Feds did not account for $32 million 'Indigenous consultations' on Trans Mountain price tag: records

The $30.9 billion current estimate does not include related expenses like $32 million to address 'concerns raised by Indigenous groups regarding the Trans Mountain Expansion project,' says the March 21 memo Supplementary Estimates.

  • By Alex Dhaliwal
  • July 28, 2023
  • News Analysis
Feds did not account for $32 million 'Indigenous consultations' on Trans Mountain price tag: records
THE CANADIAN PRESS/Sean Kilpatrick and Justin Tang, Facebook/ Trans Mountain
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According to Trans Mountain Corp (TMX), the cost of the taxpayer-owned Trans Mountain pipeline expansion jumped 44% from last year's estimate ($22.35 billion) to a whopping $30.9 billion.

The corporation added the current cost estimate excludes reserves for "extraordinary risks" and could once again change.

However, records show the taxpayer-owned energy project did not account for millions of dollars in its total cost, including additional government subsidies — disputing Cabinet's claim that "no more public money will be used to complete the Trans Mountain Expansion."

According to Blacklock's Reporter, the Cabinet has yet to disclose a total figure for all expenses charged to taxpayers for the pipeline.

"We'd like to see where all the money went," Conservative MP Greg McLean told the Commons natural resources committee earlier.

"What is the limit the federal government is willing to put public funds into the project?" asked New Democrat MP Peter Julian. "Is it $20 billion? Is it $25 billion? Or is the sky the limit?"

"The Canadian approach will be to ensure that we make a profit," replied then-Finance Minister Bill Morneau. "So that's where we're at. We believe this is the right thing for us to do: deal with a political challenge."

The latest figure does not include related expenses like $32 million to address "concerns raised by Indigenous groups regarding the Trans Mountain Expansion project," said the March 21 memo Supplementary Estimates.

According to Blacklock's Reporter, the feds paid the money through five different sources: the Departments of Natural Resources, Fisheries, Transport, Environment and the Canadian Coast Guard.

"This funding is not for the Trans Mountain Expansion construction," said the memo. "This funding is to continue to deliver on the government's Indigenous accommodation commitments and to address potential impacts to Indigenous rights."

In February 2022, TMX said it would look to secure external financing to fund the remaining cost of the project, expected for completion in the first quarter of next year.

The feds have since engaged BMO Capital Markets and TD Securities to advise on the finances of the project, who wrote that the pipeline remains "commercially viable." It is expected to generate earnings before interest, taxes, depreciation and amortization of more than $2.4 billion annually.

Morneau, in 2018, nationalized the Kinder Morgan line for $4.5 billion on a promise of profitability. "We will make a profit," he testified at 2020 hearings of the Commons finance committee, reported Blacklock's Reporter.

In February 2022, Finance Minister Chrystia Freeland concurred that the pipeline expansion remains a "serious and necessary project" in the national interest.

But she committed to investing no more Canadian tax dollars into this project. "the federal government does not intend to be the long-term owner of the project, and we will launch a divestment process in due course."

"The government stands by its commitment that no more public money will be used," said a Department of Natural Resources memo

The 590,000 barrel-per-day pipeline expansion will nearly triple the barrels flowing and open access to Asian markets. However, regulatory delays and hefty budget overruns have beset it on top of the environmental opposition.

Prime Minister Justin Trudeau purchased the pipeline from Kinder Morgan Inc. in 2018 for $4.5 billion to ensure it gets built. However, its new price tag skyrocketed to $21.4 billion, up from $13.2 billion in 2020.

"The newly revised cost estimate of $30.9 billion and construction timeline of late 2023 is due to a number of factors including global inflation and supply chain pressures," said the March 21 memo.

TMX also accounted for the B.C. floods, unexpected significant archaeological discoveries and challenging terrain for the cost increases in recent years.

"TMX is very polarizing [owing to the] protection of the environment [because] pipeline integrity is always in question," said Indigenous Resource Centre President Stephen Buffalo.

"As with all projects of this size, risks to the final costs and schedule will remain as work is completed through 2023," added TMX.

In 2022, Environmental Defence, an opponent of the Trans Mountain project, called the project a "financially dangerous boondoggle" that should be halted. "Here will be no profits, only financial losses for Canadians," Julia Levin, climate program manager, said in a statement.

According to a 2018 Angus Reid poll, Ottawa's support for twinning the pipeline from Alberta's oil sands to Canada's Pacific coast risked alienating voters opposed to conventional energy infrastructure that delivered a majority mandate to the Liberal Party in 2015. 

At the time, Canadians supported the pipeline expansion (49%) more than opposed it (33%). 

Freeland concurred that while it remains a financially viable energy project, the feds intend to sell it once completed.

In recent years, some Indigenous groups have been preparing to make bids on the energy infrastructure project despite the project's ballooning price tag.

"It means the entire pie for the project is smaller," said Paul Poscente, Executive Director of Nesika Services. "We've done some modelling based on the publicly available information, and it's absolutely still viable."

"We believe Canada can sell a portion of this pipeline to Indigenous communities commercially. We have been urging Canada to start a negotiation."

Project Reconciliation managing director Stephen Mason also said his group isn't going away.

The feds have indicated it is open to the idea of Indigenous ownership. However, they would only sell the pipeline after it is certain the project will be completed.

Eleven oil shippers, including Canadian Natural Resources Ltd and MEG Energy, have committed to long-term contracts with the project, constituting 80% of the pipeline's capacity.

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