(The Canadian Press)

(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

A laboratory technician holds a dose of a COVID-19 novel coronavirus vaccine candidate that’s ready for trial on monkeys at the National Primate Research Center of Thailand. (Mladen Antonov - AFP)
Interior Health reports 66 new COVID-19 infections

570 cases are active; 18 in hospital

The Golden Nordic Club is working towards a COVID-safe winter ski season opening. (File photo)
Golden Nordic Ski Club working towards opening

While Dawn Mountain is provincially run and open, the chalet and Nordic Club are not as of yet

The Interact Club meets in 2019 for their annual Anti-Grinch project. This year, the club members will add the Angel Tree to their list of Christmas charitable causes. (Contributed)
Interact Club takes on Angel Tree

With changes to this year’s Anti-Grinch project, there is increased capacity for the Angel Tree

santa.
Morning Start: Santa Claus has an official pilot’s license

Your morning start for Wednesday, Dec. 2, 2020

A woman wearing a face mask to curb the spread of COVID-19 uses walking sticks while walking up a hill, in New Westminster, B.C., on Sunday, November 29, 2020. THE CANADIAN PRESS/Darryl Dyck
Interior Health reports 83 more COVID-19 infections overnight

46 cases are now associated with a COVID-19 community cluster in Revelstoke

(Google Maps)
Osoyoos Credit Union staff member tests positive for COVID-19

The credit union made the announcement Dec. 1

An Enderby restaurant and pub was shut down Sunday afternoon, Nov. 29, 2020 as a precaution after a guest reportedly tested positive for COVID-19. (Howard Johnson photo)
North Okanagan pub reopens after COVID-19 scare

After a guest reportedly tested positive for the virus, staff test results came back negative

Alix Longland
Trauma resources ready for North Okanagan refugees

Family Resource Centre working with UBCO social work grad to reach out to local refugees

Elkhart Gas Station, located on Highway 97C about 60 kilometres west of Peachland, opened in November 2020. (Google maps)
The Okanagan Connector now has a gas station

The highway previously ran for over 117 kilometres without a place to fuel up

The Hughes’ Grinch was stolen from their front yard Wednesday, Dec. 1, 2020. The Santa suit the Grinch is wearing is 50 years old and has sentimental value. It was once worn by April Hughes’ dad. (Hughes photo)
Grinch stolen from Penticton home is ‘irreplaceable’

The Hughes have had a Christmas display for 25 years on Grandy Avenue in Penticton

Midway RCMP’s Cpl. Phil Peters spoke at Greenwood’s city council meeting Monday, Nov. 23. Photo: Laurie Tritschler
B.C. Mountie builds fire to warm suspect with hypothermia prior to rescue

Cpl. Phil Peters said the civilian helped police track, apprehend and eventually rescue the suspect

Premier John Horgan leaves the podium following his first press conference of the year as he comments on various questions from the media in the Press Gallery at B.C. Legislature in Victoria, B.C., on Monday, January 13, 2020. THE CANADIAN PRESS/Chad Hipolito
Revelstoke COVID-19 cluster linked to non-essential travel: Horgan

There have been 46 cases of COVID-19 in the community

Students at Lavington Elementary crammed a car full of non-perishables for those in the community facing food insecurity. Spearheaded by teacher January Peebles (left), the donations were picked up by Give LUCK founder Myrika Godard, who works to connect donors with donees in the North Okanagan. (Give LUCK photo)

Most Read