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.
Let’s face it, Justin Trudeau is unfit to lead this country or even a Boy Scout troop. His holy wokeness knows no bounds and he is more interested in jetsetting around the world to show off his socks than anything else. Perhaps it is a good thing that he is all talk and no action. Based on his socialist ideology, if he actually followed through on anything he proclaimed he would do, Canada would be beyond bankrupt by now. As it is Canada is merely in severe long term trouble under his government.
In today's political climate where every resource industry operating on Crown land is subject to stakeholder shakedown, cost over-runs are large and normal. The resource sector is essentially a cow with multiple udders and teats with every imaginable species and interest group clinging to them all and all of this mandated from the SCOC down to local governments. The federal and some provincial governments are all but poised to renounce sovereignty entirely over Crown land in their zeal to "reverse" but never "repeal" the virtual apartheid inherent in the Indian Act. The resource sector is caught up in this quagmire. TMX is the current focal point and apex in green theocracy and interest group pandering. Add the cultural disdain for the Oil and Gas sector and does anyone wonder why no new refineries have been built in North America in 50 years. Perhaps the omniscient snowboard instructor should announce that the federal government will build a new one in Quebec (fully isolated from western Canadian crude) where it will take another fifty years to complete, bankrupting the deranged dominion in the process.
One must remember that the original budget for construction was $ 7 Billion. Now apparently $21 Billion with confusion as to whether that includes the original $4.5 Billion purchase price. It is not unknown for pipelines to go over budget a few %, but this sort of thing is entirely unheard of. It must be that the project budget has become a slush fund for various federal expenditures unrelated to putting pipe in the ground, since the the cost of the pipe and welding is known by any experienced pipeline engineering company.