Finance Canada defends $10 billion loan guarantee for Trans Mountain
Ottawa says Trans Mountain has secured third-party financing from unnamed banks
Finance Canada is defending its $10 billion loan guarantee for Trans Mountain to help the company finish 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 no more public money would be poured into the project.
"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," a news release from Finance Canada said. "The Government of Canada has not spent any money to put this guarantee in place."
Politico first reported the government was providing the loan guarantee.
On Parliament Hill, CBC journalists asked Finance Minister Chrystia Freeland several times about the new federal support for Trans Mountain. The minister didn't stop to answer questions.
In February, Freeland announced the Trans Mountain pipeline expansion project's costs had nearly tripled from its initial $7.4 billion price tag — which then-owner Kinder Morgan projected in 2018 — to $21.4 billion.
"I want to assure Canadians that there will be no additional public money invested in (Trans Mountain)," Freeland said at the time.
"(Trans Mountain) will secure the necessary funding to complete the project through third-party financing, either in the public debt markets or with financial institutions."
Ottawa provided bridge financing to pipeline in December
On Wednesday, Finance Canada confirmed Trans Mountain has "now secured up to $10 billion in third-party financing with a group of Canadian financial institutions."
The statement didn't say which institutions are funding the pipeline's completion, but it does say Trans Mountain will pay a fee to the government for the loan guarantee.
The statement also said Ottawa provided $1.75 billion in "bridge financing" in December to ensure construction remained on schedule. Finance Canada said in its statement that the loan "has been repaid in full with interest."
Reached for comment, Trans Mountain referred CBC back to the government's statement.
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After news about the loan guarantee broke, opposition parties attacked the federal government for continuing to financially support a Trans Mountain pipeline expansion project that is now over-budget and running late.
"This government has done a terrible job," said Kyle Seeback, the Conservative environment critic. "They don't do the hard work of figuring out what these things cost."
"This is another subsidy to the oil and gas industry when this government says they are planning on moving away," said Green Party MP Mike Morrice said.
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Environmental groups called the loan guarantee a subsidy, citing the World Trade Organization's definition of the word.
"This is a continuation of our government propping up this project that is no longer financially viable," said Sven Biggs, Canadian oil and gas program director for Stand.earth.
The Institute for Energy Economics and Financial Analysis, which has done financial analysis of the pipeline, said the TMX project hasn't attracted private sector investment and must depend on government support to continue.
"Understanding the actual economics of the project, you realize that the only way that this project can be funded is ... through debt. And the debt has to be backed by the Canadian government," said Omar Mawji, an energy finance analyst with the Institute for Energy Economics and Financial Analysis.
Construction of the Trans Mountain expansion is expected to be completed by June 30, 2023, nine months behind the revised schedule. The pipeline was supposed to be finished by Sept 30, 2022.
The pipeline won't start shipping oil until the Canadian Energy Regulator gives it final permission to operate. Trans Mountain said the pipeline won't see its first revenue until Sept. 30, 2023.
As of April, the project was close to 50 per cent complete. When it's finished, it will increase the pipeline's output from about 300,000 barrels a day to roughly 890,000.