(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

The Okanagan’s first virtual wedding fair will be held Saturday, March 27. {Paul Rodgers photo)
Okanagan to host virtual wedding fair

Okanagan wine country is No. 1 destination for weddings - online event set for March 27

Wills Hodgkinson, 10, and his mom Neeley Brimer get ready to battle round three of cancer. The community of Penticton has his back. (Submitted)
Community raises $21K to help Penticton boy battle third round of cancer

Okanoggin Barbers held the fundraiser on Saturday for 10-year-old Wills Hodgkinson

Baldy Mountain Resort was shut down on Saturday after a fatal workplace accident. (Baldy Mountain picture)
UPDATE: 70-year-old man killed in workplace accident at Baldy Mountain

The mountain closed on Saturday but has partially re-opened today (Sunday)

Send your letter to the editor via email to news@summerlandreview.com. Please included your first and last name, address, and phone number.
LETTER: Summerland affordable housing proposal opposed

“For a building that will change the dynamic of a small town, I would have expected more discussion.”

A health worker holds a vial of AstraZeneca vaccine to be administered to members of the police at a COVID-19 vaccination center in Mainz, Germany, Thursday, Feb. 25, 2021. The federal state of Rhineland-Palatinate, start with the vaccination of police officers in internal police vaccination centers. (Andreas Arnold/dpa via AP)
B.C. officials to unveil new details of COVID vaccination plan Monday

Seniors and health-care workers who haven’t gotten their shot are next on the list

(Contributed)
Kelowna flight potentially exposed to COVID-19

Third case on a local flight this month, compared to 14 through January

Vernon Search and Rescue, with help from the Air Rescue One helicopter out of Wildcat Helicopters in Kelowna, and Central Okanagan Search and Rescue, were able to transport an injured snowmobiler to Vernon Regional Airport, where he was loaded into an ambulance and taken to Vernon Jubilee Hospital with a serious, painful back injury. (Facebook photo)
Okanagan helicopter rescue teams called to retrieve injured sledder at Greystokes

Vernon and Central Okanagan Search and Rescue help load injured man into waiting helicopter

An investigation is underway after a man was shot and killed by Tofino RCMP in Opitsaht. (Black Press Media file photo)
Man shot and killed by RCMP near Tofino, police watchdog investigating

Investigation underway by Independent Investigations Office of British Columbia.

B.C. Supreme Court in Vancouver on Tuesday December 11, 2018. THE CANADIAN PRESS/Darryl Dyck
B.C.’s compromise on in-person worship at three churches called ‘absolutely unacceptable’

Would allow outdoor services of 25 or less by Langley, Abbotsford and Chilliwack churches

Jasmine and Gwen Donaldson are part of the CAT team working to reduce stigma for marginalized groups in Campbell River. Photo by Marc Kitteringham, Campbell River Mirror
Jasmine’s story: Stigma can be the hardest hurdle for those overcoming addiction

Recovering B.C. addict says welcome, connection and community key for rebuilding after drug habit

Chase RCMP held two men involved in drunken disturbances overnight in their detachment’s cells on Feb. 6. (File Photo)
Chase RCMP hold two men involved in drunken disturbances overnight

The two separate incidents took place less than an hour apart.

Kamloops Fire Rescue battled a landfill fire which belched toxic smoke into the air on Feb. 27. (City of Kamloops Photo)
Fire at Kamloops landfill sends thick black smoke into the air

Firefighters made slow progress on the fire throughout the morning.

Most Read