Nia Williams

CALGARY (Reuters) – Canada announced Friday that it would stop any public funding for Trans Mountain’s oil pipeline expansion. The government-owned company responsible said the costs have risen 70% to C$21.4 trillion ($16.8billion).

Trans Mountain Corp. (TMC), also delayed completion of expansion by nine more months. This is yet another setback for a project that has been hampered by opposition and regulatory delays.

TMC has been informed by the government that the cost of the project is increasing. Finance Minister Chrystia Freiland stated that the TMC must secure financing from financial institutions or public debt markets.

Freeland stated, “I want Canadians to be assured that no more public money will be invested in TMC.”

Freeland stated that the government had engaged BMO Capital Markets (TD Securities) to give financial advice. The two advisors proved the project was still viable commercially and could be funded by public funding. Shipper commitments of 20 years are the backbone of the expansion project.

TMC put the increase in cost attributable to the COVID-19 epidemic and severe weather in British Columbia. The latter caused temporary disruptions in Trans Mountain’s flow in November.

The expansion is expected to be completed in the third quarter, 2023. This will bring the total capacity of the pipeline that runs from Alberta to the Pacific Coast up to nearly 890,000. barrels daily. Canada’s oil companies, keen to increase their crude exports, would appreciate this boost.

The project faced many challenges from the beginning, such as opposition from environmentalists and indigenous peoples. It was bought by the Canadian government for C$4.5billion in 2018.

“While like everyone we are disappointed… we remain fully supportive of this world-class infrastructure project which is vital to Canada’s long-term economic success and energy security,” said Mark Little, chief executive of Suncor Energy (NYSE:), one of Canada’s largest oil companies and a shipper on the line.

In February 2020, the cost estimate was C$12.6 trillion. It was C$7.4B in 2017. This new cost estimate covers all enhancements, modifications, delays, and financing.

Canadian officials do not intend to remain the owner for the long term of the pipeline. They expect to sell it in the future.

TMC announced that Ian Anderson, Chief Executive Officer of the company and its Board will be retiring effective April 1. He called the accomplishments made during the last two years “remarkable” given the recent global pandemic, wildfires, and flooding in British Columbia.

Keith Stewart from Greenpeace Canada stated that the project “was crazy in a climate context when it was supposed be C$7.4 billion but now at C$21.4 trillion and growing it is now economic madness.”

It’s now that we can cut our losses with this white elephant.

($1 = 1.2749 Canadian dollars)