(The Canadian Press)

Ottawa reports $29M profit at Trans Mountain but critic says accounting flawed

The report, based on numbers from Canada Development Investment Corp., notes operating expenses of $366 million

A report that says the Trans Mountain pipeline system has earned net income of $29 million in the 19 months since it was purchased by Ottawa relies on faulty accounting, according to a vocal critic of the project.

The oil conduit running from Edmonton to the Vancouver area had operating revenues of $728 million, mainly from user tolls, since it was purchased in the fall of 2018 from Kinder Morgan Canada for about $4.4 billion, according to an online analysis from the Office of the Parliamentary Budget Officer posted Wednesday.

The report, based on numbers from Canada Development Investment Corp. — which owns the pipeline on the government’s behalf — notes operating expenses of $366 million, financing costs of $223 million and a $172-million depletion and depreciation expense on the pipeline assets.

Those were offset in part by a $61-million tax recovery thanks to a decrease in Alberta’s corporate tax rate as well as lower income taxes for the period ended March 31.

“An increase in construction costs or changes in the price of oil could affect profitability but for the first months up to March 2020, the pipeline seems to have been profitable,” said Parliamentary Budget Officer Yves Giroux in an interview.

In a report last November, the Cleveland-based Institute for Energy Economics and Financial Analysis charged that Trans Mountain is receiving hundreds of millions of dollars in hidden direct and indirect federal and provincial government subsidies.

It listed the Alberta tax cut as a subsidy even though it applies to all businesses and said the project also benefits from lower-than-market interest rates given its high level of risk.

The Department of Finance, however, responded at the time that the government does not consider any part of its investment in the pipeline to be a subsidy.

“This (report) is a very narrow focus and does not include the massive subsidies that have been offered to the project, direct and indirect subsidies,” said IEEFA financial analyst Kathy Hipple on Wednesday.

In February, Trans Mountain announced a revised construction cost estimate for its expansion project, bumping it up by about 70 per cent from $7.4 billion to $12.6 billion.

In spite of the increased cost and the dramatic downturn in oil prices this year due to the pandemic fuelled economic downturn, the pipeline has not written down its goodwill, although oil producers have recognized billions in such writedowns, Hipple said.

“This is astonishing to me,” she said.

But Giroux defended the numbers, noting that pipeline economics are different than oil production economics.

“The issue of oil prices could affect future revenue but the tolls are being determined by the Canadian Energy Regulator so tolls are not as dependent on the price of oil itself,” he said.

“They’re dependent on the volume, so as long as Trans Mountain has secured contracts to fill the majority of its expanded capacity, revenues should not be too much at risk.”

The PBO added the CDIC has revised the sensitivity analysis it uses to determine goodwill impairments.

It previously provided estimates for the impact of a 10 per cent increase in construction costs or a one-year delay in construction, along with higher interest rates.

It now estimates a 0.25 per cent increase in interest would have a $500 million impact on the value of the project, a $600 million increase in construction costs would have a $200 million impact and the impact of a one-year delay plus a $600-million cost increase would be $900 million.

Dan Healing, The Canadian Press

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

Pipeline

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Prince Rupert Regional Airport Manager Rick Leach said on Oct. 29 that small community airports, like YPR, need a government cash infusion to survive COVID-19. (Northern View file photo)
Failure of Government and airlines leave regional and community airports on the brink of financial collapse

Govt. cash infusion is needed for smaller airports, like Prince Rupert, to survive COVID-19 - RCAC

Confirmed COVID-19 cases have affected the Prince Rupert community the week of Oct. 29 with a Shoppers Drug Mart employee and an S.D. 52 staff or student being infected with the virus. (Image courtesy CDC)
COVID-19 infects Prince Rupert school district individual

S.D. 52 is prepared for COVID-19 and is working under Northern Health protocols - Sandy Pond

Masks are now compulsory at all Prince Rupert public facilities and the City reminds people to discard used masks in waste bins, a media release on Oct. 29 said. (Photo by K-J Millar/The Northern View)
Mandatory mask-wearing effective immediately at city public facilities

City of Prince Rupert makes masks compulsory to protect community health and safety

North Coast home-grown ice talent Carly Edwards from Haida Gwaii and Prince Rupert takes centre ice on TV competition show Battle of the Blades Thursday nights at 8 p.m., with her partner NHL partner Kris Versteeg. (Photo supplied)
Local figure skater spotlights on TV show’s centre ice

Prince Rupert’s Carly Edwards is featured on TV competition show Battle of the Blades

A deer was spotted in October 2020 in Prince Rupert, B.C., with a bright pink yoga ball stuck in its antlers. (Kayla Vickers/Chronicles Of Hammy The Deer Official Page)
PHOTOS: Hammy 2.0? Prince Rupert deer spotted with bright pink yoga ball stuck in antlers

The BC Conservation Officer Service is aware of the deer roaming around the city

Sooke’s Paul Larouche enjoys gold panning along the Sooke River, looking for small treasures. (Aaron Guillen/News Staff)
VIDEO: Island man finds niche audience by gold-panning on YouTube

Paul Larouche, 29, with over 215,000 subscribers, opens up about his journey

Health care employees take extensive precautions when working with people infected or suspected of having COVID-19. THE CANADIAN PRESS/Chris Young
WorkSafeBC disallows majority of COVID-19 job injury claims

Health care, social services employees filing the most claims

Conservative leader Erin O’Toole rises during Question Period in the House of Commons in Ottawa on Wednesday October 28, 2020. (Adrian Wyld/The Canadian Press)
Conversion therapy ban gets approval in principle, exposes Conservative divisions

Erin O’Toole himself voted in favour of the bill, as did most Conservative MPs

CBSA. (Black Press Media File)
4 sentenced in B.C. steroid smuggling, distribution ring that spilled into U.S.

Canadian Border Services Agency announced the results of a lengthy investigation it called ‘Project Trajectory’

Search and Rescue Technicians carry a stretcher to the CH149 Cormorant during a 442 Squadron Search and Rescue Exercise in Tofino on February 28. (Photo by: Cpl Joey Beaudin, 19 Wing Imaging, Comox)
Father and son found dead after weeklong search near Pemberton

The father and son had set out for a day of mushroom picking last Thursday

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

A full moon rises over Mt. Cheam on Saturday, Feb. 8, 2020. (Jenna Hauck/ The Progress)
Rare full moon, Daylight Saving makes for a uniquely spooky Halloween – despite COVID-19

We can’t host costume parties but this weekend is still one for the history books

A woman wears a face mask and plastic gloves while browsing books as a sticker on the floor indicates a one-way direction of travel between shelves of books at the Vancouver Public Library’s central branch, after it and four other branches reopened with limited services, in Vancouver, on Tuesday, July 14, 2020. (THE CANADIAN PRESS/Darryl Dyck)
B.C. reports 234 new COVID cases, 1 death of senior who had attended small birthday party

Roughly 5,700 people are isolating due to being exposed to a confirmed case

A study by SlotsOnlineCanada notes there is at least 88 hours of top-rated horror movies for Canadians to consume this Halloween. (Unsplash)
Spooks and Chill study reveals Canada’s favourite horror flicks

88 hours of top-rated horror movies can fill COVID-19 Halloween

Most Read