(Bloomberg) -- The cost to build Justin Trudeau’s pet oil-pipeline project just got a few billion dollars more expensive.
The price tag for the Trans Mountain expansion has increased 70% to C$12.6 billion ($9.5 billion) because of legal delays and accommodations made to indigenous communities along its route, the pipeline’s operator said Friday in an emailed statement. That doesn’t include the C$4.5 billion Trudeau’s government spent to purchase the conduit, but it does incorporate C$1.1 billion spent by the project’s previous owner, Kinder Morgan Inc.
“The project that we’re all working on and building today is not the project that we originally envisioned and introduced in 2012,” Trans Mountain Chief Executive Officer Ian Anderson said on a conference call. “It’s much, much more today.”
The cost increase threatens to be a political liability for the Canadian prime minister, who has disappointed some in his environmentalist base over his support for the crude-oil conduit. Trudeau’s government made the unusual move of buying a pipeline as Canada’s oil industry struggles with a shortage of infrastructure to ship crude from Alberta’s oil sands, which hold the world’s third-largest reserves.
The project would boost daily shipping capacity by 590,000 barrels, to a total of 890,000 barrels, helping relieve a transport bottleneck that has weighed on Canada’s oil industry. The pipeline, which runs from Edmonton to a shipping terminal near Vancouver, also may help develop new markets for the country’s crude in Asia.
Producers that are currently committed to shipping their crude on the expanded line include Suncor Energy Inc., Cenovus Energy Inc., Athabasca Oil Corp., MEG Energy Corp., Husky Energy Inc., a unit of PetroChina Co. and Imperial Oil Ltd., Anderson said. It’s expected to be in service by December 2022.
Trudeau’s finance minister sought to reassure taxpayers after the increased cost was announced.
“We know that had we not taken on this project when the company from Houston went back to Houston we wouldn’t be able to get a fair price for our resources,” Bill Morneau told reporters at the finance ministry in Ottawa. “This is not only going to deliver strong economic benefits for Canada, it’s going to deliver jobs for people in Alberta -- and it’s going to ensure that, going forward, we have a way to get our resources to market.”
Earlier in the week, the pipeline expansion cleared a key legal hurdle when the Federal Court of Appeals ruled the Trudeau government adequately consulted with indigenous communities, who had challenged the project’s approvals.
But even before Friday’s cost increase, Trans Mountain was losing popular support. An Angus Reid Institute poll at the end of January found opposition to it had risen more than 10% since it was nationalized in 2018.
While the government has always intended to sell the project back to the private sector, Morneau said there is no clear time-line yet for doing so.
(Updates with government comment from 7th paragraph.)
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