Thank you, Mr. Chair, and thank you for the invitation to speak to the committee.
I come to you as someone who has consistently been opposed to the expansion of fossil fuel infrastructure because of the existential challenge to humanity posed by climate change. While Canada has made some progress towards transitioning to a cleaner energy economy, the Trans Mountain pipeline expansion symbolizes the contradictions in Canada's climate policy. TMX opens as a project that could not be more ill-fitted for the current moment in history.
I'm pleased this committee is looking into how costs could get so out of control. I am personally puzzled at how so many could have signed off on much lower cost estimates over the past six years. From an original estimate of $5.4 billion in 2013 and $7.4 billion when the federal government took over in 2018, final TMX costs, as you know, have been revised up to $34.2 billion. Only a small portion, about $1.4 billion of this massive increase, is attributed to flooding and landslides in 2021, other extreme weather events and two years of COVID measures. The remainder is a long list of “project enhancements...schedule pressures and [higher] financing costs.”
Clearly, megaprojects like these can't be guided by wishful thinking alone. They require comprehensive and independent assessment before any approvals are made.
The implications of the cost overruns are stark. A current concern is that Trans Mountain will provide ongoing public subsidies to the oil and gas industry by undercharging tolls for shippers relative to tolls that would break even on operating and capital costs. A new study just out by Tom Gunton at Simon Fraser University estimates the subsidy to Canada's oil industry at between $9 billion and $19 billion. This is based on comparing Trans Mountain's interim tolls to what a private sector firm would charge to cover operating and capital costs.
Final tolls will be determined in early 2025. It's imperative that the Canada Energy Regulator ensures cost recoveries are either built into those tariffs or, as suggested by Gunton, into a specific levy per barrel—or ad valorem—on western Canada oil production.
For the industry, these higher tolls of up to nine dollars per barrel over the previous Trans Mountain pipeline will diminish gains from higher prices for exports by reducing the spread between Western Canada Select and WTI. There has been little apparent effect from TMX so far, though of course we are still in early days of operation.
Local impacts are also notable. Werner Antweiler from the University of British Columbia estimated that the increase in tariffs, which apply to the old and new pipelines alike, will increase the local price of gasoline by six cents per litre, costing an additional $222 million British Columbia-wide per year.
In terms of greenhouse gas emissions and the proposed emissions cap, if TMX successfully expands Alberta's oil production, it will lead to additional carbon emissions. I estimated that TMX would facilitate about 84 million tonnes per year of CO2 emissions, with 25 million tonnes upstream and 59 million tonnes exported. While most of those emissions will be in other countries and will not therefore be counted in Canada's GHG inventory, even the domestic emissions in Canada associated with this export growth will make it nearly impossible for Canada to meet its 2030 GHG target of 40% to 45% below 2005 levels.
Also not counted in terms of costs is the potential damage to land or water from a pipeline or tanker spill. Such a spill would impose billions in cleanup costs, affect employment and devastate ecosystems. The greater presence of tankers in Vancouver Harbour is already notable. On the other hand, if the world is successful in acting to reduce greenhouse gas emissions, the need for TMX would vaporize and we would be left with a stranded asset before the end of its useful life.
In sum, TMX is a pessimistic bet that the world will not get its act together on climate change. Thank you.