A money-back guarantee

Canada’s biggest banks are expecting a nice chunk of change from Trans Mountain next year — but depending on how things go, that cash could actually come from the Canadian public.

We already knew another $10 billion of taxpayer money was on the line for TMX. Back in April, Finance Canada unveiled a federal loan guarantee, propping up a pipeline project the government’s own financial watchdog says is “very unlikely” to earn back the $4.5 billion Ottawa spent to buy it in the first place. (Trans Mountain’s total estimated cost now sits at $21.4 billion.)

Who is that money going to? This week, my colleague John Woodside reported that Canada’s six biggest banks — TD, RBC, CIBC, BMO, Scotiabank and the National Bank of Canada — are all in on the loan, which has to be paid back in one year.

Normally, a deal like this would be a risky bet: TMX has lost 17 insurers and its business case is on shaky ground. (Deputy Prime Minister Chrystia Freeland insists the project can still make money, but Finance Canada has refused to provide evidence to support the claim.) The federal loan guarantee, however, is a game-changer: Ottawa’s pledge means that if the company can’t pay back its debts — plus interest — within a year, Canadian taxpayers will.

And so, the deal is a no-brainer for the banks. They’ve got nothing to lose in the short term: whether or not the pipeline actually gets built, they still make their money.

But the threat of climate change — largely driven by fossil fuels like the oil set to run through that pipeline — touches everything. In the long run, a hotter planet and everything that comes with it, from food shortages to public health problems to more destructive and unpredictable weather, will hurt banks’ bottom lines. And the longer Bay Street delays its breakup with fossil fuels, the more money it stands to lose as the world moves toward clean energy sources like wind and solar and the oilfields and infrastructure that make up the fossil fuel industry become worth less and less.

Canadian taxpayers, meanwhile, are shouldered with the immediate $10-billion gamble. It will be a tall order for Trans Mountain to find the cash it needs to pay back the loan within a year when the project isn’t supposed to be finished until sometime between July and September 2023. And if that doesn’t happen, Freeland’s promise of no more public money for TMX goes out the window.

What has critics especially irked about TMX — besides the economic and environmental risks — is the secrecy around the loan.

“If this was a robust, guaranteed-to-be-profitable, guaranteed-to-be-climate-safe, not an Indigenous-rights-violating project, then we would be having Finance Canada and the Canadian banks shouting this out from the rooftops,” Richard Brooks, climate finance director for Stand.earth, told John earlier this week.

“But because it's a boondoggle from a financial standpoint, because it's literally a carbon bomb that's being built across the mountains, because it is a project that is violating Indigenous rights and goes against all the climate science, including the International Energy Agency and their modelling around what we need to do to reach net-zero emissions and keep temperatures under 2 C, nobody is proud of this project.”

TMX by the numbers

890,000: Barrels of oil per day the new pipeline will carry from Alberta’s Strathcona County to Burnaby, B.C. — nearly three times as much as it does now

0: How many new fossil fuel projects the world can afford to build and still keep global warming under 1.5 C

17: Number of insurance companies that have cut ties with TMX

21: Number of days the pipeline shut down last November — the longest in its history — after a massive storm (made more likely by climate change) nearly flooded a pump station and uncovered buried sections of the pipeline

$17.3 billion: How much taxpayer money is already invested in TMX, as of September 2021, according to a recent report from the Institute for Energy Economic and Financial Analysis

$26.1 billion: How much Canadian taxpayers could wind up paying for the entire project, according to that same report

Reads of the week

• Doug Ford's resounding win cost the Liberals and NDP their leaders. Now what?
• ‘We are losing a whole generation of Canadians’: Bill to curb toxic drug deaths defeated
• To get into Canada's weapons fair, you'll have to walk through an anti-war protest
• The surprising truth about gun deaths in Canada
• ‘I’ve never been treated so bad in my life’: Manitoba’s first female Indigenous RCMP officer
• Pride flags fly over more Catholic schools in Ontario this year
• Environmentalists shudder as Ford bulldozes opponents to win second majority in Ontario election
• West White Rose offshore oil project is back on, leaving climate concerns in its wake