(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

Just Posted

Parksville Golden Oldies Sports Association’s popular walking soccer league was one of several sports programs and activities that were cancelled following provincial health officer Dr. Bonnie Henry’s latest announcement to ban indoor adult team sports. (PQB News file photo)
Adult sports shutdown ‘tough pill to swallow’ for some Vancouver Islanders

Adult recreation adjusting to new provincial COVID-19 orders

Island Health has reported a COVID-19 outbreak at Saanich Peninsula Hospital. (Arnold Lim/Black Press)
Four new COVID-19 cases added to Saanich Peninsula Hospital outbreak

Inital round of patient testing is complete, staff testing continues

Mustang Sally and her owner John Ludlow will be seen driving throughout the Comox Valley this Christmas season (and beyond). Photo by Erin Haluschak
Mustang Santa spreading joy, one car ride at a time

Vancouver Islander’s 1966 Ford Mustang Sally transforms for the holiday

12-year-old Ella Smiley captured some video of orcas on a sea lion hunt on Nov. 28 at Kitty Coleman Park, just north of Courtenay. Photo by Ella Smiley
VIDEO: Orcas hunt sea lion off Comox

Young whale watcher captures the action near Kitty Coleman Park

Camp residents were escorted by police into the camp and given about 10 to 15 minutes to gather their belongings and vacate the camp, which is now closed. (Chris Bush/News Bulletin)
City dismantling Wesley Street homeless encampment after fire

Fire broke out at about 12:15 p.m. Thursday, Dec. 3

Nanaimo RCMP hope the public can help identify a woman driving a Ford pickup who fled the scene following and collision on Wellington Road Tuesday. (File photo)
Nanaimo RCMP seek driver alleged to have fled from hit-and-run

Driver allegedly flees scene after head-on crash between two Ford pickups

A fountain of water spewed from a Courtenay fire hydrant Friday (Dec. 4) morning after it was hit by a vehicle on Fitzgerald Avenue. Photo by CTV Vancouver Island
Vehicle hits hydrant in Courtenay sending fountain of water in the air

Comox Valley RCMP were on scene looking at a vehicle left behind which had extensive damage.

Dennis and Jenny Shorty, from Ross River, Yukon perform with others as Dena Zagi – combining traditional Dena First Nations themes and lyrics with contemporary musical styles. (Courtesy West Coast Reach Association)
National names mingle with Greater Victoria talent for diverse, free concert

Virtual event commemorates Human Solidarity Day, International Day of Persons With Disabilities

A Canada-wide warrant has been issued for Romey O’Neill. (Photo submitted)
Nanaimo RCMP seek man wanted on immigration warrant

Romey O’Neill, 26, rented Kia sedan in Nanaimo, car was later reported stolen

Lake Trail Middle School in Courtenay has closed again due to a threat Friday (Dec 4). File photo
Island middle school closed for the second time in a week due to threat

On Nov. 26, Lake Trail Middle School was closed for a day while a similar incident occurred.

The Klahoose First Nation village on Cortes Island is under lockdown until at least Dec. 7 due to a positive COVID-19 test. Photo courtesy Kevin Peacey.
Klahoose First Nation’s COVID-19 response working

Community testing comes back negative after week of lock down

Swiftsure International Yacht Race 2018. (Black Press Media file photo)
Popular Swiftsure yacht race cancelled for second consecutive year

International sailing race hopes to run its 77th event in 2022

Most Read