Kinder Morgan acquisition could increase federal budget deficit by 36%

Report says the government is probably facing at least $11.6 billion in project-completion costs for the pipeline

Mario ToneguzziCanada could see its budget deficit grow by more than a third with the federal government’s purchase of the Trans Mountain pipeline from Houston-based Kinder Morgan, according to a report by the Institute for Energy Economics and Financial Analysis.

The report – Canada’s Folly: Government Purchase of Trans Mountain Pipeline Risks an Increase in National Budget Deficit by 36%, Ensures a 637% Gain by Kinder Morgan – says the government is probably facing at least $11.6 billion in project-completion costs for a pipeline system that had stalled under Kinder Morgan for lack of market and political support.

“Canada is weakening its finances by taking on unlimited costs to buy an unneeded pipeline with an uncertain future and giving an unusual profit to a U.S. company,” said Tom Sanzillo, IEEFA’s director of finance and the former first deputy comptroller for New York State, in a news release.

“Even though the government plans to sell the pipeline, such a deal would likely come at a loss given the unusual guarantees promised future buyers, weak market conditions, and the likelihood that the Canadian government would be selling the project under distressed conditions.”

The report said the transaction and the cost of further planning and construction could add a $6.5 billion unplanned expenditure to Canada’s budget during fiscal year 2019. This would increase Canada’s projected deficit of $18.1 billion by 36 per cent to $24.6 billion.

Respected business writer Mario Toneguzzi is a veteran Calgary-based journalist who worked for 35 years for the Calgary Herald in various capacities, including 12 years as a senior business writer.

kinder morganThe views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.

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