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Steel pipe to be used in the oil pipeline construction of the Canadian government’s Trans Mountain Expansion Project lies at a stockpile site in Kamloops, B.C., on June 18, 2019.Dennis Owen/Reuters

The federal government says no more public funds will be spent on the Trans Mountain pipeline expansion, after the Crown corporation building the project announced Friday that the cost has ballooned to $21.4-billion and the expansion now won’t be complete until late 2023.

That’s close to a 70-per-cent jump over the initial $12.6-billion price tag, and almost a year later than the original December, 2022, start date targeted by Trans Mountain Corp.

Finance Minister Chrystia Freeland told media Friday that instead of public cash, Trans Mountain will secure the funding necessary to complete the project with third-party financing, either in public debt markets or from financial institutions.

Ms. Freeland said financial advice from BMO Capital Markets and TD Securities confirmed that “public financing for the project is a feasible option that can be implemented promptly.” And despite the increased cost estimate and longer completion timeline, she said the project remains commercially viable.

Cost of Trans Mountain pipeline expansion soars 70 per cent to $21.4-billion

Trans Mountain referred questions about how it will secure financing to Ms. Freeland’s office. Her office provided no details on how confident the minister is that the project will be able to nail down funds, but said prospective purchasers still have a strong interest in operational infrastructure assets such as the pipeline expansion.

Financial institutions are growing increasingly wary of financing oil projects, as they face pressure to put more emphasis on environmental, social and governance (ESG) measures and make greener investment decisions.

Less than a year ago, Trans Mountain successfully lobbied the federal energy regulator to let it keep the name of its insurer secret, arguing that public pressure on insurance companies over environmental concerns in the oil sector has already made it harder and more expensive to insure the pipeline expansion.

The expansion’s financing costs alone have already increased by about $1.7-billion, Trans Mountain said Friday. The corporation attributed that to higher construction costs, the extended end date and interest payments.

Trans Mountain said another $2.3-billion of the cost jump comes from what it called “project enhancements,” such as more benefit agreements with Indigenous communities, the installation of advanced leak detection systems and new, unplanned route changes that avoid culturally and environmentally sensitive areas.

Wildfires, extreme heat, flooding and landslides that pummelled British Columbia in 2021 and COVID-19 measures added $1.7-billion to the price tag, while schedule pressures such as securing permits and the “significant construction challenges in both marine and difficult terrain” that have pushed the completion date into late 2023 account for another $2.6-billion.

The expansion project will nearly triple the capacity of the existing pipeline, which runs from Strathcona County, near Edmonton, to Burnaby, B.C. The vast majority of the project, which is about half complete, uses the existing pipeline route.

Prime Minister Justin Trudeau’s government bought the pipeline and expansion project from Kinder Morgan Inc. for $4.5-billion in 2018 amid legal hurdles and opposition from Indigenous communities, environmentalists and the B.C. government. The Federal Court of Appeal overturned the pipeline project’s approval, ruling Ottawa had failed to adequately consult First Nations. That led to a new round of consultations, and the federal cabinet approved the expansion for the second time in 2019.

However, the federal government has never intended to be the final owner-operator of the expanded pipeline, and Ms. Freeland reiterated that position Friday.

While buying the pipeline and the expansion was “a serious and necessary investment” to ensure Canada receives fair market value for its oil and gas, she said, Ottawa intends to launch a divestment process in the coming months.

“Our government has also been working with Indigenous communities on further economic participation in Trans Mountain for more than two years, and we will announce the next step towards that important objective later this year,” she said.

Eugene Kung of West Coast Environmental Law, an environmental law and public advocacy group, said in a statement Friday that the skyrocketing cost of the expansion and the delay demonstrate that Trans Mountain’s “already-collapsed business case is worse than ever, and the cost will probably increase further.”

“It is outrageous that [the Trans Mountain expansion’s] cost has nearly doubled in two years with very little oversight. Especially since the so-called economic benefits were used to justify the infringement of Indigenous rights, the significant climate impacts of building oil and gas expansion infrastructure, and the devastating effects on wildlife like salmons and orcas,” he said.

“It’s time to admit that [the project] is a bad idea and to cut our losses by cancelling this white elephant before it becomes a stranded asset.”

Oil companies, however, remain supportive of the pipeline expansion.

Cenovus Energy Inc. president and CEO Alex Pourbaix said he believes the business case for the project remains sound, and looks forward to it coming online.

“While no one wants to see cost increases, they are often a fact of life with projects of this size, and in this case were largely beyond Trans Mountain’s control,” he said in an e-mail.

“Getting this pipeline built will provide a significant boost to the Canadian economy while helping to solidify investor confidence in our oil and gas industry.”

Suncor Energy Inc. president and CEO Mark Little said in an e-mail that while he was disappointed with Friday’s news, the pipeline remains “vital to Canada’s long-term economic success and energy security.”

Trans Mountain president and CEO Ian Anderson will retire April 1. On Friday, he said progress on the pipeline expansion over the past two years has been “remarkable when you consider the unforeseen challenges we have faced including the global pandemic, wildfires and flooding.”

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