Mr. Speaker, last December I asked the Prime Minister about the financial situation surrounding the Trans Mountain pipeline. As most Canadians know, the government now owns this pipeline, having bought it in 2018. We paid $4.5 billion for the pipeline, a price that has most charitably been characterized as being at the higher end of the valuation range. By other analysts, it was considered overpriced by a billion dollars or more.
I asked that question because the Parliamentary Budget Officer had just reported that the pipeline was losing money. To be accurate, it actually posted a small profit in 2019 due to, according to the PBO report, tax recoveries due to negative earnings before taxes and changes in the provincial corporate tax rate. Therefore, the taxpayers, particularly those in Alberta, continue to subsidize this project.
In my question I also mentioned the analysis of Trans Mountain's financial situation by economist Robyn Allan. She found that the tolls charged by the pipeline only covered about a third of the cost of running it, and that these tolls were constrained by the way Canada had bought the pipeline, through shares instead of capital assets.
The Prime Minister answered with two familiar narratives. He said that Canada needed access to new oil markets outside the United States, and even after I had explained why there would be no profits for Trans Mountain, the Prime Minister said that all those profits would go to “nature-based solutions and new technologies”.
I will say briefly that all analysts would agree that almost all the oil that may flow one day through the Trans Mountain expansion pipeline will go to the United States, not Asia, since it is in the U.S. that the best opportunities for bitumen lie. The narrative that the government and industry are spinning about the need for pipelines to tidewater is not at all accurate.
I want to spend the rest of my time explaining why the Trans Mountain expansion project will result in little or no profits for shippers or the government. The government has been saying for months that tax revenues will increase by $500 million per year once the expanded pipeline is in place. That assumption is wildly incorrect for two reasons. First, it was based on an estimated project cost of $5.4 billion and, as I will mention shortly, that figure has changed a bit. Second, it is also based on the incorrect assumption that all the oil production in western Canada would benefit from better prices produced by having a pipeline to tidewater.
As we have all heard, there is often a considerable differential between the price of oil received by some producers in western Canada and the general world price. That differential is caused by shipping constraints when refineries are shut down for maintenance or pipelines are shut off to fix leaks, so a bigger pipeline would help eliminate that differential. However, according to Natural Resources Canada, the differential only affects about 30% of oil produced in Canada, so profits would only increase theoretically for about 30% of oil producers, and even those profits are at risk because of the rising costs of the project.
I asked a second question on Trans Mountain a few weeks ago when the company announced the price of the expansion had gone up from $5.4 billion to $12.6 billion, and as project costs skyrocket, profits for the companies that have pledged to use the pipeline quickly vanish. They go down because a portion of the pipeline shipping toll fees for those producers is linked to the costs of the project. As the tolls go up, profits go down, and if the cost is truly $13 billion, they essentially vanish. It is those non-existent profits that would theoretically generate the tax revenues the Prime Minister would want to use to fight climate change.