The Canadian government is setting challenging benchmarks for any state hoping to achieve fame for incompetence. Having bought the Trans-Mountain Pipeline Expansion (TMX to insiders), one of the few domestic energy megaprojects it had not managed to destroy, despite a boom in energy prices it seems poised to lose a fortune on it. After having brought the project close to disaster four years ago due to endless dithering over whether it would grant an approval, the Trudeau administration swooped in, bought it for $4.4 billion and said no problems, we got this, with our usual vaunted competence we’ll have it all sorted out in no time. Well, time has passed, and now the latest estimate from the Parliamentary Budget Officer is that the project will cost $21.4 billion to complete, meaning its present net value is… oh dear… minus $600 million.
Back in 2018 the government’s increasingly labyrinthine approval process had gone from all maze and no cheese to also there’s a minotaur, so the private firm behind TMX decided to chew through the walls and run away. Suddenly the government was concerned to signal that Canada was a good place to invest even in fossil fuels, even though it kept taking measures that ensured Canada was not a good place to invest especially in fossil fuels, which the government was determined to abolish.
Which all turned out the way any sensible person would expect. And thus since the last PBO assessment alone, the cost of TMX has increased from $12.6 to $21.4 billion. When one contemplates the way in which, for instance, the budget for major defence procurements balloons in Canada, one might think oh yeah, it’s just more of the same, a typical example of managerial incompetence and lack of incentives to get it right, since there are neither shareholders nor customers to impose discipline and voters seem resigned to it all. But when it comes to hydrocarbons there’s another factor that increases the suspicion that even if it’s not being bungled on purpose, the tendentious way the errors line up means it would still be foolish to become involved with it in any way.
Pardon our obviousness. But when a government is openly pledged to bring the fossil fuel industry to an end it gets hard to attract investors, a problem Joe Biden is now encountering. Especially if foreign firms, and domestic ones, start thinking that issues like the tepid police response to blockades and sabotage, at least of energy projects, as well as the endless merry-go-round of consultations with every “stakeholder” however loosely defined, will be driven not by a devotion to the rule of law but the policy outcome of stopping all conventional energy megaprojects. And while Ukraine begs Canada to supply more energy, our leaders jet from continent to continent denouncing the fuel in their airplanes and the industry that produced it.
The PBO also looked at the implications if the federal government simply cancelled TMX, and found that it would require a write-off of over $14 billion. But remember that this is an administration that has added over $500 billion to the federal debt since 2015, and is currently spending $452 billion a year of which it is borrowing $44 billion. So whether or not such a write-down would be fiscally damaging, the Prime Minister and his colleagues are unlikely to think so given their feckless attitude toward public borrowing and their apocalyptic vision of the consequences of continuing to produce, export and consume fossil fuels.
Well, maybe not export, given that energy accounts for over a quarter of Canada’s total exports of some $60 billion a month. But exports require access either to land crossings or ports, and either requires pipelines. And this government couldn’t even make money building one of those.
In fact the minus $600 million value is just about the best case scenario. There are lots of ways they could lose more. Which we’re not going to list to avoid giving them ideas. Not that they really seem to need any.