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Ottawa may be overpaid on Trans Mountain for $ 1B, a parliamentary budget officer says



The Federal Liberal Government may be overcharged for the Trans Mountain pipeline project to $ 1 billion, the parliamentary budget officer estimates, and there is a risk that its value may fall further if there are other delays in the building period.

However, even if Ottawa paid too much, the value of the project for Canadian oil producers and the government is remarkable, as it will eliminate the price difference that makes oil spillage more difficult, Parliament's Budget Office said in a report published on Thursday.

The report says that both the existing pipeline and the planned expansion project are worth between $ 3.6 billion and $ 4.6 billion, which is an inaccurate range that attracts it well below the government purchase price of $ 4.5 billion – or also directly on money.

"The government agreed on the purchase price at the highest level of the PBO valuation range. The PBO's financial assessment assumes that the pipeline is built in time and budget."

PBO ratings are further complicated by the fact that they do not have a number of pipeline terminals and Puget Sound Pipeline – other Ottawa assets acquired as a deal with the former initiator Kinder Morgan. These related assets are not included in the figure generated by the PBO, but officials said on Thursday that enlargement was not being developed, the value of these assets would be low.

Nevertheless, the PBO warns that any further delays in the project, increase in construction costs or other "risk profile" changes can significantly reduce the project, while negatively impacting the final sale price that Ottawa could receive when selling it to another company.

One year delay would reduce the project value by $ 700 million. In the event of delays exceeding 31 December 2021, the PBO stated that it was fair to have the government overpayed for this asset.

The PBO estimates that building an enlargement project at its highest level would create nearly 8,000 jobs.

Impact on GDP

However, the true value of the Trans Mountain Expansion Project (TMEP) will come from oil producers selling a large number of Canadian oil at world prices. Currently, as Canadian manufacturers are forced to sell almost all their products to US refineries, Western Canadian Select sells at a discount to the West Texas Intermediate (WTI) gold standard for US oil pricing.

"It is difficult to determine the impact of TMEP on price differences between the WTI and WCS categories. However, the recent PBO analysis found that the average reduction of US $ 5 per barrel on average by 0.1% real GDP growth and nominal GDP growth of 0.3 percent," In the PBO report.

"It could affect USD 6 billion in GDP over five years from 2019 to 2023."

Without enlargement, the value of the Trans Mountain pipeline would be about $ 2 billion.

The government went on to buy the pipeline and planned expansion last year after Kinder Morgan stopped all the essential construction costs until legal issues were received.

B.C. Prime Minister John Horgan tried to stop its construction by encouraging Ottawa to get involved in the project and buy it to "break".

Local groups have said that the federal government has not sufficiently consulted before Prime Minister Justin Trudeau and the Cabinet in 2016 gave a green light to the project.

The Federal Court of Appeal canceled the Cabinet approvals for the project in August last year, citing inadequate consultation and environmental assessments, Kinder Morgan's shareholders agreed that most of the company's Canadian assets were sold in Ottawa.

The Federal Government is committed to building the project despite its legal problems.


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