Cost to twin pipeline $1.9 Billion higher
U.S. filing says project could take year longer
OTTAWA • Kinder Morgan Canada says expanding the Trans Mountain pipeline could cost the federal government as much as $1.9 billion more than the company’s original construction estimate and could take 12 months longer to complete.
The figures are included in documents the company filed Tuesday with the U.S. Securities and Exchange Commission related to its plan to sell the pipeline to the Canadian government for $4.5 billion.
The sales price does not include how much more Canadians will pay to finish twinning the pipeline between Alberta and British Columbia. Finance Minister Bill Morneau won’t say how much Ottawa expects to spend on construction because he fears that would affect negotiations with construction contractors that are now underway.
The $7.4-billion construction cost Kinder Morgan reported in February 2017 hasn’t been updated since the project hit political snags, construction delays and opposition in B.C.
The first update of any kind came Tuesday when the company filed required documents as it gears up for a shareholder vote on the sale in Calgary on Aug. 30.
In those documents, Kinder Morgan looks at a few different construction-cost scenarios as part of a fairness evaluation of the sales offer to the Canadian government. The most expensive scenario pegs construction costs at $9.3 billion with the project taking until December 2021 to complete — a full year after the current timetable of December 2020.
The government was quick to point out that the figure is not an official cost forecast. An official in Morneau’s department, speaking on background because he was not authorized to speak publicly, said the numbers do not specifically reflect the government’s expectation of what the final project cost will be.
However Robyn Allan, an independent economist and former CEO of the Insurance Corporation of British Columbia, said Kinder Morgan wouldn’t evaluate the fairness of the sale based on numbers that have no bearing on reality.
Allan, who said she has expertise on a number of multibillion-dollar infrastructure projects, believes that in the end, $9.3 billion will seem like a steal compared to the final price tag.
“This is the least it’s going to cost,” Allan said. She said the biggest frustration is the lack of information coming from the federal government about the planned sale.
Prime Minister Justin Trudeau has staked the legacy of his government in part on being able to protect the environment without impeding Canada’s resourcebased economy, and building this particular pipeline has become the test of whether that’s possible. The government stepped in to buy the pipeline in May after the company’s investors became concerned that political opposition in B.C. would mean it never got built.
Although Canada approved construction in 2016, B.C. Premier John Horgan is trying to obtain judicial authority to restrict what can flow in the pipeline, and that uncertainty led Kinder Morgan to consider shelving it.
Allan said the only detailed information Canadians have about the particulars of the sale is due to investor laws in the United States and Canada that require Kinder Morgan to file documents outlining the specifics. She said that because taxpayers are now the shareholders of the project, they deserve the same level of disclosure from Ottawa,
THE MOST EXPENSIVE SCENARIO PEGS CONSTRUCTION COSTS AT $9.3 BILLION.
and they aren’t getting it.
B.C. New Democrat MP Nathan Cullen was equally frustrated, going so far as to call the government dishonest about the deal.
“It’s really, really frustrating that at their core has been a murky and dishonest transaction with so much money involved,” he said. “I worry about what we’re going to get stuck with.”
Morneau’s official said that as soon as construction contracts are in place, the government will release an official cost update, which he said should happen no later than next winter.
The initial goal to finalize the sale in August has been delayed until September or October pending the Aug. 30 shareholder vote results.