Morningstar: $20 Billion Loss to Taxpayers Due to Trans Mountain Pipeline

Morningstar Inc. says that Canadian taxpayers could lose $20 billion on the government-owned Trans Mountain Pipeline since the costs to expand it has increased substantially.

According to Morningstar analyst Stephen Ellis, Trudeau’s government would likely receive less than $15 billion for Trans Mountain when it sells the company.

To enhance the system’s capacity to 890,000 barrels per day, the federal government paid $4.5 billion to Kinder Morgan Inc. in 2018. The original budget of $18 billion has risen to an estimated $31 billion due to unforeseen issues, such as difficulties obtaining materials.

“At a $31 billion investment cost, no way the pipeline is going to recover costs,” said Ellis.

Canada’s Trans Mountain pipeline is the only one of its kind in the country, transporting oil from Alberta to the coast near Vancouver, British Columbia. The government decided to purchase it because they felt the expansion would be financially beneficial, providing oil producers with the chance to export their products to countries other than the United States.

“When complete, the Trans Mountain expansion will ensure Canada receives fair market value for our resources as we work to achieve net-zero by 2050,” wrote Adrienne Vaupshas, a spokesperson for Finance Minister Chrystia Freeland, in an email.

Trans Mountain is facing intense competition from Enbridge Inc.’s significantly more extensive pipeline, which transports Canadian crude to the Gulf Coast of the United States. According to Ellis, this will keep the profits for the pipeline “very low” because Trans Mountain will be unable to charge as much to the 20% of oil shippers without contracts.

The wisest alternative for the government would be to sell Trans Mountain to a group of corporations that could expand their existing oil infrastructure, such as storage tanks and other pipelines that connect to it.

Trans Mountain is in the “national interest,” according to the government, since it provides access to Asian markets. Without it, Canada’s oil exports would have only one customer: the United States.

“TD Securities and BMO Capital Markets have provided a public value analysis of the project, which confirms that third-party financing is a feasible option to fund the completion of the project and believe that both strategic and financial investors would participate in a divestment process” once the project is complete, added Vaupshas.

Original source material for this article taken from here