TMEP – Is it Canadian culture; or cost overruns & time delays to be truly blamed?

The Trans Mountain Expansion Project (TMEP) will hold the number one spot as the “most expensive” oil pipeline project in modern history. Clocking in at CAD 34.4 billion. Originally constructed in 1953, built, operated, and owned by Kinder Morgan Inc. until Aug 2018, growing demand over prior years required the addition of building new pipelines, or expanding existing infrastructure by “twinning” the original crude oil pipeline. Originally estimated to cost CAD 5.6 billion, the final price tag, on In-Service date, May 1, 2024, ballooned to CAD 34.4 billion. The Canadian Federal Government purchased the TMEP and the existing pipeline infrastructure in Aug 2018.

It is quick and easy to point fingers at the Canadian Federal Government. Once one completes a detailed analysis of timelines, delays, and cost overruns, it is not difficult to identify root causes. In “consulting speak”, a “Cause and Effect” analysis and diagram, covering the actual timeline, goes a long way, as one method, to unpack and quantify the effects of delays and cost overruns.

These questions are to be asked, and root causes are to be analyzed. After all, taxpayers (Canadian Residents as “shareholders”), funded the entire project. The CAD 4.4 billion (WIP on the TMEP, including the original infrastructure and improvements from many years prior (since 1953)) that ended up with a price tag of CAD 34.4 billion (mushrooming in a few years since Aug 2018, i.e., 5 years and 9 months, thus close to 6 years). In-service enabling works were conducted until early 2025, when the pipeline became fully stocked to start accepting nominations from shippers and producers.

I was curious to ascertain what one can refer to as “delay-impact ratios” stemming from the TMEP. What was planned and what unfolded. With such an absorbent price tag, it is important to identify what these factors look like once quantified. Use the outcome as a “blueprint” for enhanced project finance stress-testing. Too often, project finance is evaluated based on counting the years from 1,2,3 and onwards. One needs to work with properly defined phases and understand how capital behaves within each of the phases.

Recently, I was asked the question, “When should I invest my money in a large-scale transportation project? Is it at inception, when the Final Investment Decision (FID) stage is reached? Is it only after regulatory approval? Is it at the construction start phase (less risky), or in the in-service phase when the project is de-risked? A conservative investor would argue the latter is the best. Not so. Almost zero risk equates to nearly zero return, running the risk of below-inflation returns over the long term. So, when is the best time?

Backgrounder

Canada has not developed critical resource transportation infrastructure in decades. If memory serves right, we have the national rail networks, the Trans-Canada Highway (which in itself was conceived in the 1920s, legislated in ~1949, and construction and development from the 1950s to the early 1970s. A process that stretched over some 4 decades. In comparison, many other emerging economies can plan, develop, construct, and utilize key infrastructure much more quickly. Notably, the Gautrain Rapid Rail project. Yes, there were delays too; however, the project sponsors knew exactly what they were doing. Such individuals are rare. The chief project sponsor has a unique and highly stressed role, requiring a solid commitment where failure is not an option. No matter that person’s background. It is all about being a “Committed Maestro” who directs a performance by the “London Philharmonic Orchestra. That is the required mindset that ensures long-term and ongoing success.

A valid argument is that national infrastructure development spans multiple time zones in Canada. The population density is low. Canada is the second most immense landmass in the world after Russia. That should not serve as an excuse for having to entertain critical time delays and turning almost impossible developmental ideas into reality. The 1885 Canadian Pacific Railway nation-building project took a mere five years to complete.

It is very ironic. Canada is the land of “lineups”. Really. Why am I saying this? Do you recall the movie “Meet the Parents” from 2000? When Greg arrives at the airport, the flight attendant tells him to wait in line as his row number has not been called yet (the flight attendant is calling row nine and up, and Greg is in row 8). No other passengers are waiting in line, yet a wait-line is being created because of the eagerness, tenacity, and the precise rule-driven nature of the flight attendant (Missy Perfect, Virtue signalling). It is anal. Canada is friendly, eager to help, but based on strict rules that must be followed, things move at a snail’s pace. I kid you not!

It already starts when you apply to immigrate to Canada, when you quickly realize that the processing delays and wait times are unpleasantly long. And I mean super long, as long as ~7 years in most cases.

Over many years, the sparkle that defined the North Star has faded amid over-obedience, striving for perfection, all driven by complacency to the nth degree. Take the Canadian Healthcare system. It is known in the world as a decent government-sponsored healthcare system. To some degree (if you think Canadian Residents and Citizens fund the healthcare through the taxes that we pay). The national lotteries go a long way to help fund it. Canadians also purchase lotto tickets (nothing wrong with that). The reality is, healthcare in Canada is not free. Every resident and citizen has an equal opportunity to need and access healthcare. Quite rightly so, government (provincial and federal) pay the bills and creates the ability “to access”. However, it is a different kind of fish when administrators and politicians set policy in the hope of solving things, which never yield the desired outcome. Solving this chronic line-up dilemma (worsened a lot since 2008), means prioritizing the hiring of international health professionals through fast-tracked immigration, abolishment of non-recognition of foreign medical qualifications. The reality is, humans are the same everywhere on planet Earth. Our biology is the same, other than for looks, shapes, tallness, genitalia, and sexual orientation. The born functioning is the same for all on planet Earth. Why then does Canada, known for humanitarian accolades and a culture of non-discrimination, discriminate against international professionals in the medical field (other fields as well, but not part of this writing). For such reasons, this explains why projects take a long time from inception to construction and completion.

I will support Prime Minister Justin Trudeau’s and Mark Carney’s love for China. And only as it pertains to transportation infrastructure development and funding. China plays a “breathtaking A-game” when it comes to developing transportation infrastructure. Just Google a few pictures about the roads and bridges constructed in what would normally be referred to as “highly inaccessible mountainous areas,” or look at the Three Gorges dam and water project(s). Canadians need to get their priorities straight. Move away from pretentiousness, fake and complacent attitude to a “CAN DO” attitude and mindset.

Other issues that crowd out

Other notable reasons why transportation infrastructure development is hindered in Canada stem from:

• • • An inability to objectively collaborate in making joint decisions that benefit all Canadians. Sometimes one feels that each province is a “little country”. We live in 2024, not in the 1800s.
    • The lack of presence of the Development Finance Institutions (DFIs). Their mandate precludes funding and participation in countries that are defined as “Developed Economies”. In contrast, Canada is a hybrid of developed and underdeveloped status. Between the 49th and 57th parallels are well-developed. North of 57, transportation infrastructure is lacking, yet Canada is ambitious to play a meaningful role in extracting critical minerals. The old saying, “without distribution, you do not have business.”
    • The lack of a deep and highly liquid municipal bond market is a weakness that stems from highly restrictive borrowing covenants driven by different rules for the municipalities in each province. Pooled funding does exist. However, it is not as effective as it could be.
    • What is required is an overall reform of municipalities’ recognition under the Constitution Act. There are interesting and truly huge catalysts that can be leveraged to draw in the private sector in innovative financing combined with well-quantified risk reduction measures. If third-world and developing countries can be bold in similar funding spaces, what is wrong with us in Canada? Yawning, boring and slothful (like in the movie “Zootopia”), and wokeness preventing concerted efforts, enabling boldness?
    • Has Canada morphed into a “mamma’s boy-“, a “sissy-“, and “a keener” land that wants to please the world-” kind of country? I hope not, I wish and believe for the current paths of wokeness to be replaced by creating opportunities and executing them supported by less talk and more “DO”, unite behind Canada’s blessing of abundance, cultivate a culture of “CAN DO”. There is a reason Canada is the only country in the world whose name starts with “CAN”. There is a reason for that. We have lost our compass and drifted away from being the world’s North Star; and
    • Climate change transformation obsessiveness. The on-purpose definition to marginalize the energy industry only leads to compounded problems. Like the rising cost of energy, little to no investment in new energy projects is critical to support the development and growth of the Canadian economy. Current policy drives investment out of Canada. It is sad to know that the biggest pension fund, the Canadian Pension Plan (CPP), prefers to invest in other international markets rather than in Canada. The same argument applies to other large asset managers and the insurance industry. The rolling out of both transportation infrastructure and green infrastructure creates solid, high-yielding opportunities to match investors’ long-dated liabilities.

What worked

Canada’s history reflects determination with the coming of age of transcontinental development. Confederation was partially motivated by the Canadian Pacific Railway project from 1871 until completion in 1885, thus 14 years from inception to completion (with little to no modern technology, relying only on men, hands, and behemoth laborious tasks). Construction started in 1880, and the famous picture of the two opposite-direction constructions joining happened in 1885.

Where there is a STRONG WILL, nothing is impossible. The population in 1871 was a mere ~3.4 million people, including First Nations peoples. The desire to build infrastructure of this magnitude, covering some ~4,697 Km (~1,600km longer than the first transcontinental rail project in the USA), is truly “nation building”. It proves the fact that strong transportation infrastructure development is a key component for creating real prosperity for all Canadians. Transportation infrastructure facilitates compounded crowding-out of economic and personal benefits over the long term.

What is broken

In 2025, Canada stands on the brink of being further marginalized amid the tariff wars with the USA. President Trump is not a bad person, although most Canadians believe so. That is because he says it directly, the way it is. Canada will perform much better with equals, like President Trump. Same merely placed the spotlight on “Canada’s spoilt” comfortable position, riding along on the USA economy. Some 76% of Canada’s exports are sent to the USA, of which oil and gas make up a substantial portion. Canada also exports, but to a lesser extent, too. Nine other countries as large secondary export destinations. Last I saw, the world has ~193 countries. Why is Canada not the “king of the export castle” to the other remaining ~183 countries?

Canada’s ports are dated, lacking technology that drives efficiencies. Adjacent land is built up, making the execution of expansion plans costly. Vancouver port on the West Coast of Canada is the largest port in Canada, facilitating ~150 million metric tonnes of cargo and 3.13 million Twenty Foot Equivalent Units (TEUs) p.a. in 2023. Halifax on the East Coast managed, for the same year, only 9.8 million metric tons and 546 thousand TEUs. Montreal in Quebec, and linking into the St. Lawrence Seaway, managed for 2023, ~35.4 million metric tonnes and 1.5 million TEUs. The St. Lawrence Seaway, developed and constructed in the 1950s, is an advanced channel, for that time, linking the Great Lakes with the Gulf of St Lawrence and into the open Atlantic Ocean. The St Lawerence Seaway is also dated, as modern wider vessels cannot fit into the channel.

In conclusion, the TMEP experienced delays and massive cost overruns due to its over-dependency on what worked in the previous era, combined with an inability to adapt to modern approaches. I strongly believe that another reason for the massive cost overruns is the complacency factor, very evident in the broader Canadian culture, as I have identified some of them above. Ever wonder why Canada has a multi-decade challenge with weak productivity? Well, look no further. I’ll go one step further, too, and that is, “assume” really makes an “ass-of-you-and-me” stemming from the ill-defined notion that it was incorrectly assumed when the TMEP twinning-idea was birthed, it was believed that since the right of way already then existed since 1953, there are no obstacles and would be a “tick-box check-list effort”. How wrong such thoughts were.

It isn’t very pleasant to think that it is likely how wealthy executives sold the project to senior, well-paid government officials. At the end, it is our tax dollars that saved the day. The question is, will future returns be enough to repay our capital and exceed the government’s cost of capital? No, it will not! It is highly dependent on much higher tariffs. Will it produce a return that exceeds the negative impacts of future inflation? No, it will not!