Evidence of meeting #107 for Natural Resources in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was tolls.
A video is available from Parliament.
Conservative
Ted Falk Conservative Provencher, MB
The CER will base its decision on the cost of the construction, as well as on providing an adequate debt service level. Is that something that it considers, or does it not consider that? Does it just look at world markets and world pricing?
Professor of Economics, University of Calgary, As an Individual
No. In setting the toll, it looks at many factors, but it does want to ensure the viability of the project itself. The idea is to set tolls that allow for sufficient returns, to have a reasonable rate of return on the investments made in the project and no higher. It's meant to avoid the kind of market power that a pipeline would otherwise have. Think of it as setting a toll that just allows for a reasonable rate of return.
Professor of Economics, University of Calgary, As an Individual
That toll covers the costs of the pipeline: operations, debt service and so on. Therefore, the existence of the pipeline is of great benefit to both the sector and Canada's economy overall. To the extent that the tolls actually allow for the existence of the pipeline, then the benefits accrue right across the board for Canadians in general, even those not directly involved in oil and gas.
Conservative
Ted Falk Conservative Provencher, MB
So, it would benefit Canadians.
You made a comment at one point that the Canadian taxpayer is not on the hook for the pipeline. However, the reading I've done has shown that the Trans Mountain Corporation was provided with a $17-billion loan directly from the government and another $18 billion in financing from traditional banks but completely backed by the government. Really, the taxpayer is on the hook for the full $34 billion, the way I read it. Would that be accurate?
Professor of Economics, University of Calgary, As an Individual
Thanks for allowing me to clarify that. I mean, they're not necessarily on the hook. They face risk. The risk is that the pipeline's lifespan and capacity utilization wouldn't provide enough revenue to cover debt service and debt repayment. However, there are many scenarios where revenue is sufficient to cover that, so taxpayers would, at the end of the day, not be facing that cost.
Liberal
Liberal
Vance Badawey Liberal Niagara Centre, ON
Thank you, Mr. Chairman.
I'll go back to to Mr. Tombe with my questions.
We spoke earlier, and near the end of our discussion, you talked about the transition costs and the accrual of some of the monies that would go to a cleaner social cost of carbon. I want your to expand on that and get your thoughts on how relevant carbon pricing—sometimes known as the carbon tax—is to lowering the social cost of carbon.
Professor of Economics, University of Calgary, As an Individual
The carbon pricing system that's most relevant for oil and gas in this discussion is Alberta's provincial large emitter system, called the TIER program. This is a program that works fairly well. Prices for industry emissions are currently at $80 per tonne.
That's an example of something that.... It's not to make predictions about future policy. It's something whose continued existence and stability are important for investment in the sector. The revenues from that flow in part to the government, but also provide subsidies to research and development and technology adoption in the sector.
Liberal
The Chair Liberal George Chahal
Thank you, Mr. Badawey.
Thank you to all of our witnesses for joining us today.
As I mentioned earlier, you can submit an additional brief if there are questions you need to further expand on or if you have other information you think would be beneficial to the committee. You can send that directly to the committee clerk.
Thank you so much. It's been a pleasure having you, and I look forward to seeing you again sometime in the future.
The meeting is adjourned.