Time's running out!
The Trans Mountain pipeline has generated $70 million in earnings since it was bought by the Canadian government, Finance Minister Bill Morneau's fiscal update revealed Wednesday.
Pipelines generally charge tolls in exchange for allowing substances like crude oil to flow through them, similar to how a toll highway works. The $70 million is largely due to revenue generated from these tolls.
"Since acquisition, the Trans Mountain entities have earned $70 million in earnings before interest, taxes, depreciation and amortization," the fiscal update released Nov. 21 stated.
The government said this value represented over $200 million on an annualized basis. Given that the Trans Mountain expansion project has not been built yet, the existing Trans Mountain operations would be generating these revenues.
Canada still wants out of the business
Since Canada bought the troubled Trans Mountain pipeline, its expansion project and related assets for $4.5 billion this summer, it has become the property of a Canadian Crown corporation called the Canada Development Investment Corporation.
That Crown corporation, which goes by the short title CDEV, controls the pipeline through a subsidiary called the Trans Mountain Corporation. The government's Canada Account, managed by Export Development Canada, loaned money to CDEV to finance the purchase.
The pipeline's expansion project would triple the capacity of oil and other petroleum products shipped from producers in Alberta's oilsands, up to 890,000 barrels per day, to a terminal in the metro Vancouver suburb of Burnaby, B.C.
The government's purchase closed at the end of August, but Morneau first announced in mid-May he was prepared to protect the pipeline against financial loss.
The finance minister took the step after a hectic month that saw the original corporate proponent of Trans Mountain, Texas-based Kinder Morgan, threaten to pull out of the project after massive protests and resistance from British Columbia Premier John Horgan.
That spurred the Trudeau Liberals to huddle in discussions with Alberta Premier Rachel Notley and Horgan, who had pledged to use all legal tools available to block the Trans Mountain expansion's construction.
Morneau said at the time that he saw the role of the federal government as breaking the impasse created by Horgan. But the government has also said it never intended to be a long-term owner of the pipeline.
The minister's fiscal update reiterated this stance Wednesday. "The government’s purchase represents a sound investment opportunity. It is not, however, the intention of the government of Canada to be a long-term owner," it read.
New construction will add to book value
After it bought the pipeline, Ottawa then lost its approval to construct the expansion project, following a federal court ruling that the National Energy Board (NEB) failed to address the impact of tanker traffic on the marine environment and the government did not undertake meaningful consultations with First Nations.
The Trudeau Liberals announced in September they were taking a series of steps to fix the new impasse, including launching a new NEB process which began hearings this month.
The fiscal update said Ottawa expects to record the Trans Mountain entities "as an asset valued at the final purchase price."
If it is able to start construction again before it is able to sell it off, the government said, it will record new construction expenses as "adding to the book value of the asset."
Ottawa said it was still uncertain when it will sell the pipeline or even when construction would start again. Given that uncertainty, the fiscal update stated, its budgetary projections aren't yet affected by these factors.
"The Trans Mountain entities have significant commercial value and generate returns from existing operational assets," the update stated.