CALGARY—The federal government may have paid too much for Kinder Morgan’s Trans Mountain pipeline, but a petroleum marketing expert says taxpayers will be able to recoup the forecasted $11-billion investment if the project can be completed on schedule and under budget.

Analysts with Royal Bank say Justin Trudeau’s Liberals are paying a premium of approximately $1.2 billion for the existing link from Alberta to the B.C. coast and the engineering plans for an expansion that will nearly triple the pipeline’s capacity.

But the $4.5-billion price Ottawa agreed to pay the Houston-based company and the estimated $6.4-billion cost of constructing the additional link would be offset by what Moody’s Investors Service estimates will be gross earnings of $1.3 billion a year once the combined pipeline is operating.

“If Kinder Morgan could get this project built on time without major cost overruns, it would be a very valuable stretch of pipeline,” says Richard Masson, a fellow with the University of Calgary’s policy school and former head of the Alberta Petroleum Marketing Commission.

“They decided the risk was out of whack and they backed away.”

While Ottawa has said it wants to put the pipeline back in private hands before the deal closes this summer by offering to indemnify any future owner against losses due to delays caused by other levels of government, Masson said he can’t see any companies reaching for their chequebooks.

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“The guarantees from the feds and the additional $2 billion from Alberta are too nebulous,” he said.

“It’s very difficult to imagine anyone else stepping up where Kinder Morgan feared to tread.”

While Masson believes the federal government can recoup its money in a sale after the expanded pipeline is operational, advocacy groups on both sides of the political spectrum are skeptical the deal is financially prudent.

Aaron Wudrick, federal director of the Canadian Taxpayers Federation, admits Ottawa is trying to make lemonade from lemons after Kinder Morgan balked last month at proceeding with the project, but he worries the same hurdles remain now for the federal government.

Alberta Premier Rachel Notley says a federal government plan to take over the Trans Mountain pipeline will “unlock investment” in the oilsands. B.C. Premier John Horgan says he will continue to fight the pipeline expansion in court. (The Canadian Press)

“The main obstacles to this deal have always been political, not economic,” Wudrick said.

“The fact that the government owns the project now isn’t going to keep protesters from padlocking themselves to bulldozers to stop construction. In fact, it might make them even angrier.”

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David Hughes, a former federal government scientist and research expert with the Canadian Centre for Policy Alternatives, disputes Ottawa’s and Alberta’s claim that delays in constructing the pipeline are costing Canada $15 billion a year.

Hughes says the difference between the discounted price Alberta producers get for oilsands bitumen and the value sweet crude attracts in the United States is due entirely to the additional cost of refining the product and transporting it to market.

“It’s a completely bogus claim, based on false rhetoric,” he said.

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