Trudeau paid ‘sticker worth’ for Trans Mountain pipeline, finances watchdog says

Canada’s authorities bought Kinder Morgan Inc.’s Trans Mountain pipeline on the increased vary of its valuation, in accordance with the nation’s finances watchdog.

The Parliamentary Price range Workplace, in a report revealed Thursday in Ottawa, estimated that the 710-mile pipeline and proposed enlargement had a mixed worth of between $3.6 billion and $4.6 billion. It warned, nevertheless, that regulatory delays may additional erode the worth of the undertaking.

The current Kinder Morgan pipeline — not the controversial expansion project — is valued between $1.8 billion and $2.8 billion, according to the Parliamentary Budget Office.
The present Kinder Morgan pipeline — not the controversial enlargement undertaking — is valued between $1.eight billion and $2.eight billion, in accordance with the Parliamentary Price range Workplace.  (Jonathan Hayward / THE CANADIAN PRESS file photograph)

Justin Trudeau’s authorities purchased the pipeline final yr for $4.Four billion as Kinder Morgan threatened to desert the enlargement undertaking. The acquisition worth additionally included associated belongings, like terminals, that the finances watchdog didn’t embrace in its valuation, as a result of it thought of their worth to be nearly fully tied as to whether the enlargement is accomplished or not.

“If it was a automotive, we’d say they paid sticker worth,’’ Parliamentary Price range Officer Yves Giroux mentioned. If there’s a delay that raises the fee and reduces potential revenues, he mentioned it could then be “fairly clear to us the federal government may have overpaid.’’

The watchdog estimated that baseline complete building prices for the enlargement will likely be $9.Three billion. Regulatory and political hurdles, nevertheless, damage the worth of the undertaking. A one-year delay in building completion would scale back the worth by about $700 million, the PBO initiatives.

Development Timeline

Kinder Morgan, when the sale was finalized to the federal government, estimated an in-service date of Dec. 31, 2021. However a courtroom ruling in August despatched the federal government again to the drafting board on the undertaking. The PBO used that date as its baseline, however there’s ample draw back danger to the development timeline, which means most indicators level to added prices from building, Giroux mentioned.

Canadian oil producers have been dealing with a roller-coaster of costs — the benchmark price for heavy Alberta crude plummeted late final yr. Constructing the pipeline may shrink the distinction between benchmark U.S. West Texas Intermediate costs and the decrease Canadian worth, the PBO mentioned.

A $6.50 improve within the Canadian worth would result in a 0.1 per cent improve in actual gross home product and a 0.Three per cent improve in nominal GDP, the finances watchdog estimated. That might increase GDP by $6 billion, the PBO projected.

The present pipeline — not the controversial enlargement undertaking — is valued between $1.eight billion and $2.eight billion, the PBO mentioned.

The finances watchdog was granted entry to confidential authorities monetary figures associated to the undertaking, however didn’t publish these in its evaluation, which is predicated on publicly out there numbers.

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