 31, 2020. THE CANADIAN PRESS/Darryl Dyck
B.C. paramedics respond to record-breaking number of overdose calls in 2020

On the front lines, COVID-19 has not only led to more calls, but increased the complexity

Throughout December, RCMP conducted CounterAttack road checks as police worked to keep roads free of impaired drivers. (BLACK PRESS file photo)
From the “You can’t make this stuff up” file – stories from the BC CounterAttack campaign

Amusing, yes, but a reminder impaired driving affects ability to drive and to make good decisions

Snow is forecasted to appear in parts of Metro Vancouver this weekend. (Black Press Media files)
Snow forecasted for parts of Lower Mainland this weekend

Environment Canada is predicting flurries and snow from Saturday to Monday evening

(Thesendboys/Instagram)
Video of man doing backflip off Vancouver bridge draws police condemnation

Group says in Instagram story that they ‘don’t do it for the clout’

A Langley woman said she was shaken by the angry encounter. (Google Maps)
Woman shaken after belligerent encounter with unmasked man in Langley store

A man angry about vaccines berated a fellow shopper, a witness said

Inspection of bridge crossing on a B.C. forest service road. (B.C. Forest Practices Board)
B.C. falling behind in maintenance of forest service roads

Auditor finds nearly half of bridges overdue for repair

(Black Press Media files)
Woman steals bottles of wine after brandishing stun baton in New Westminster

Police say the female suspect was wearing a beige trench coat with fur lining

Stand up paddleboarder Christie Jamieson is humbled to her knees as a pod of transient orcas put on a dramatic show on Jan. 19 in the Ucluelet Harbour. (Nora O’Malley photo)
UPDATED WITH VIDEO: Vancouver Island paddle boarder surrounded by pod of orcas

“My whole body is still shaking. I don’t even know what to do with this energy.”

Toronto’s Mass Vaccination Clinic is shown on Sunday January 17, 2021. THE CANADIAN PRESS/Frank Gunn
Canadian malls, conference centres, hotels offer up space for COVID vaccination centres

Commercial real estate association REALPAC said that a similar initiative was seeing success in the U.K.

Most Read