The federal government said on Friday it will halt any further public funding for the Trans Mountain oil pipeline expansion after the government-owned company behind the project said costs had surged 70 percent to $21.4 billion, up from an earlier estimate of $12.6 billion.
Trans Mountain Corp (TMC), a federal Crown corporation, will also be delaying the finish date for the expansion of the pipeline by a further nine months, dealing yet another blow to a project beset by regulatory delays and opposition, reports the Vancouver Sun.
After this latest cost overrun, Finance Minister Chrystia Freeland told TMC to secure the necessary financing from public debt markets or financial institutions.
“I want to assure Canadians that there will be no additional public money invested in TMC,” Freeland added, according to Reuters.
To that end, the government has engaged BMO Capital Markets and TD Securities to provide financial advice to TMC. Both financial institutions have confirmed the project is still commercially viable and public financing for the project is a feasible option.
TMC now expects to finish the expansion of the pipeline in the third quarter of 2023, when it will nearly triple the capacity of the pipeline running from Alberta to the Pacific Coast to 890,000 barrels per day.
They blame both the impact of the COVID-19 pandemic and the extreme weather experienced in British Columbia in November of 2021 when the Trans Mountain pipeline was temporarily shut down for the higher costs.
One group that has stood solidly behind the pipeline expansion is Canada’s oil and gas industry – claiming it is essential to Canada’s economy, despite the newly disclosed budget overruns, reports CTV News Canada.
“We remain fully supportive of this world-class infrastructure project which is vital to Canada’s long-term economic success and energy security,” said Suncor Energy Inc. chief executive Mark Little, in a statement released just hours after federal Crown corporation Trans Mountain Corp. released its new cost projections for the project.
“While no one wants to see cost increases, they are often a fact of life with projects of this size and in this case were largely beyond Trans Mountain’s control,” said Alex Pourbaix, CEO of Cenovus Energy Inc., in a separate statement.
TMC said Chief Executive Ian Anderson will retire from the company and its board, effective April 1. He said the progress made over the two years was “remarkable” considering the global pandemic, wildfires, and flooding in British Columbia.
“This project was crazy from a climate perspective when it was supposed to cost C$7.4 billion, but at C$21.4 billion and rising it is now economic madness,” said Keith Stewart, a strategist for Greenpeace Canada. “It’s time to cut our losses on this white elephant.”
