Business
Trans Mountain pipeline’s soaring cost provides more proof of government failure
From the Fraser Institute
By Julio Mejía and Elmira Aliakbari
To recap, since the Trudeau government purchased the project from Kinder Morgan for $4.5 billion in 2018, the cost of the Trans Mountain expansion has ballooned (in nominal terms) to $34 billion.
According to the latest calculations, the Trans Mountain pipeline expansion project, which the Trudeau government purchased from Kinder Morgan in 2018, will cost $3.1 billion more than the $30.9 billion projected last May, bringing the total cost to about $34 billion—more than six times the original estimate.
This is yet another setback for a project facing rising costs and delays. To understand how we arrived at this point, let’s trace the project’s history.
In 2013, Kinder Morgan applied to the National Energy Board (NEB) to essentially twin the existing pipeline built in 1953, which runs for 1,150 kilometres between Strathcona County, Alberta and Burnaby, British Columbia, with the goal to have oil flow through the expansion by December 2019.
In 2016, after three years of deliberations, the NEB approved the pipeline, subject to 157 conditions. By that time, according to Kinder Morgan, costs had risen by $2 billion, bringing the total cost to $7.4 billion.
And yet, despite Kinder Morgan following the legal and regulatory process to get the necessary approvals, the B.C. NDP and Green Party vowed to “immediately employ every tool available” to stop the project. At the same time, the Trudeau government was planning regulations that would increase the cost and uncertainty of infrastructure projects across the country.
Faced with mounting uncertainty and potential setbacks, Kinder Morgan planned to withdraw from the project in 2018. In response, the Trudeau government intervened, nationalizing the project by purchasing it from Kinder Morgan with taxpayer dollars for $4.5 billion. Once under government control, costs skyrocketed to $12.6 billion by 2020 and $21.4 billion by 2022 reportedly due to project safety requirements, financing costs, permitting costs, and crucially, more agreements with Indigenous communities. One year later, in 2023, the Trudeau government said the cost has risen to $30.9 billion.
To recap, since the Trudeau government purchased the project from Kinder Morgan for $4.5 billion in 2018, the cost of the Trans Mountain expansion has ballooned (in nominal terms) to $34 billion.
Surprised? You shouldn’t be.
When government attempts to build infrastructure projects, it often incurs cost overruns and delays due to a lack of incentives to build in an efficient and resourceful way. According to a study by Bent Flyvbjerg, an expert in this field, a staggering 90 per cent of 258 public transportation projects (in 20 countries) exceeded their budgets. The reason behind this phenomenon is clear—unlike private enterprises, government officials can shift cost overruns onto the public without bearing any personal financial consequences.
And the Trudeau government continues to make a bad situation even worse by introducing uncertainty and erecting barriers to private-sector investment in vital infrastructure projects including pipelines. Federal Bill C-69, for instance, overhauled the entire environmental assessment process and imposed complex and subjective review requirements on major energy projects, casting doubt on the viability of future endeavours.
What’s the solution to this mess?
Clearly, if policymakers want to help develop Canada’s natural resource potential—and the jobs, economic opportunity and government revenue that comes with it—they must enact regulatory reform and incentivize private investment. Rather than assuming the role of construction companies, governments should create an environment conducive to private-sector participation, thereby mitigating risk to taxpayers.
By implementing reasonable and competitive regulations that enhance investment incentives, policymakers—including in the Trudeau government—can encourage the private sector to build large-scale infrastructure projects that benefit the Canadian economy.
Authors:
The Canadian Taxpayers Federation released new Leger polling showing that half of Quebecers say the most effective way to reduce gun crime is to crack down on illegal gun smuggling from the United States, not a federal gun ban and confiscation.
“Law enforcement experts say the best way to make Canada safer is to stop illegal gun smuggling and Quebecers say exactly the same thing,” said Nicolas Gagnon, CTF Quebec Director. “It makes no sense to pour hundreds of millions into a confiscation that only takes guns from lawfully licensed gun owners.”
In 2020, the federal government launched its policy to confiscate thousands of so-called “assault-style” firearms from licensed gun owners. Ottawa recently announced a pilot project in Cape Breton to start taking firearms from individual owners.
The Leger poll asked Quebecers what they think is the most effective way to reduce gun crime. Results of the poll show:
- 51 per cent say introducing tougher measures to stop the illegal smuggling of guns into Canada from the United States
- 37 per cent say banning the sale and ownership of many different makes and models of guns along with a government buyback program
- Six per cent say neither of these options
- Seven per cent do not know
The results of the polls arrived as recorded remarks from Public Safety Minister Gary Anandasangaree made headlines in September.
In a leaked audio recording, the minister suggested the confiscation program is being pushed in part because of voters in Quebec, while also expressing doubt that local police services have the resources to enforce it.
Police organizations have long warned Ottawa’s confiscation program is misguided. The RCMP union says it “diverts extremely important personnel, resources, and funding away from addressing the more immediate and growing threat of criminal use of illegal firearms.”
The program was first estimated to cost $200 million. Just providing compensation for the banned guns, not including administrative costs, could cost up to $756 million, according to the Parliamentary Budget Officer.
Premiers of Alberta and Saskatchewan have both publicly said that they would not cooperate with Ottawa’s gun ban. Premier François Legault has stayed silent on this issue.
“Quebecers have been clear: the real problem is illegal gun smuggling, not law-abiding firearms owners,” said Gagnon. “The police have also made it clear the gun confiscation will waste money that could be used to stop criminals from committing gun crimes.
“Legault needs to stand up for Quebec taxpayers and refuse to help implement Ottawa’s costly and ineffective confiscation scheme. The federal government needs to drop this plan and focus its resources on intercepting illegal guns at the border: that’s how you actually make communities safer.”
From the Fraser Institute
By Julio Mejía and Elmira Aliakbari
The PBO estimates that the CFR will decrease Canada’s economic output by up to 0.3 per cent—or approximately $9.0 billion—in 2030. For context, that’s more than the entire output of Prince Edward Island in 2024, so the effects are roughly equivalent to wiping out the economy of a whole province.
The Carney government recently announced changes to the Clean Fuel Regulations (CFR), signalling stricter carbon content rules for gasoline and diesel—though few details were provided. While the prime minister expressed confidence that the changes will strengthen the Canadian economy, in reality, the CFR is designed to increase fuel prices in exchange for negligible environmental benefits. If the government is serious about prioritizing the wellbeing of Canadians, it shouldn’t tinker with the CFR—it should eliminate it.
The CFR, which came into effect in July 2023, aims to reduce greenhouse gas (GHG) emissions by requiring a gradual reduction in the carbon content of gasoline and diesel. By 2030, fuels must contain 15 per cent fewer GHG per unit of energy than in 2016. Those who don’t meet the target must buy compliance credits, which raises their costs. Ultimately, these costs are all passed on to Canadians at the pump.
According to a recent study by the Parliamentary Budget Officer (PBO), the CFR is expected to increase fuel prices by up to 17 cents per litre for gasoline and 16 cents for diesel by 2030. These costs will be added on top of already high, policy-driven fuel costs. In 2023, for example, the average price of gasoline in Canada was 157.3 Canadian cents per litre, compared to just 129.4 cents per litre in the United States—a 21 per cent difference, mainly the result of fuel taxes in Canada.
As fuel prices rise due to the CFR, the costs of running tractors, powering machinery, and producing and transporting goods and services will all increase, setting off ripple effects across our economy. The PBO estimates that the CFR will decrease Canada’s economic output by up to 0.3 per cent—or approximately $9.0 billion—in 2030. For context, that’s more than the entire output of Prince Edward Island in 2024, so the effects are roughly equivalent to wiping out the economy of a whole province.
Of course, increases in fuel prices also mean more pressure to household budgets. The PBO estimates that in 2030, the average Canadian household will incur $573 in additional costs because of the changes to the CFR, and lower-income households will bear a disproportionately larger burden because they spend more of their budget on energy.
The policy’s uneven impact across provinces is particularly significant for lower-income regions. For example, households in Nova Scotia and P.E.I.—two of the provinces with the lowest median household incomes—are expected to bear average annual costs of $635 and $569, respectively. In contrast, families in Ontario and British Columbia—two of the provinces with higher median household incomes—will pay less, $495 and $384 per year, respectively. Simply put, the CFR imposes more costs on those who make less.
To make matters worse, the expected environmental benefits of the CFR are negligible. Even if it delivers its full projected reduction of 26 million tonnes of GHG emissions by 2030, that represents only “two weeks of greenhouse gas emissions from the Canadian economy,” according to the federal government.
Given that GHG emissions cross all borders regardless of where they originate, in a broader perspective, that reduction represents just 0.04 per cent of projected global emissions by 2030. So, Canadians are being asked to pay a material price for a measure that will have virtually no environmental impact.
Toughening regulations on carbon content for gas and diesel won’t benefit Canadians, in fact, it will do the opposite. The CFR places a real financial burden on Canadian households while delivering no meaningful environmental benefit. When a policy’s costs vastly outweigh its benefits, the answer isn’t to adjust it, it’s to scrap it.
Julio Mejía
Elmira Aliakbari
Director, Natural Resource Studies, Fr
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