Finance Canada is defending its $ 10 billion loan guarantee for Trans Mountain to help the company complete its pipeline expansion after opposition parties and environmental groups called it a fossil fuel subsidy.
This financial support comes after the government said in February that more public money would not be poured into the project.
“This is a common practice that introduces an insurance policy for the institutions that have invested in the project – it does not reflect any new public spending.” news release said Finance Canada. “The Canadian government has not spent money to introduce this guarantee.
Politico reported first the government provided the loan guarantee.
On Parliament Hill, CBC reporters asked Treasury Secretary Christia Freeland several times about new federal support for Trans-Mountain. The Minister did not stop answering questions.
Deputy Prime Minister and Minister of Finance Christia Freeland walks past reporters as she arrives for a meeting on Parliament Hill in Ottawa on Wednesday, May 11, 2022 (THE CANADIAN PRESS / Justin Tang)
In February, Freeland announced that the cost of the Trans Mountain pipeline expansion project had tripled from its original cost of $ 7.4 billion – which then-owner Kinder Morgan predicted in 2018 – to $ 21.4 billion.
“I want to assure Canadians that no additional public money will be invested in (Trans Mountain),” Freeland said at the time.
“Trans Mountain will provide the necessary funding to complete the project through funding from third countries, either in public debt markets or with financial institutions.”
Ottawa provided bridge funding for the pipeline in December
On Wednesday, Finance Canada confirmed that Trans Mountain “has now provided up to $ 10 billion in financing from third countries with a group of Canadian financial institutions.”
The statement did not specify which institutions were financing the completion of the pipeline, but said Trans Mountain would pay a fee to the government for the loan guarantee.
The statement added that Ottawa had provided $ 1.75 billion in “bridge financing” in December to ensure that construction remained on schedule. Finance Canada said in a statement that the loan was “repaid in full at interest”.
Asked for comment, Trans Mountain referred the CBC to a government statement.
Following the news of the loan guarantee, opposition parties attacked the federal government for continuing to financially support a project to expand the Trans Mountain pipeline, which is now over-budgeting and overdue.
“This government has done a terrible job,” said Kyle Seabeck, a conservative environmental critic. “They don’t do the hard work to figure out how much these things cost.”
“This is another subsidy for the oil and gas industry when this government says it plans to step down,” said Green Party MP Mike Morris.
Environmental groups have called the loan guarantee a subsidy, citing the World Trade Organization’s definition of the word.
“This is a continuation of our government, which is supporting this project, which is no longer financially viable,” Sven Biggs, Canada’s oil and gas program director, told Stand.earth.
The Institute for Energy Economics and Financial Analysis, which conducted a financial analysis of the pipeline, said the TMX project had not attracted private sector investment and should depend on government support to continue.
“Understanding the real economics of the project, you understand that the only way this project can be financed is … through debt. And the debt must be backed by the Canadian government, “said Omar Mauji, an energy finance analyst with the Institute for Energy Economics and Financial Analysis.
The consolidation of the 1,150-kilometer Trans Mountain pipeline will nearly triple its capacity to approximately 890,000 barrels per day, and crude oil tanker traffic from the Westridge marine terminal could increase from about three ships a month to one a day. (CBC)
Construction of the Trans Mountain extension is expected to be completed by June 30, 2023, nine months after the revised schedule. The pipeline was to be completed by September 30, 2022.
The pipeline will not start delivering oil until the Canadian energy regulator gives it a final operating permit. Trans Mountain said the pipeline will not receive its first revenue until September 30, 2023.
By April, the project was nearly 50 percent complete. When completed, this will increase pipeline production from about 300,000 barrels per day to approximately 890,000 barrels.
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