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Trans Mountain pipeline gets extra government support as costs balloon
02/06/23
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Jun 1, 2023
Costs jumped 44 per cent in March
The Trans Mountain pipeline received additional support from the Canadian government after the cost to expand the controversial Alberta-to-British Columbia oil conduit jumped 44 per cent in March.
The government, which guaranteed loans last year that allowed the project to secure $10 billion of private financing, has since provided an additional $2.5 to $3 billion for the Trans Mountain expansion in two separate backstops, according to information posted on the Export Development Canada website.
One guarantee was issued in March and the other in May. Last year’s loan guarantees were extended after the costs of the project increased 70 per cent and Finance Minister Chrystia Freeland said that no additional public money would be invested in Trans Mountain.
Trans Mountain has faced repeated cost increases and regulatory delays since the expansion project was first proposed a decade ago. In March, the company announced that the cost of expanding the pipeline system’s capacity to 890,000 barrels a day rose to $30.9 billion — the latest in a series of increases over recent years — because of factors including inflation, supply chain challenges, floods in British Columbia, unexpected archaeological discoveries and challenging terrain.
Prime Minister Justin Trudeau decided to nationalize the system in 2018, paying Kinder Morgan Inc. $4.5 billion after the midstream company threatened to cancel the expansion amid fierce local opposition and rising costs.
Last June, Canada’s budget watchdog said the line would be a “net loss” for taxpayers. The expansion project has incurred $21.5 billion in construction capital spending costs plus $2.8 billion in financial carrying costs since project inception, the company said in its first-quarter financial statement.
“To meet obligations as they become due, TMC will require additional funding through external financing,” the company said. External financing is expected to be obtained in a “timely manner” and on satisfactory terms, but “there is no assurance that external financing will be obtained.”
[Top photo:Construction crew works on pipe during construction on the Trans Mountain Pipleline expansion project at Bridal Falls, between Hope and Chilliack in the Fraser Valley. PHOTO BY TRANS MOUNTAIN CORP.]
