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 Crown corporation said it is trying to secure external financing to fund the remaining cost of the project which they hope will start shipping oil in the first quarter of 2024.
Prime Minister Justin Trudeau's government bought the pipeline from Kinder Morgan Inc. in 2018 for $4.5 billion to ensure the expansion got built, drawing sharp criticism from environmental groups.
According to an Angus Reid poll from 2018, 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%).
However, in February 2022, Ottawa said it could no longer subsidize TMX. Its new price tag skyrocketed to $21.4 billion, up from $12.6 billion in 2020 and $7.4 billion in 2017.
Deputy Prime Minister Chrystia Freeland said TMX would need third-party funding to complete the project through banks or public debt markets. She reiterated the federal government plans to sell the pipeline once it is complete.
"As we committed to Canadians last year, no additional public money will be invested in this project as construction is completed," said Freeland.
"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 590,000 barrel-per-day pipeline expansion will nearly triple the flow of barrels and open access to Asian markets. However, regulatory delays and hefty budget overruns have beset it on top of the environmental opposition.
Despite the escalating costs and pushback on Indigenous land claims among some reserves, several Indigenous-led initiatives like Nesika Services, a non-profit organization working to help Indigenous communities along the pipeline's route, hope to acquire a stake in Trans Mountain.
"It means the entire pie for the project is smaller," said Nesika Services executive director Paul Poscente. "But we've done some modelling based on the publicly available information, and it's 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."
Freeland concurred it is a "serious and necessary project" in the national interest and remains financially viable.
The government has since engaged BMO Capital Markets and TD Securities to advise on the finances of the project.
On Friday, the banks wrote the federal government to relay that TMX is "commercially viable" and is expected to generate earnings before interest, taxes, depreciation and amortization of more than $2.4 billion annually.
While BMO declined to comment, TD did not immediately respond to a request for comment from Reuters.
Eleven oil shippers, including Canadian Natural Resources Ltd and MEG Energy, committed to long-term contracts constituting 80% of the pipeline's capacity.
TMX accounted for high global inflation and supply chain issues, floods in British Columbia, unexpected significant archaeological discoveries and challenging terrain for the cost increases in recent years.
The corporation added the current cost estimate excludes reserves for "extraordinary risks" and could once again change.
"As with all projects of this size, risks to the final costs and schedule will remain as work is completed through 2023," said TMX in a statement.