Canada’s costly Trans Mountain pipeline expansion (TMX) was “worth the cost,” claimed the chief executive of Trans Mountain Corporation, a publicly-traded subsidiary. 

CEO Mark Maki appeared Monday before the Commons Natural Resources Committee, where he justified the pipeline’s inflated $34 billion price tag. He told MPs its performed “very well” since completion on May 1.

The expansion project was plagued by delays, regulatory hurdles and soaring construction costs since 2019, when the work first began.

TMX, which carries crude from Alberta to the B.C. coast, tripled the pipeline’s capacity by adding an additional 590,000 barrels per day of shipping capability.

Maki notes TMX has overcome the discount importers have historically paid for Canadian crude by $10 per barrel in under half a year of operations. 

The expansion will contribute an estimated $26.3 billion to Canada's GDP from 2018 to 2030, according to an economic analysis conducted by the corporation. 

However, with the Canada Energy Regulator uncertain whether Trans Mountain Corporation can charge higher tolls to shippers, the pipeline's long-term revenues remain in flux.

“Having the rate case behind you will help with the certainty of what the revenue in the system is going to be,” Maki said. It could be several years before the toll matter is settled, he warned.

Meanwhile, NDP MP Charlie Angus rejected Maki’s rosy TMX assessment before the natural resources committee. He took aim at the chief executive for selling Canadian crude at a loss to attract customers.

“If [the pipeline] is supposed to be so profitable and we’re supposed to be getting our money back, why are we (losing money) on every barrel shipped?” Angus asked. “That just doesn’t add up.”

Angus also called out the Crown corporation for using a subsidiary “shell company” to hide the project’s losses.

“You’ve got a company that’s set up that exists to hold debt with no employees, that looks to me like a shell company,” he told Maki.

“A shell company’s not all that difficult to set up if you’re going to keep all the debt off your books so then you can come to us at a future meeting and say … we’re going to get all our money back,” said Angus.

TMX is Canada’s first new pipeline to the coast approved in over four decades.

Although critics and financial analysts believe the pipeline will be sold at a loss to taxpayers, Maki believes patience is key in finding the right buyer. 

“Let's go to my conviction about this,” he said. “I think if we are disciplined sellers … we can get our capital back.”

TMX’s costs have swelled more than sixfold since it was first proposed in 2013, at an estimated cost of $5.4 billion.

Maki says the ball is in Finance Canada’s court to sell the pipeline expansion for a fair return. The Trudeau government paid Kinder Morgan $4.5 billion for the project in 2018, which has been mired by costly delays worth billions of dollars.

A mid-2022 report by the Budget Officer estimates the pipeline expansion is on track to lose $600 million, based on an estimated cost of $21.4 billion.

 

Go Ad Free

The CEO told committee members the financial picture for TMX has drastically changed since the pipeline became operational on May 1.

“In my time in the pipeline sector, there’s one thing that’s really stuck with me,” Maki testified. “And that is the importance of being both a disciplined buyer and a disciplined seller.”

“When the time is right, Canada can sell [the pipeline] and the outcome that they should expect is the recovery of the taxpayers’ capital.”

The chief executive clarified the feds should avoid rushing the pipeline expansion’s final sale.

“What the government needs to be here is a disciplined seller. Full stop,” Maki testified. “And a disciplined seller does the following things — you do not act in a hurry, you take your time.”

He claims interested “capital markets” need clarity on Indigenous participation before they purchase the pipeline from taxpayers.

The federal government is reportedly still consulting with First Nations and Métis governments on the prospects of partial Indigenous ownership.

A spokesperson for Finance Canada, who will oversee its sale, contends a divestment process will be launched “in due course.”

Bloomberg earlier reported the sale of TMX will likely be delayed until after the 2025 election.