Natural Resources Committee on Sept. 16th, 2024

[Yves Giroux]

I wouldn't draw that conclusion so quickly, as annual profits are quite likely given that the rates for the use of the pipeline are regulated in such a way as to provide a certain return to shareholders. As Ms. Levin mentioned in her opening remarks, the rates are regulated and must be reviewed over the next few years to ensure a certain minimum performance. So it is very likely that pipeline operations will generate profits on an annual basis. It is said that the sale value will not cover what the government will have paid for the original purchase and the expansion. However, in the meantime, there may be profits on an annual basis.

[Mario Simard, Bloc, Jonquière, QC]

I want to follow up on that quickly.

If I remember correctly, in your 2022 update, I think you came up with something negative in terms of profits that would be reinvested in clean energy projects, that is to say that there would be no profits that would be reinvested. At that time, the cost was at $21.4 billion. Right now, it is at $34 billion. I don't know how the pricing will be done, but, in my opinion, the possibility of profits being reinvested in clean projects seems quite low.

[Yves Giroux]

You and I are discussing the difference between the profits over the life of the project as a whole and the annual profits that could be generated. Once you take into account the purchase and construction price of the expansion and the present value of all those future cash flows, it's unlikely to generate profits over the life of the project.

[Mario Simard, Bloc, Jonquière, QC]

That's great, thank you. That's what I wanted to hear.

It is unlikely to generate profits, so it is unlikely that those profits will be reinvested in clean energy projects.

Let's quickly skip over the operation.

With regard to the sale of the pipeline, we are hearing the scenario of possible partnerships with first nations. Otherwise, at the cost of the value of the project as a whole, do you think anyone could buy it?

[Yves Giroux]

It is difficult to determine with certainty whether the answer is yes or no. Is it possible? Yes. Is it probable? I don't think so.

[Mario Simard, Bloc, Jonquière, QC]

Okay.

Based on your analysis, the scenario of profitability may also be eliminated. We'll see.

Thank you, Mr. Giroux.

[The Chair, Liberal, George Chahal]

Thank you, Mr. Simard.

We'll now proceed to Mr. Angus for six minutes.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you very much.

When you did your first report, I think the cost to taxpayers was under $21 billion. It's over $34 billion now. Have you started to model out the kinds of scenarios that would be required for us to get that money back?

[Yves Giroux]

We have not modelled that because that could happen under various scenarios. Greater utilization of the pipeline would probably be difficult. Higher tolling for—

[Charlie Angus, NDP, Timmins—James Bay, ON]

Higher tolls...?

[Yves Giroux]

Yes, higher tolls. We are undertaking that analysis, so it's something that we will be looking at.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Excellent. Thank you.

I'm trying to get a sense of the finances here because the Liberal government has really done a great job of hiding from the public and lying about what they are giving to the oil industry. In TMC's published financial quarterly reports, they're profitable, but then there's the other TMP financial corporation that's kind of a black box.

Are you aware of the finances of TMP Finance and what their debt holdings are?

[Jason Stanton]

I know that initially, before 2022, how TMP Finance would work is that it would receive the loan through the government via the Canada account at 100% debt, and then that was financed to TMC at a debt-to-equity ratio. Since 2022, TMC itself is now able to, I guess, borrow from the syndicate of banks that are now providing the loans.

I don't have all the information in terms of what is currently on TMP's balance sheet. They were used initially to finance TMC, but now TMC is able to get the loans.

[Charlie Angus, NDP, Timmins—James Bay, ON]

There's a 2018 report to Parliament that says TMP Finance is a wholly owned subsidiary of the Canada Development Investment Corporation and has no employees. The day-to-day operations are administered by CDEV employees in Toronto, Ontario, and it says that their finances, their corporate structure, is debt—100% debt.

Will you ask TMP Finance to turn over the debt so that we have a sense of what they're holding or keeping from the public?

[Yves Giroux]

I'm not sure there is that much that's being kept secret, in a sense, because the structure is a bit layered, but from my understanding, we got all of the information we needed.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Okay, good, because, under subsection 23(6) of the Export Development Act, all or part of the debt obligations owed by TMP Finance to the Canada account can be forgiven through ministerial direction. It seems like they set up this shell company to hide the costs, and then they can just write it off. I'm feeling like I'm in Kazakhstan or Venezuela or something when dealing with Chrystia Freeland's commitment to the tar sands.

[Yves Giroux]

I agree with you that the structure seems to be, as I said—I used this adjective—layered.

There seem to be a lot of corporate structures under CDEV, whereas CDEV probably could have done that directly rather than set up different subsidiaries.

[Charlie Angus, NDP, Timmins—James Bay, ON]

What would be the advantage of setting up a shell corporation that has no employees and whose only role is to hold all your debt and to keep it off the books of the Trans Mountain Corporation? Doesn't that seem kind of shady and shifty?

Again, is this petrostate economics 101 with Chrystia Freeland?

[Yves Giroux]

I have no idea why it was established that way, because CDEV is non-taxable and its subsidiaries are probably non-taxable. I don't see the benefit of establishing additional corporations just for the purpose of holding one asset. Maybe it's to facilitate the eventual sale of the asset, but that's not something that we were told or that was made obvious to us. That would be a good question for the minister.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Will you look into that when you do your modelling? That's a real question.

[Yves Giroux]

We can ask.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Okay. Thank you.

I have another question in terms of this issue. We heard from our Liberal friends this morning about the economic benefits of the Canadian people spending $34 billion to vastly increase oil production at this time. We have the International Energy Agency saying that we're hitting peak oil, we're facing a climate crisis and we're going to deal with shifting assets. We see the UN panel saying that we have to seriously diminish and change and transform, yet the Liberal government has committed to a massive increase. We're seeing 500,000 to 800,000 barrels a day. We're seeing record oil production now, at a time when the market is soft.

When you do your factoring in on cost-benefit analysis, would you be looking at the economics that are out there in terms of climate catastrophe from how many new emissions will be coming on stream in the next few years?

[Yves Giroux]

We don't do that directly, but in our financial analysis of Trans Mountain, the project and the expansion, we also have sensitivity analysis that shows what the impact will be of the viability of the pipeline if the use of the pipeline, its utilization rate, goes down, which is something that could very well happen in attaining or reaching Canada's commitment to get to net zero, or in a scenario where oil demand decreases significantly.

[Charlie Angus, NDP, Timmins—James Bay, ON]

If there was an emissions cap, certainly...but what we've seen is a massive increase. Imperial says it's the biggest amount of production ever. Cenovus is looking to massively increase. Husky is increasing. This is all due to the subsidy that was given to them by the Trudeau government. It looks like they're going all in on increasing.

Will you factor in the potential environmental impacts of their going all in?

[The Chair, Liberal, George Chahal]

Thank you, Mr. Angus, for your question. The time is up. Maybe you can get to that in the next round.