Federal deficit expected to swell after pipeline buy

CALGARY A study by a sustainable energy research group predicts the federal government’s purchase of the Trans Mountain pipeline will add significantly to the deficit.

The study released Tuesday by the Institute for Energy Economics and Financial Analysis said buying the Kinder Morgan Canada assets, plus planning and construction costs, will put $6.5 billion in unplanned spending on the books for the 2018-19 fiscal year.

Study authors Tom Sanzillo and Kathy Hipple said until Ottawa clarifies how it plans to account for the spending, there’s a risk the purchase could add 36 per cent to the projected $18.1-billion deficit.

“The principal budgetary action here looks to me like an unplanned expenditure for 2019,” said Sanzillo, director of finance for the institute in an interview.

Sanzillo, a former first deputy comptroller of New York State, said the government does have other ways to account for the funds, but it shouldn’t be borrowing for a speculative asset.

Canada’s ability to sell the pipeline, at least without a loss, is in doubt because it has already signalled it is a reluctant buyer and because of the growth prospects of the oilsands in the latter half of the next decade, the study said.

The authors call on the government to do more to disclose how it arrived at the purchase price, what cost benefits were weighed, what potential costs the public is exposed to, and whether Kinder Morgan attempted to sell the pipeline elsewhere.

The government agreed to buy the pipeline, expansion project and terminals from Kinder Morgan Canada for $4.5 billion in April.