(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

Westbound Highway 1 traffic near Herrling Island is backed up a long way following a vehicle incident. (Photo/Trish Dunbar)
Pedestrian killed in crash near Agassiz

Woman in her 50s struck by moving van

A nurse holds vials of AstraZeneca vaccine against COVID-19 during a vaccination campaign at WiZink indoor arena in Madrid, Spain, Friday, April 9, 2021. THE CANADIAN PRESS/AP/Manu Fernandez
Hope residents 40 and older can now get vaccinated at participating pharmacies

Remedy’s RX pharmacist said the response from the public was immediate following announcement

Future Finlandia Lion Ian Heagy with his biggest fan, mom Jen Heagy. (submitted photo)
Chilliwack hockey player Ian Heagy defies the odds to land at Finlandia

Having never played a minute of rep, Heagy is making the jump from house to NCAA Div 2 hockey

The Abbotsford Centre has the ability to host AHL level games if the Vancouver Canucks or any other NHL team chose to move its affiliate to the arena. (File photo)
Abbotsford Centre ready for AHL if right opportunity presents itself

Building recently upgraded glass and boards, schedule would allow for AHL tenant

In 2012, police in Abbotsford placed surveillance cameras near the Dhaliwal home in the 2500 block of Bradner Road after there were two drive-by shootings in the area. Harb Dhaliwal, 31, has now been identified as the victim of a fatal shooting April 17 in Vancouver. (Abbotsford News file photo)
Abbotsford man named as victim of fatal weekend shooting in Vancouver

Harpreet Dhaliwal, 31, killed outside of Cardero’s restaurant in Coal Harbour

In this image from NASA, NASA’s experimental Mars helicopter Ingenuity lands on the surface of Mars Monday, April 19, 2021. The little 4-pound helicopter rose from the dusty red surface into the thin Martian air Monday, achieving the first powered, controlled flight on another planet. (NASA via AP)
VIDEO: NASA’s Mars helicopter takes flight, 1st for another planet

The $85 million helicopter demo was considered high risk, yet high reward

A man has died after being shot at Coquitlam’s Town Centre Park the evening of Monday, April 19. (Twitter/IHIT)
1 man dead after shooting at Coquitlam park: IHIT

The gunman is still at large, according to the Integrated Homicide Investigation Team

Paramedic Matthew Schlatter of Victoria is living a fuller life today due to the double lung transplant he received in 2019. He encourages B.C. residents to register as an organ donor and let their families know their wishes. (Instagram/Matthew Schlatter)
B.C. man living a full, active life after double-lung transplant

Matt Schlatter encourages people to register as an organ donor to help others live

(Photo by Mojpe/Pixabay)
Canadian kids extracting record amounts from Tooth Fairy

Our neighbours in the U.S. receive slightly less from Tooth Fairy visits

Dr. Bonnie Henry gives her daily media briefing regarding Covid-19 for the province of British Columbia in Victoria, B.C, Monday, December 7, 2020. THE CANADIAN PRESS/Jonathan Hayward
Toddler marks youngest British Columbian to die related to COVID-19

Child one of eight people to die from virus this weekend

Families of two of three workers killed in a train derailment near Field, B.C., in 2019 have filed lawsuits accusing Canadian Pacific of gross negligence. The derailment sent 99 grain cars and two locomotives off the tracks. THE CANADIAN PRESS/Jeff McIntosh
Families of workers killed in Field train derailment allege negligence in lawsuit

Lawsuits allege the workers weren’t provided a safe work environment

(New Westminster Police)
4 youth arrested after 30-person brawl in New Westminster leaves 1 seriously injured

Police are looking for witnesses who saw the incident take place

Most Read