Natural Resources Committee on Oct. 21st, 2024

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Thank you.

I guess that's a good segue to you, Mr. Campbell.

I very much enjoyed listening to your opening remarks. From a technical aspect, what were some of the challenges for the workers, the Canadian workers who worked on this, whom you briefly mentioned in your opening remarks? What are some of those technical challenges that allowed for cost overruns, things that cost more just because of the terrain, for example? Could you expand on that?

[Patrick Campbell]

I appreciate the question.

Kevin commented on the segmenting of the work. One of the things that really need to be understood is that when you get into urban pipelining, this is not anything like we have in the Prairies. When we constructed the line 3 project, we had opportunities because of our skilled members and our knowledgeable contractors. We could employ ditching wheels able to produce in excess of 10 kilometres of ditch a day. Urban pipelining is a very different animal, and just with respect to those kinds of challenges, it was very difficult.

When you segment projects, the real cost there, the significant cost associated with segmenting projects like that, is that the equipment, material and personnel then need to be moved about the right-of-way to access and construct those areas that then have permits. In a traditional pipelining sense, that equipment would be deployed at the lay-down yard; that equipment would be engaged on the right-of-way, and that equipment would be able to execute their portion of the project right to conclusion.

When you're dealing with urban pipelining, or when you're dealing with breaks in what would be defined as a “traditional spread”, all of that equipment, all of the personnel and all of the material required for that next segment have to then be transported by our brothers from the Teamsters to that next lay-down area.

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Would it be fair to say this was a unique and very challenging build?

[Patrick Campbell]

It was incredible. When you look at line 3, they had budgeted that project at $8 billion. That's the project where, as I've explained to you, you can get as far as 10 kilometres a day through the Prairies using a ditching wheel. I would argue that the initial cost estimates of this project from Kinder Morgan Canada, from our perspective, were not based in reality.

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Thank you, Mr. Campbell.

I'd like to come back to you, Mr. Maki. I was glad to hear you reference the environmental protections that were put in place. I had the opportunity to see some of those in the vessels that were put in place when I was in Nanaimo about a month and a half ago.

This is important for me as somebody who cares very deeply about the environment, as well as for my constituents in Vaudreuil—Soulanges.

What else was put in place to ensure that the environment was protected should anything come about? Could you expand on that, please?

[Mark Maki]

It's a good question.

First and foremost, on the marine side, the WCMRC reinforcements were a big part of the effort, with more response vessels, more equipment on hand and more personnel to respond to a spill. All of those are critical components.

Let's go back to the pipeline itself and the facilities. We have a very comprehensive leak detection system on the pipeline. One of the neat things we are installing is a high-technology fibre optic cable along virtually the entire pipeline system. Once it's fully operational, that will allow us to hear or sense either activity on the right-of-way or a small leak or some other disruption in the system. One of the great dangers to a pipeline is third party damage. The ability to have a system that senses activity on the right-of-way is an incredible addition to the full suite of leak detection and environmental protection mechanisms on the system.

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Thank you very much.

Thank you, Chair.

[The Chair, Liberal, George Chahal]

Thank you.

We'll now go to Monsieur Simard for six minutes.

The floor is yours.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

Before I begin, I want to make sure that the witnesses can hear the English interpretation of my remarks.

Can you hear me?

[Some hon. members]

No.

[The Chair, Liberal, George Chahal]

We're just going to suspend for a moment until we get this sorted out.

[The Chair, Liberal, George Chahal]

Monsieur Simard, the floor is yours. Go ahead, please.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

My question is for you, Mr. Maki.

According to your regulations, as a Crown corporation, you are accountable to the government. You certainly have to justify the cost overruns on your projects. In addition, I'm sure you need to validate the decision-making process you follow.

I remember that, in 2022, when the cost of the Trans Mountain project went from $12.6 billion to $21.4 billion, the Minister of Finance assured Canadians that there would be no additional public funding for Trans Mountain.

Would you be able to provide the committee with documentation that explains how the project is funded?

The cost of the project is now at $34 billion. Have you actually done anything to obtain financing, in accordance with what the Minister of Finance said in 2022? In other words, did you have to turn to the debt market through financial institutions to finance your project?

Are you able to share with the committee what your financing structure looks like?

[Mark Maki]

Thank you, Mr. Chairman, and thank you, Mr. Simard, for the question.

As I understand the question through the translation, you're asking about the structure that's used to finance and about comments made by Minister Freeland back in 2022.

I would probably direct anything related to Minister Freeland's comments back to her.

Going to the financial structure and so forth, the way the company was financed originally was as an acquisition by the government from Kinder Morgan. That acquisition was effectively done through Canada Development Investment Corporation, or CDEV, as the purchaser, and then funding was provided through CDEV and through an intermediary company into Trans Mountain to pay for the expansion project. The initial way that was set up was either as a loan into Trans Mountain or equity into Trans Mountain.

I'm going to speak at the Trans Mountain level, so this is what we see down below. Equity and debt are provided. When the minister changed the financing model in 2022, the project had advanced far enough, and the conclusion of the owner was that we could obtain financing from the public sector. Since that time, the company has, through a consortium of the big Canadian banks plus one of the U.S. investment banks, effectively financed the remaining construction on debt. That is how the project has been financed. The big picture in terms of numbers—

[Mario Simard, Bloc, Jonquière, QC]

I'm sorry to interrupt you, but I don't have much speaking time. I would like to clarify my question.

I'm going to ask you two very simple things.

First, are you able to provide the committee with a document indicating the project's financing structure? That could be very helpful.

Second, if you obtained financing from financial institutions, there are loan guarantees. Did the government provide them?

You probably read the report the Parliamentary Budget Officer, or PBO, released at the time the project cost was estimated at $21.4 billion. The report indicated that the project would not be profitable. We had to forget the whole idea of taking the revenue from the project and reinvesting it in clean energy.

The project cost is now estimated at $34 billion. However, I assume that the financial institutions will want to be paid back at some point. How are we going to repay that debt? Who did it come from? Who assumes responsibility? Is it the government?

I would like to get a clear picture of all the public funding that has been granted to Trans Mountain. The Deputy Prime Minister told us in 2022 that she wanted to change the structure and that there would be no additional public funding. Clearly, that money had to come from somewhere. Are you able to provide that information to the committee?

[Mark Maki]

Mr. Chairman, just to repeat back the question, basically the question at the core is.... There were comments about the project not being viable or the company not being viable. I would say, first off, just simply that I don't agree with that at all.

Where you can get more transparency, though—and it is a bit to wade through—is the corporate plans of both Trans Mountain and its owner, CDEV, which are filed with the Treasury Board. Those have all kinds of transparency about the financing and so forth associated with the company and with the third party banks. There is a guarantee in place by Canada of the borrowings. That is also well documented inside the corporate plans.

Right now, with the company in operation and basically proving itself every day, there are lots of avenues available to Trans Mountain to finance the company in a permanent fashion for the long term. That will be worked on, together with colleagues inside the Department of Finance, to find the optimal solution for Canada.

As I mentioned in my comments, one thing we're very focused on at the company is making sure Canada gets back all of its capital. The fundamental job one, after running the pipeline right and safe, is making sure the taxpayer is kept whole. Full stop. That's what we're focused on.

[Mario Simard, Bloc, Jonquière, QC]

I would still like you to commit to providing the committee with the documents relating to your financing structure.

Thank you.

[The Chair, Liberal, George Chahal]

Thank you, Mr. Simard.

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

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

Thank you, gentlemen, for your participation.

I think one of the big questions I hear from people all the time is about this $34 billion in taxpayers' money that was spent to build this. It is being interpreted as a subsidy. Simon Fraser University's recent study says that the cost of building this is hitting between $581 and $1,248 per household, for every Canadian family.

Mr. Maki, you said that your priority is that we all get our capital back.

How do we get that money back and when?

[Mark Maki]

That's a very good question. Thank you, Mr. Angus, for that.

First and foremost, I do the math on that $580 or $1,250 and it is basically an assessment by Simon Fraser University that's looking at what they think the subsidy in the capital cost is and then dividing it by the number of households in Canada, and there are a range of outcomes. The math is transparent.

With respect to getting back the full capital, I said in my comments that what the government really needs to be here is a disciplined seller. Full stop.

As a disciplined seller, you do the following things: You do not act in a hurry. You take your time. There are a number of uncertainties around the business that we need to clarify for the capital markets. For example, there's a rate case ongoing that has to be behind us. There is the concept of indigenous equity participation or economic participation in Trans Mountain. For a buyer, it will be important to understand how that works.

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

I'm sorry. I have only a short period of time.

Would a disciplined seller sell it for the full cost of $34 billion, or are we going to give it as a subsidy to a buyer?

[Mark Maki]

A disciplined seller, by definition, in my book, Mr. Angus, gets back their full value.

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

That's what I wanted to hear. I'm asking that because, on the question of these interim toll rates, which is less than half of the cost, again, that strikes people as a serious subsidy. If this is so profitable and we're supposed to be getting our money back, why are we giving away $12 to $13 in loss on every barrel shipped in order to get customers?

[Mark Maki]

There is a long-term arrangement in place with the customer community that governs, effectively, the tolling of the expansion project and the company. With respect to the concept of $12 or $13 being too low on tolls, like a lot of things, there are lots of assumptions that go into that. One of the big ones will be what the horizon is for the pipeline. How long is it going to be around?

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

Are we going to subsidize it, then, for 30 years? It just doesn't make sense to me. I'm not a businessman, but if I set up a business to make my money back and I subsidize the people who use it by 50% and I tell the people I borrowed the money from that I'm going to pay them back, somehow that just doesn't add up.

I'm switching gears here, because I don't have a lot of time.

What's the relationship between the TMX corporation and TMP Finance?