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.
Chief Executive Officer and Senior Managing Director, Project Reconciliation
At the time we tabled the offer to purchase, the estimate of the capex at that point was $12.6 billion.
Chief Executive Officer and Senior Managing Director, Project Reconciliation
It went from $5 billion to $7 billion and then jumped to $12.6 billion and then jumped again to $21.4 billion.
Conservative
Ted Falk Conservative Provencher, MB
Have you been following the construction costs? I cut you off and I apologize for that; you were talking a little bit about some of the cost overruns, but the acts of God that the project experienced don't account for nearly all of the cost overruns. We know that some of the contractors were replaced midstream. There would have been some severance packages paid out and single-source contracting to some preferable contractors.
Can you talk about that a little bit?
Chief Executive Officer and Senior Managing Director, Project Reconciliation
We weren't at that level, but certainly what caused a significant portion of the cost overrun was the permits getting pulled at least three times because they were challenged in courts on the constitutional duty to consult not being thorough enough.
Chief Executive Officer and Senior Managing Director, Project Reconciliation
The regulator pulled the permits by court order until they were satisfied that the constitutional duty to consult with the landowners, meaning the indigenous peoples, met its full obligation. That pipe was sitting on the ground—
Chief Executive Officer and Senior Managing Director, Project Reconciliation
—for many years while the permits were in a holding pattern.
It looks like we're getting the red flag here from the Chair.
Liberal
The Chair Liberal George Chahal
You'll get another round to ask more questions. Thank you, Mr. Falk.
Now we go to Mr. Jowhari for five minutes.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Thank you, Mr. Chair.
First of all, thank you to all the witnesses for coming here today and for your testimony.
Most of my questions are going to focus on the economic benefit, and I'm going to start with Mr. Detomasi. In a 2021 article, you said:
Canada must cultivate a positive but realistic energy relationship with the United States. The U.S. still absorbs over 90% of Canada's oil exports. This is too much customer concentration.
What do you really mean by “customer concentration”, and what's the impact in Canada not only on dependency but also on economic GDP?
Professor, Queen's University, As an Individual
There are two or three answers to that question.
What we teach our business school students is that it's never wise to have one customer for your product, because that customer exerts power over you in a way that you don't want.
The second thing I talk about in my course is that one of the biggest myths in Canadian economic thought is that the Americans are always our friends. Sometimes they are, and sometimes they aren't. It's up to them which role they play.
We have U.S. election coming up, and it's a wild card now who will win, but to automatically assume that the U.S. will take decisions at least thinking about us is wrong. I don't think there's evidence that it does that. In fact, when we originally negotiated the Free Trade Agreement in 1989, 1990 and 1991, the Americans were interested in our energy; that's what brought them to the table. Now they're not because they have plenty of their own.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Can you break that down to dollars per barrel, with that 90% customer concentration and with our dependency of having only one customer? How did that translate into dollars per barrel?
Professor, Queen's University, As an Individual
I'd have to work through about how much that was costing then. I was more worried about the power they could exert over our economics.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Is there any range you can share with us? Is there any range between x amount in dollars to x amount in dollars?
Professor, Queen's University, As an Individual
Perhaps it's $15 or something like that.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Great. Thank you. $15 a barrel....
I'm going to switch now to Mr. Tombe.
In your article on The Hub, you emphasized that the economic benefit of the Trans Mountain pipeline far exceeds its cost. Could you expand on how these benefits will manifest across Canada, particularly the region outside of Alberta? If we assume the $15 a barrel, how does that translate? In your benefit analysis, did you take that into consideration when you looked at the economic benefit, inasmuch as an opportunity loss, if we hadn't built the Trans Mountain pipeline?
Professor of Economics, University of Calgary, As an Individual
In that article, I used a $9 per barrel estimate of what the effect of sufficient pipeline capacities would be on that differential. That would be on all oil produced, on average. That translates into considerable increases in revenue received by that sector and directly into GDP overall, not just Alberta. In 2019, for example, which unfortunately is the latest year of data that I have on this—
Liberal
Majid Jowhari Liberal Richmond Hill, ON
My apologies for interrupting, but can you give me a number, a range? You mentioned billions of dollars. I think it was $245 billion.
Professor of Economics, University of Calgary, As an Individual
That's right. If you look over the 25-year period between 2016 to 2040, when I did this analysis, that would add up, in today's dollars, to about $240 billion overall to Canada's economy from having—
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Just for clarification, on $9 a barrel, that's $245 billion.
Professor of Economics, University of Calgary, As an Individual
That's right—in total.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
If we're talking about $15 a barrel, now we're talking about nearly $500 billion.
Professor of Economics, University of Calgary, As an Individual
Potentially. It would certainly be higher if you thought the effect on the differential was larger.