General Canadian Politics eh.

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Freeloading Rusty

Here comes Rover, sniffin’ at your ass
Jan 11, 2016
26,916
26,743
Trans Mountain Deal Was Structured to Bleed Billions, Finds Economist
The existing pipeline is losing money, concluded Allan, the former CEO of the Insurance Corporation of BC and chief economist for BC Central Credit Union.

The proposed expansion to triple the pipeline’s capacity will add to the losses as taxpayers subsidize both construction and the fees companies pay to ship oil.

And, Allan noted, Ottawa has no idea how much the expansion will cost.

“Trans Mountain was a profitable pipeline system when Ottawa bought it,” she writes, “but it is not generating earnings now — it is booking losses and has been since the government took over.”

Allan’s independent assessment is worth your attention.

First, you need to know that you own something called the Canada Development Investment Corp. The Crown corporation, with the unlovely acronym CDEV, was established in 1982 and manages federal investments, including in the Hibernia offshore oil field — and now the Trans Mountain pipeline.

Among CDEV’s responsibilities are two Crown corporations created as part of the deal to buy the Trans Mountain pipeline. Canada TMP Finance Ltd. borrows the money and pays the interest. And it actually owns Trans Mountain Corporation, which operates the pipeline. (Yes, it takes two Crown corporations to own one pipeline.)

Allan parsed through CDEV’s most recent financial statements. They include some sobering revelations.

Red ink warnings

For starters, CDEV is already warning of possible cost overruns.

“There is risk surrounding the completion of Trans Mountain Expansion Project and the construction of TMEP will be faced with difficult terrain, risks of cost overruns and the potential for additional legal challenges or other impediments to construction,” it notes.

And, according to the Crown corporation’s report, there are other worries for taxpayers.

“Financial commitments have not been obtained to finance the entire project which results in continued financial and completion risk for the project.

But as Allan discovered, the news gets much worse.

The tax favour that cut billions in value

When Ottawa purchased Trans Mountain it bought shares rather than assets, which Allan says benefited the indebted Texas firm. “Buying shares rather than assets reduced the taxes Kinder Morgan was required to pay on the sale,” she reported.

But more importantly the decision “guaranteed a huge subsidy to shippers through reduced toll rates,” Allan reports.

Pipelines make money by charging customers tolls. The Canada Energy Regulator (formerly the National Energy Board), yet another federal agency, sets the rates. The regulator, known as the CER, set the rates for Trans Mountain for the next three years in 2019.

Here’s the catch. Rates are set based on pipelines’ operating costs and the asset value of the pipeline and related facilities, with the aim of ensuring a fair return for the owners (and fair rates for the companies that ship oil or gas).

Allan found that by purchasing shares instead of assets, the federal government ensured the asset value of the Trans Mountain pipeline would be understated. That meant lower future tolls, she reports, “a gift to Alberta’s oil patch, refiners in Washington State, Parkland Refinery in B.C. and refiners off Westridge dock (which means predominantly refineries in California).”

According to Allan’s reading of the regulatory documents, the tolls that the CER approved are based on a valuation of the Trans Mountain assets at $1 billion. Yet Ottawa paid $3 billion for the existing pipeline and $1.5 billion for the expansion plans. If the government had bought assets instead of shares, the full $3 billion would have been considered by the CER in setting tolls, resulting in higher rates for shippers. (Yes, Ottawa did overpay for the pipeline.)

How fine print created a white elephant

Allan adds that the decision will make it hard to unload the aging pipeline.

“What private company motivated by commercial returns would be interested in buying the existing pipeline for the $3 billion Ottawa paid, when the tolls it would receive reflect a value for the facility of only $1 billion?”

That’s a question that Canada’s finance minister has not yet answered.

Allan found the decision means that shippers will pay $2 billion less in tolls over the next three years — at the expense of Canadian taxpayers. The loss will rise to $3.4 billion over five years, she warns.

So far, Morneau’s promise of making money for Canadians from the pipeline isn’t looking all that good. No cash and no smiles.

The Canada Development Investment Corp.’s latest financial statements reveal another awkward problem: The Trans Mountain pipeline lost $75 million in the first nine months of 2019.

Why? “Because Mr. Morneau failed to ensure that the toll settlement agreement between Trans Mountain and its shippers resulted in toll rates high enough to cover the cost of buying it,” Allan argues.

The Canadian government claimed it would cost $7.4 billion to complete the expansion project when it bought the pipeline. Kinder Morgan later amended those costs to $9.3 billion.

Allan estimates that the final bill will be $12 billion, or 60 per cent more than the budget Ottawa relied on to make its purchase. She sets out a long list of reasons, including longer construction timelines, more land purchases, escalating material costs and new contracts.

That’s bad news for taxpayers. “There is nothing in the construction project agreement Trans Mountain has entered into with the committed shippers that will allow for a full recovery of these costs, so Canadians will bear them,” Allan says.

Because the pipeline tolls are now set, the government is “now unnecessarily on the hook for a large portion of the project’s cost above $7.4 billion.”

In plain English, that means taxpayers will pay another $3.5 billion if the final costs come in at $12 billion.

Up to $8 billion in taxpayer subsidies

There is one more subsidy here. In 2013, Suncor recommended that that cost of ensuring safe transport for bitumen tankers and oil spill cleanup readiness should be borne by shippers, “regardless of what the costs might be.”

But guess what? Canadian taxpayers are now paying $1 billion for the Ocean Protection Plan. (Even though no credible technology for cleaning up ocean oil spills exists.)

Put all the costs together and the purchase of the Trans Mountain pipeline has probably cost taxpayers $8 billion in subsidies to oil and gas companies through unjustifiably low pipeline tolls.

And Canadians are still on the hook for escalating construction costs on a project that hasn’t been built.

None of this should surprise Canadians. Federal and provincial subsidies subsidies — tax breaks, royalty reductions and infrastructure credits — to the oil and gas industry total $3.3 billion a year.

Allan pointed out these disagreeable facts on Trans Mountain pipeline to Ottawa months ago and asked for a response from Morneau’s office.

“None has been forthcoming,” says Allan.
 

Freeloading Rusty

Here comes Rover, sniffin’ at your ass
Jan 11, 2016
26,916
26,743
Federal agencies mishandled sensitive documents more than 5,000 times last year
38 agencies reported an average of 20 incidents per working day
As a senior RCMP intelligence official faces charges of disclosing secret information, new figures reveal thousands of incidents last year in which federal agencies, including the national police force, mishandled sensitive documents.

Answers tabled in Parliament in response to a query from Ontario Conservative MP Jamie Schmale show 38 agencies reported a total of more than 5,000 incidents between Jan. 1 and Dec. 10 in which classified or otherwise protected documents were stored in a manner that did not meet security requirements.

That averages out to about 20 such incidents across the government each working day.

The number is likely higher given that one large department, Global Affairs Canada, did not provide figures for the year but reported thousands of such incidents in a 2016 survey.
 

otaku1

TMMAC Addict
Jul 16, 2015
4,649
5,893
Lol
It's not like the Chinese don't have a well deserved reputation for lack of sanitation if not complete disregard for cleanliness and hygiene that could help spread this virus.
And the cover-ups.
Yep it's all racism. Of course.
 

jason73

Yuri Bezmenov was right
First 100
Jan 15, 2015
72,781
134,158
Lol we are such a joke of a country
and we will remain a joke country for the foreseeable future. the CPC leadership race is looking pretty grim. no one wants the job . after justin we will get cottage cheese thighs freeland
 

BeardOfKnowledge

The Most Consistent Motherfucker You Know
Jul 22, 2015
60,547
56,268
and we will remain a joke country for the foreseeable future. the CPC leadership race is looking pretty grim. no one wants the job . after justin we will get cottage cheese thighs freeland
McKay was a cool cat when he was defense minister.