The federal government has approved a new, approximately $10-billion loan guarantee for the Trans Mountain pipeline expansion, a move it says is common practice and does not reflect any additional public funding for the high-profile, over-budget oil pipeline.
The Trans Mountain pipeline was bought by the federal government in 2018 for $4.5 billion after previous owner Kinder Morgan Canada Inc. threatened to scrap the pipeline's planned expansion project in the face of environmentalist opposition.
The construction project – which will essentially twin the existing pipeline, raising daily output to 890,000 barrels – is now 50 per cent complete. However, in February, Trans Mountain Corp. revealed that the project’s price tag has ballooned to $21.4 billion, up from an earlier estimate of $12.6 billion.
At that time, Finance Minister Chrystia Freeland said that there would be no additional public funding for the pipeline. She said Trans Mountain, a Crown corporation, would need to secure third-party funding to complete the project, either through banks or public debt markets.
News of the $10-billion loan guarantee, which was approved by cabinet on April 29 through the Canada Account at Crown corporation Export Development Canada, has been criticized by environmental groups and opposition politicians who see it as Freeland going back on her word.
“This is a huge new subsidy from a government that promised voters last fall that it would eliminate fossil fuel subsidies,” said Julia Levin of Environmental Defence, adding critics have suggested that Trans Mountain's skyrocketing price tag means the project is no longer economical. “It also comes just a few months after Minister Freeland told Canadians that there would be no more public spending on TMX.”
“It was clear from the get-go they're going to pay whatever it costs to get TMX through,'' said NDP Charlie Angus.
But on Wednesday, the Department of Finance issued a statement saying that the federal government has not spent any money to put the new loan guarantee in place.
The statement said Trans Mountain has secured up to $10 billion in third-party financing for construction costs from a group of Canadian financial institutions, and the government is providing a loan guarantee on behalf of the corporation as part of that process.
“This is a common practice which puts in place an insurance policy for the institutions that have invested in the project it does not reflect any new public spending,” the statement said.
The government said there have been no changes to the cost estimate outlined in February and the estimated 2023 completion date for the pipeline project remains in place.
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