THE CANADIAN PRESS Prime Minister Justin Trudeau (left) sits next to Federal Finance Minister Bill Morneau during a round table discussion at the Canadian Transformational Infrastructure Summit and the Canlnfra Challenge, Toronto, Tues. May 29, 2018.

The federal Liberals announced in late May they will buy Kinder Morgan's Trans Mountain pipeline system for $4.5 billion, after the Texas-based pipeline builder warned it could cancel the project due to "continued actions in opposition to the project," specifically the B.C. government's efforts to block the pipeline's expansion.

The report comes from the Institute for Energy Economics and Financial Analysis (IEEFA), which is funded by a variety of philanthropic groups dedicated to climate and energy issues, including the Rockefeller Family Fund.

Texas-based Kinder Morgan made a seven-fold return on the sale of its Trans Mountain pipeline system to Canada's federal government, according to a new report that also warns the federal budget deficit could jump by 36 per cent because of the purchase.

The project has an estimated $7.4 billion price tag, of which Kinder Morgan says it has already spent about $1 billion. But the IEEFA report estimates that the company has only put about $600 million into the project so far. It estimates the company will make a 637-per-cent gain on the $4.5-billion sale.

It predicts the government will sell the pipeline at a loss "under distressed conditions."

The federal government is on the hook for about $11.5 billion in costs, including both the purchase and the remaining cost of construction, the report estimates.

"This 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," the report stated. "This would increase Canada's projected deficit of $18.1 billion by 36 per cent. to $24.6 billion."

"There is every indication that the Canadian government has bought the pipeline at a high price and is likely to resell it for far less than it will pay to build it," Tom Sanzillo, the institute's director of finance, said in a statement.

"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," he added.

The notion that the Trans Mountain is an "unneeded pipeline" is debatable. Canadian oil exports have been trading at a deep discount to North American benchmark oil prices due to difficulty bringing oil to Canada's largest market, the U.S. The Trans-Mountain expansion is meant to allow Canadian oil to flow to Asian markets, diversifying Canada's customers for oil.

But many climate groups say it makes little sense to build oil infrastructure at a time when most of the world's countries are shifting away from oil, under the Paris climate agreement.

That doesn't seem to be stopping Canada's oil industry from betting on a bright future. A recent forecast from the Canadian Association of Petroleum Producers predicts oil production in Canada will rise by 33 per cent by 2035, compared to last year's levels.

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