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Trans Mountain expansion could never return the expected $26.1 billion spent by taxpayers

March 28, 2022
Tom Sanzillo and Omar Mawji
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Key Findings

However, additional cost overruns cannot be financed without government backing.

The Canadian government, which owns the project, would not be able to generate an adequate profit for investors because the tolls it would charge for the completed project’s use cannot be raised high enough to support new debt on the pipeline plus operational costs.

Between the $4.7 billion purchase price and the reported $12.6 billion construction costs, Canadian taxpayers have already funded $17.3 billion on the project. These funds will never be recovered, and guaranteeing another $8.8 billion to complete the project will simply be throwing good money after bad, for a total taxpayer loss of $26.1 billion.

Executive Summary

The report finds: 

  • Between the $4.7 billion purchase price and the reported $12.6 billion construction costs, Canadian taxpayers have already funded $17.3 billion on the project.
  • To complete the project, another estimated $8.8 billion will be needed. 
  • Under typical market conditions, the pipeline will require a 100% increase in tolling revenues to make a profit. If this occurred, however, it would drive up the market price of Canadian oil to uncompetitive levels. 
  • The government’s claim that it will use private dollars to finance the $8.8 billion is unsupported. 
  • Given the project’s high financial risk, the government will not be able to obtain private investment unless it guarantees the $8.8 billion. 
  • The government would also have to write off or subordinate all or part of its interest in the $17.3 billion that reportedly has already been spent. 
  • Even if the Canadian government finds a buyer for the pipeline, under current market conditions, it will not receive a price that covers the $26.1 billion project costs, and any additional costs to come. 
  • The $26.1 billion could have been spent instead on renewable energy development. It could have funded every major wind and solar project in Canada from 2019-2021 five times over, adding 15 gigawatts to Canada’s power supply—equivalent to the total energy capacity added from wind and solar projects built in Canada over the last decade.

Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures. He also examines such areas as community and shareholder activism, institutional investment, public subsidies and Puerto Rico’s energy economics.

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Omar Mawji

Omar Mawji is Energy Finance Analyst, Canada. At IEEFA, Omar focuses on oil & gas upstream, midstream, and downstream companies and projects in Canada. His work pays particular attention to how oil & gas companies adapt to a changing low-carbon energy future.

Omar has spent his entire career in the investment management industry specializing in energy and technology investments. He has experience in oil & gas M&A, corporate finance, strategy, and distressed debt.

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