The Institute for Energy Economics and Financial Analysis (IEEFA) has just published a report that calls into question the financial viability of the Trans Mountain Expansion (TMX) project, exposing its burden on Canada’s public accounts.
Through an exhaustive analysis, the entity revealed that the total cost to the federal government amounts to more than $40 billion, much more than had been officially acknowledged.
The cost of the Trans Mountain pipeline expansion
The Canadian government acquired the TMX project in 2018, after Kinder Morgan decided to abandon it due to financial and regulatory risks. Since then, construction costs skyrocketed 584% over the original budget, reaching figures exceeding $35.6 billion in direct financing.
Added to this are guarantees and indirect subsidies that place the public effort above 40 billion.
IEEFA also warns that nearly 70% of this investment cannot be recovered through the planned maritime tolls. The tariff structure faces objections from the carriers, which complicates the recovery of public funds.
This scenario has set off alarm bells among experts and fiscal control agencies. In its report, the IEEFA suggests that any new pipeline project that requires state support should be evaluated with budgetary rigor. In addition, it emphasizes that the Asian market shows signs of weakening oil demand, which aggravates the financial risk of similar initiatives.
As if that were not enough, the growing trade tension between Canada and the United States has given rise to proposals for new pipelines to connect with refineries in the central and eastern parts of the country. However, the TMX precedent raises serious questions about the sustainability of continuing to commit public resources to this type of energy infrastructure.
The impact on Canadian taxpayers could be considerable. More than $25 billion would no longer be recoverable and the remainder hangs in the balance in the face of rate-setting problems. The IEEFA report concludes that this case should be taken as a stark fiscal warning.
Source: IEEFA
Photo: shutterstock
