Government Operations Committee on May 13th, 2022

[Yves Giroux]

We looked at the Trans Mountain pipeline a couple of times over the last three and a half years. Every time we looked at it—especially every time there was a delay in construction and coming into operation—we found that it was less and less likely that the government will be able to sell the pipeline for more than the acquisition and construction costs. It is very likely that the government will end up losing money when it sells the Trans Mountain pipeline and its expansion, despite the fact that oil prices are at a high level.

The price of oil does not have a direct impact on tolling. Rather, the volumes have a direct impact on the revenues generated by the Trans Mountain pipeline. With delays in construction and additional construction costs, we find that it's very likely the government will lose at least some money when it sells the pipeline.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Tom Sanzillo, the director of financial analysis at the Institute for Energy Economics and Financial Analysis, stated that the Minister of Finance's “assertion that Canada will invest no more public money in TMX” was "grossly misleading".

Do you foresee the government needing to spend even more money on top of the loan guarantee? Do you project that?

[Yves Giroux]

That's a difficult question to answer directly.

I think what's more likely to happen is that the government is probably likely to.... It's difficult to say whether they'll spend more money. The likely outcome is that the selling price will be lower than what the government has spent, or will spend in totality, before selling it.

[Gord Johns, NDP, Courtenay—Alberni, BC]

What if they didn't sell it and they kept it as a public asset? How many years would it take for that asset to be paid off by the Canadian taxpayer?

[Yves Giroux]

That's a question I don't have the answer to off the top of my head. I think we would need to run a couple of simulations to have a clearer idea as to that question.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Could it ever be like 50, 60, 80, 100, 200 years?

[Yves Giroux]

It would depend on a number of scenarios—for example, their production profile and the usage of alternative ways of delivering oil—so it's a—

[Gord Johns, NDP, Courtenay—Alberni, BC]

If there's even a demand.

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

We'll now go to Mr. Lobb for five minutes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Thanks very much. I'll share my time with Mr. McCauley.

As my first question, have you ever considered doing a price comparison for Mr. Johns for a dry dock in his riding? Have you ever done that?

I'm sorry; that's a long-running joke. If you run out of everything else to do, that's what he'd like you to do next.

Digital ID and digital government are topics that are coming up more and more often. At the last meeting we had with Treasury Board, on digital government, they were talking about streamlining services and how there are 270 points where you can sign in, etc. These are going to be big expenditures, multi-billion-dollar expenditures, by the looks of things. Have you had an opportunity to kick the tires on that one and do any value on it?

[Yves Giroux]

No, I haven't had the opportunity, nor have I been requested, to the best of my knowledge, to kick the digital tires, so to speak.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Okay. That would be one we would ask you to look at at some point in time.

Another one is that at this point in time—and I don't think I'm telling any secrets out of school here—I get a lot of requests from vendors, as I'm sure other MPs do as well, who are doing business with the government in hardware, software, the cloud and so on, and they're making all sorts of comments about capabilities, cost and the way procurement is done. Have you ever looked at this area to see if we are getting value for money? Is the government, in their RFPs, issuing the right RFPs to provide the right hardware, speed and security? Is this something you've looked at? Is this something you'd be willing to look at?

[Yves Giroux]

We have looked at one issue specifically, which is the infamous Phoenix pay system. We were asked to look at how much it would cost to upgrade, replace and fix Phoenix. It was mostly to replace Phoenix. In the course of discussions with many stakeholders, we were told that this was not an example to be repeated.

However, to answer your question on whether we looked at the broader issue of procurement and issues around software and hardware, no, we have not looked at that.

[Ben Lobb, Conservative, Huron—Bruce, ON]

I'm going to turn my time over to Mr. McCauley.

[Kelly McCauley, Conservative, Edmonton West, AB]

Great.

I have a quick question for you, Mr. Giroux.

In the public accounts, on page 18 a section about accounting for the Bank of Canada's purchases of Government of Canada bonds reports a $19-billion net loss. Can you give a Coles Notes version of it or walk us through that $19 billion and what happened to result in the $19-billion loss? Is it a paper loss only, that will be recovered later?

[Yves Giroux]

I assume, again, Mr. Chair, I don't have more than 60 minutes.

The short answer is that the bank purchased bonds on the market at market price, and these securities, these bonds, had a higher return or higher interest rate than what was available at that time. In bond markets, the principal goes up in value when a bond has an interest rate that is higher than what's available at that specific time. That's why the bank had to write it off: They paid slightly more, the face value, than the capital value of these bonds—

[Kelly McCauley, Conservative, Edmonton West, AB]

Then it is a real $19-billion loss?

[Yves Giroux]

Yes and no. I'd say it's mostly no. It's a paper exercise, because over time the interest that the bank will get on these bonds will be higher than what the bank would have received had it purchased bonds issued at that same time. It paid more in capital to compensate for the fact that these bonds are paying more in interest. Over time, it's a wash.

[Kelly McCauley, Conservative, Edmonton West, AB]

Is doing it like this, for lack of a better word, a form of printing money? Is it like an MMT in a rough way?

[Yves Giroux]

It's certainly not MMT. I would personally stay away from MMT. It's not purely printing money in the sense that people understand that. That's why we and people like economists use “quantitative easing”, as opposed to “printing money”. “Printing money” usually refers to printing money and not registering a liability anywhere else, so it is really a practice not to be repeated. In that case—

[Kelly McCauley, Conservative, Edmonton West, AB]

But this is a book liability that will have to—

[Yves Giroux]

—be repaid.

[Kelly McCauley, Conservative, Edmonton West, AB]

We will have to pay it back.

[Yves Giroux]

Yes. It will not disappear. Eventually, these bonds will mature and expire, and the government will have to refinance itself.

[Kelly McCauley, Conservative, Edmonton West, AB]

[Inaudible—Editor] lower rates.

Thank you.