Canada's budget watchdog says building the federally owned Trans Mountain pipeline expansion is no longer a profitable investment after costs ballooned to more than $21 billion.
"Trans Mountain no longer continues to be a profitable undertaking," the Parliamentary Budget Officer (PBO) wrote in a report released Wednesday.
According to the government-owned pipeline corporation, the projected cost of twinning the Trans Mountain pipeline has nearly tripled because of natural disasters, environmental protection measures and rising debt payments.
The latest figures show TMX's initial $7.4-billion price tag — projected when the federal government purchased the project in 2018 — has since ballooned to $21.4 billion.
To arrive at its findings, the PBO performed a financial analysis which found the purchase, building and operation of Trans Mountain and its expansion will result in a "net loss" of about $600 million for the Canadian government.
After the report dropped, environmental groups were quick to call for the government to cancel construction of the pipeline from Alberta to British Columbia and invest any remaining taxpayer dollars into developing sustainable energy projects.
"As the costs of the project keep ballooning, the government should cut its losses and cancel construction of the expansion pipeline — before even more of our dollars are wasted," said Environmental Defence's Julia Levin.
Given the loss that's expected, the budget watchdog examined the cost of cancelling the project. It estimates the government would need to write off $14.4 billion worth of assets.
In response, a spokesperson for the finance minister said that independent analyses from BMO Capital Markets and TD Securities have confirmed that the project remains commercially viable at the new cost.
"The Trans Mountain expansion project is in the national interest and will make Canada and the Canadian economy more sovereign and more resilient," said Adrienne Vaupshas, press secretary for Finance Minister Chrystia Freeland.
Vaupshas said the government still intends to sell the pipeline after consultation with Indigenous communities and the pipeline is derisked.
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Conservatives still back expansion plan
Greg McLean, the Conservative natural resources critic, said with the world trying wean itself off Russian oil, and the need for new sources of oil to meet global demand, TMX is more crucial than ever.
Despite the negative financial assessment of the pipeline, Conservatives expressed support for the government moving ahead with construction.
"This is a huge important project for Canada. It's infrastructure that's required, not just in Canada but the world requires this resource right now, to offset some of the oil that is no longer on the market," McLean said. "We still need this built."
The Parliamentary Budget Officer, Yves Giroux, said in an interview that his report isn't perfect and he admits it doesn't consider a range of factors such as how much money oil producers lose due to lack of pipeline access.
"[The report] does not take into consideration the broader benefits to the country," he said.
The Bloc Québécois believe the pipeline's expansion should never have happened and called Trans Mountain a government fossil fuel subsidy.
Bloc Leader Yves-François Blanchet said the pipeline was bought for "political reasons" and will probably be sold for less than the government paid for it.
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NDP critics Laurel Collins and Charlie Angus in a statement called Wednesday's findings "a lose-lose for Canadians" and said that "people are right to be upset."
The government purchased the Trans Mountain expansion from Kinder Morgan in 2018 after the Texas-based company suspended construction when uncertainties surrounding court challenges and opposition from the British Columbia government escalated.
Once the government assumed ownership and legal political hurdles were cleared, construction resumed. It's not expected to start shipping oil until June 30, 2023, nine months behind the revised schedule. The pipeline was supposed to be finished by Sept. 30, 2022.
The pipeline won't start shipping oil until the Canadian Energy Regulator gives it final permission to operate. Trans Mountain said the pipeline won't see its first revenue until Sept. 30, 2023.
When it's finished, the expansion will increase the pipeline's output from about 300,000 to 890,000 barrels a day.