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by Greg McLean
CALGARY – December 17, 2020 – Based on outcomes alone, the last week of Parliament for 2020 was a whirlwind for me and the Natural Resources files on which I act as Shadow Minister. On Friday alone, I chaired the Natural Resources Committee which was able to question the Minister for the first time during this Session on the direction of his government with respect to this critical part of the Canadian economy.
This came right after my introduction of a new Private Member’s Bill in the House of Commons, seeking an amendment to the Income Tax Act to allow a transferable non-refundable tax credit for entities that expend resources on carbon capture, utilization and storage.
And to cap it off, the Liberal government released their environment plan which included a revised Fuel Standard – so my flight back to Calgary that evening had some urgent reading material rise to the top.
Obviously, much more goes on all week in files pertaining to Natural Resources. But the standout event last week centered around the release of the Parliamentary Budget Officer’s (PBO) report on ‘Trans Mountain Pipeline – Financial and Economic Considerations – Update’. The result should be anti-climactic for those following the energy industry: yes, it is still economically viable; that is, its Net Present Value is still positive. Tough task! – given that since the Liberal government acquired it, over $5 billion has been added to the initial $7.5 billion capital cost.
During a briefing by the PBO for Parliamentarians, I listened as members of the other three parties jumped on some of the language and illustrations that formed parts of the report. The effort was there to drive a narrative that, IF…IF the government’s climate policies changed, it might produce a demand outcome that MIGHT question the pipeline’s financial viability.
As this attempt to create a false narrative somewhat annoyed me, I followed up with a written response to the PBO questioning the use of scenario analysis as defined outcomes based on speculative policy.
I also pointed out to the PBO that if his office uses data from a report prepared recently by the Canadian Energy Regulator, then they are missing the troves of data on energy that are available from serious market participants that have an actual stake in the outcomes of energy project developments. Participants such as project proponents sinking hundreds of millions of dollars into processes – that are still too lengthy and opaque.
It’s important to enumerate the source of an additional $5 billion of capital, which includes undertaking a new regulatory approval process because — the federal government’s officials did not perform their jobs properly during the first approval process. It’s tough to put that governmental lack of performance onto the financial shoulders of a project proponent, had it still been a private sector entity. In addition, the various ‘lawfare’ activities undertaken by opponents of TMX are covered in this excess spending – often on both sides of the legal ledger.
The PBO did an excellent job in the report in pointing out the taxes collected ($76 million in 2019), which are not included in the financial model (as they do not flow to the project, but away from it, to the government), along with an estimate of $6 billion per year in unattributed value to Canada as a result of a reduction in the differential we receive on our oil shipments. In 2019, this differential was estimated to cost Canadians $16 billion – wealth flowing elsewhere, as opposed to staying in Canada where it could be spent and taxed and provide for social services.
Of course, these attributions of value to Canada and Canadians were completely lost on my colleagues from other parties.
As a stand-alone entity, the Trans Mountain Expansion Project has always made ample financial sense. Even layering in extraneous costs still shows the Project makes financial sense (as illustrated in the PBO report).
But I watched the narrative twist with the ‘what if’ scenarios presented – that are largely academic and completely speculative. Some politicians are looking for a justification to oppose; try as they might they didn’t find it.
Throw in the financial benefits to the country – billions of dollars per year in reduced oil export pricing discounts, and tens of millions per year in taxes associated with higher GDP – and this project, for the country, is a huge windfall. The only question that is not part of the narrative currently is: does this Liberal government care about billions of dollars of actual economic benefit that will flow to Canadians? This is the side of the balance sheet for which they have shown no regard in their reckless, unaccountable spending.
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Greg McLean is the Member of Parliament for Calgary Centre and Shadow Minister for Natural Resources & Canadian Northern Economic Development Agency (CanNor).
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