Feds brace for financial losses from expensive Trans Mountain pipeline project

The federal government now stands to lose money from its investment in the Trans Mountain pipeline, according to a new report, but Canada's oil industry says the war in Ukraine has made the massively expensive infrastructure project more important than ever.

The latest analysis by the Parliamentary Budget Officer, released Wednesday, shows the net present value of the pipeline is negative $600 million, leaving it worth about $1.2 billion less than the PBO'S estimate in December 2020.

The new financial analysis takes into account new developments such as the budget overruns disclosed in February that peg the current cost of the Trans Mountain expansion at $21.4 billion, a 70-per-cent increase from an earlier estimate of $12.6 billion.

The new PBO report also reflects the fact that the pipeline's projected completion date has been pushed back to the third quarter of 2023.

“We heard that the costs had gone up months ago. We knew this was really bad news and would have a big impact on the value for the federal government. This ( Wednesday's report) is just kind of the math confirming that,” said Richard Masson, executive fellow with the University of Calgary's School of Public Policy.

Federal Crown corporation Trans Mountain Corp. has blamed the ballooning costs since it took over the project on a variety of factors, including the COVID-19 pandemic and the effects of the November 2021 flooding in British Columbia.

On Wednesday, Adrienne Vaupshas — press secretary for federal Finance Minister Chrystia Freeland — said independent analyses from both BMO Capital Markets and TD Securities have found that the pipeline project remains commercially viable.

The Canadian Association of Petroleum Producers, an industry lobby group, said the current global energy crisis that has been exacerbated by Russia's invasion of Ukraine proves the importance of the Trans Mountain project, as the pipeline will help to link Canada's oil to its allies and trading partners around the world.

“In a world that is running short on energy ... the Trans Mountain expansion is more important now,” said Lisa Baiton, CAPP president and chief executive, in a statement.