Canadian taxpayers could face billions in losses from a potential sale of the Trans Mountain Pipeline.
According to a report from the Parliamentary Budget Officer issued on Friday, the analysis reveals that the pipeline, whose cost recently ballooned from $21.4 billion to $34.2 billion, is now valued below its total assets, meaning a sale could fall significantly short of recouping taxpayer investments.
“Whether the Government records a profit or a loss on the eventual sale of the Trans Mountain Pipeline system will depend on what someone is willing to pay for it,” reads the report. “This can depend on a wide range of factors, such as the number of potential buyers, their cost in raising the required capital, when and how it will be sold, market conditions at the time of sale, whether it will be an arms-length transaction, and/or whether certain groups will be prioritized in the sale.”
Based on the Trans Mountain Corporation’s balance sheet from Dec. 31, 2023, if the $26.9 billion in the pipeline’s liabilities were sold, $5.6 billion would remain after accounting for the $35.2 billion in assets. However, this would not be enough to account for the $8.3 billion of shareholder equity, leaving a $2.7 billion shortfall.
“TMC would have to write off the balance of the equity and record a loss,” reads the report.
The PBO values the Trans Mountain Pipeline to be worth between $29.6 billion and $33.4 billion, depending on whether 20-year contracts are renewed or the pipeline reverts to a cost-of-service model.
“However, there is also uncertainty in some of the underlying assumptions on pipeline utilization, tolls and discount rate, all of which can impact the valuation,” reads the report.
Thomas Gunton, a professor at Simon Fraser University, submitted a case study of the Trans Mountain Pipeline to the International Institute for Sustainable Development.
In the report, he concluded that taxpayers stand to lose between $8.7 billion and $18.8 billion, equivalent to between $581 and $1,248 per household.
“These estimates differ due to variability in assumptions regarding the future quantity of oil transported and operation costs,” he said.
However, he said the cost can be entirely recovered by increasing tolls and applying a tax to oil shipments going forward.
The Trans Mountain Pipeline began exporting oil in May at a cost of $34.2 billion, nearly fivefold the initial cost estimate of $7.4 billion in 2017.
The Liberals initially bought the pipeline for $4.5 billion. The pipeline had been delayed at 97% completion for about half a year due to overregulation.