On Friday, February 7, 2020, the CEO of Trans Mountain pipeline, Ian Anderson, announced that the costs of building the pipeline expansion have “soared from an initial estimate of $7.4 billion to $12.6 billion.”
That seemingly straight-forward statement is replete with misconceptions.For one thing, the pipeline’s “initial estimate” was not $7.4 billion. In the National Energy Board hearings, Kinder Morgan estimated the cost of building the pipeline expansion at $5.4 billion. So the real leap in costs is from $5.4 to $12.6 billion.
For another thing that new figure of $12.6 billion isn’t the full cost to Canadians. To get that you have to add in the $4.4 billion of taxpayers money spent on buying the pipeline in the first place. So the real cost to Canadians is $12.6 billion plus $4.4 billion for a whopping $16 billion.
For a third thing, we paid $4.4 billion for the existing 67-year-old pipeline as the cost of getting to zero to build the expansion. But the value of the pipeline is now likely far below what we paid. In its June 2019 report, the Parliamentary Budget Office estimated that the value of the pipeline, when we agreed to buy it, was $2.8 billion.
On Friday, February 7, 2020, the CEO of Trans Mountain pipeline, Ian Anderson, announced that the costs of building the pipeline expansion have “soared from an initial estimate of $7.4 billion to $12.6 billion.”
‘Buying an old and leaky pipeline in order to take over a private sector project that had hit the rocks was hardly smart. But overpaying for it to the extent that the Liberals did was an act of political desperation,’ writes @ElizabethMay
Second, it took the money raised for the equity required by Canadian banks to secure their investment, $1.5 billion, and used it to pay down debt held by the parent company.
Instead of heeding those signs, the Liberals paid a price exceeding the old pipeline’s value in order to take on a project that Kinder Morgan had clearly decided would not fly.
The Liberals wanted more than anything to prove they could get the pipeline built. One can only imagine the glee of the Texas oil men when they realized they could sell the old pipeline for nearly twice what it was worth.
When Kinder Morgan kidnapped its own project to demand a guarantee — or else — they were not looking for ransom. They wanted to shoot the hostage. Being able to blame a third party when they abandoned the project could avoid penalties under long-term contracts Kinder Morgan had signed.
But the reckless behaviour with public funds does not end with the announcement in May 2018 that the Government of Canada was buying the pipeline for $4.4 billion.
On Aug. 30, 2018, the Federal Court of Appeal struck down the pipeline permits ruling that not only did the Liberal government violate Indigenous rights leading to the quashing of the permit, Kinder Morgan itself violated indigenous rights. In other words, the vendor contributed to the devaluing of the asset, and we should never have paid $4.4 billion without re-negotiating the price.
Yet, without any explanation, Finance Minister Bill Morneau cut a cheque for $4.4 billion to Kinder Morgan the very next day, Aug. 31, with no closing date for purchase and sale of the pipeline.
We overpaid not once, but twice.
What is most galling to me is that our public funds are being used to brow-beat First Nations along the route into signing benefit agreements. One elected council member of a First Nation that is fighting the project told me recently that they are being “bombarded” by the now government-owned Trans Mountain with offers of millions of dollars to agree to the project.
Those are public dollars being used to coerce acceptance of a project most Indigenous nations do not want to accept. And yet every time a First Nation accepts a benefit agreement, politicians celebrate it claiming Indigenous people want the project. That is the case in some instances, but it seems like the latest form of oppression and colonialism: Refuse to listen to Indigenous objections, convince people the project is inevitable and use our money to bribe and coerce.
As Chief Allan Adam of the Fort Chipewyan Nation explained his decision to agree to the Teck Frontier mine:
“We’ve been fighting industry for how long? And we’ve spent well over $1 million in court fees with nothing tangible in return… So what am I supposed to do? Am I supposed to continue on fighting as a chief while others sit on the fence and say nothing and do nothing?
“I don’t want to do this. I didn’t want to make this decision but I had no choice. I had to make sure my nation was protected, and that our people are going to benefit from it for the future.”
Now, we have federal dollars flowing into a Crown Corporation. Anderson boasts that he runs it as though it were in the private sector. Any notion that concern for Indigenous rights will be greater now that the people of Canada own the pipeline can be set aside as fanciful.
The Trans Mountain pipeline remains a project outside market forces. The arguments for it rest on misconceptions and propaganda. It will not get a higher price at “tidewater.” Bitumen is inevitably expensive to produce with low value in the marketplace. As the carbon bubble bursts, these expensive “assets” will be the first to be stranded — uneconomical and unusable. Pursuing it blows our Paris commitments while squandering public funds.
It is not too late to ask the question: what could be done with the further $13 billion? Could we not do more for the Alberta economy in cleaning up toxic abandoned wells and mines, as well as tailings ponds in northern Alberta? Could we not fund green and renewable energy? Ensure clean drinking water for every First Nation? Ensure we have an electricity grid to move 100% renewable energy from province to province?
How much is too much? In my view, a single penny more is too much.