Canada’s Trans Mountain pipeline not profitable – budget officer

June 22 (Reuters) – Canada’s government-owned Trans Mountain pipeline is no longer profitable after cost overruns and delays to its expansion project, the country’s Parliamentary Budget Officer (PBO) said on Wednesday. .

A report by Parliamentary Budget Officer Yves Giroux indicates that the pipeline has a net present value of minus C$600 million (negative $463.03 million), based on the difference between Trans Mountain’s cash flow and its purchase price of C$4.4 billion.

The report by the Parliamentary Budget Officer, who provides independent advice to Parliament, is a blow to Prime Minister Justin Trudeau, whose government bought the pipeline in 2018 to ensure the expansion continues despite protests. The expansion of other pipelines has since facilitated the flow of crude oil, one of Canada’s most valuable exports.

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Trudeau faces criticism that the pipeline expansion is contrary to Canada’s goals to reduce greenhouse gas emissions.

Further delays and increased construction costs would further reduce Trans Mountain’s value, the Parliamentary Budget Officer said. If Ottawa cancels the expansion, the government faces a C$14.4 billion write-off, the Parliamentary Budget Officer said.

The cancellation scenario is hypothetical, and the government has no such plans, a government source said. The source added that the PBO’s analysis of unprofitability does not take into account other economic benefits such as jobs.

The Trudeau government has long said it will sell the pipeline once the expansion is nearly complete.

The pipeline transports up to 300,000 barrels of oil a day from near Edmonton, Alberta to the Pacific coast in British Columbia, and the expansion would nearly triple its capacity.

Industry and environmental advocates have starkly different views on the pipeline.

The expansion is essential for the Canadian oil industry, ensuring its long-term stability and providing more diversified market access, said Reg Curren, a spokesman for producer Cenovus Energy (CVE.TO).

The government should call off the expansion and cut its losses, said Julia Levin, national climate program manager at Environmental Defense, an environmental advocacy group.

“Continuing to pump public funds into the project would be another broken promise from a government that is committed to ending fossil fuel subsidies,” she said.

The cost of Trans Mountain’s expansion has risen from C$12.6 billion to C$21.4 billion, and its in-service date has been delayed by nine months to the end of 2023, a said Trans Mountain Corp in February.

($1 = 1.2958 Canadian dollars)

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Reporting by Rod Nickel and Ismail Shakil; additional reporting by Steve Scherer in Ottawa; Editing by Chizu Nomiyama, Nick Zieminski and Leslie Adler

Our standards: The Thomson Reuters Trust Principles.

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