Evidence of meeting #114 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 report.
A video is available from Parliament.
Conservative
Ted Falk Conservative Provencher, MB
They will pay even though there's a world market price for the oil.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Exactly.
Conservative
Ted Falk Conservative Provencher, MB
—reduces their profitability and reduces the taxes paid to the Canadian government.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's a very good five-second summary of what happens, exactly.
Conservative
Ted Falk Conservative Provencher, MB
On a going-forward basis, what will interest rates do to the value? What interest rate did you base it on? That might be a better question to start with.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We based it on the CDEV scenario interest rate, did we not?
Advisor and Analyst, Office of the Parliamentary Budget Officer
Yes. We based it on the projections of the publicly available documents on borrowing rates. That would be factored into the discount rate that is used as part of the 8%, so it's based on rates that the corporation has. There is a portion that's—
Conservative
Ted Falk Conservative Provencher, MB
Would you have used the commercially available rates through national banks, or would you have used the sovereign rate for the Government of Canada?
Advisor and Analyst, Office of the Parliamentary Budget Officer
It would be based on the borrowing rate that the corporation has.
Again, in terms of how they specifically calculate it, I think it's best placed with CDEV, because we assumed the same discount rate that they had. There is a portion of the debt financing that is on a fixed basis, as well as for the initial borrowing, as well as the market rates with the syndicated banks, but again, that would factor into the discount rate.
They would be best placed in terms of providing the exact rates.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Maybe I can complement that.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Okay.
There's a hybrid. Trans Mountain Corporation has financing from the government through the subsidiaries, but they also have some financing through commercial banks. They have a hybrid.
To answer your question on what happens if interest rates go down, the discount rate would normally go down as well. It's determined quite closely with the prevailing interest rates and the longer-term interest rates as well.
Liberal
The Chair Liberal George Chahal
Time's up. Thank you, Mr. Falk and Mr. Giroux.
We'll now go to Ms. Dabrusin.
Ms. Dabrusin, you have five minutes.
Liberal
Julie Dabrusin Liberal Toronto—Danforth, ON
Thank you, Mr. Chair.
Thank you to both of you for being here today. It's been very interesting to hear your input and your ideas.
I want to clarify one thing. I think in some of the questions there was the statement that the cap, which was announced a couple weeks ago now, is a cap on production. I do want to clarify that what was announced and what the draft regulation set out is actually a cap on emissions from oil and gas. I think that's really important to clarify right at the outset.
Mr. Giroux, I also to clarify something that you spoke quickly about. You did not do, when you did this report, any analysis of what the impacts would be on a cap on emissions from oil and gas on the sale. Is that correct?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
You're right. We did not.
November 18th, 2024 / 12:10 p.m.
Liberal
Julie Dabrusin Liberal Toronto—Danforth, ON
Okay.
As well, just so I can be clear on this, when you were doing this report, did you calculate the impact of different tax credits for carbon capture?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
No, we did not. We didn't think that was material in the ownership and operation of a pipeline.
Liberal
Julie Dabrusin Liberal Toronto—Danforth, ON
Thank you.
I can hear the members opposite choosing to chirp a little bit about my questions. I find that interesting. I will just say that I'm trying to clarify what was in the report and what the pieces were. I believe that's something everyone here has had a chance to speak to.
I know that when we were talking as well, you talked about not factoring in benefits. Perhaps we can talk a little bit about what exactly goes into the scope of your study. For example, some of the witnesses we have heard today talked about how there was a difference in the contracts for workers on these pipelines. Before it was purchased by the government, they were not union jobs. Then they did become union jobs.
In all the valuations you do, do you include such things as those kind of benefits to workers, particularly in Alberta?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We did not use or look at the downstream—or upstream, in that case—benefits through higher employment and employment income. However, in previous reports, we looked at the economic impacts of the construction of the pipeline. I don't remember it off the top of my head, but we had an estimated impact on the number of jobs and the impact on GDP, gross domestic product. We don't in this report, because we looked at the optics from a private sector buyer who would consider buying the pipeline.
Liberal
Julie Dabrusin Liberal Toronto—Danforth, ON
Thank you.
I also want to clarify your mandate when you're working on these reports. Maybe you can help me clarify what the scope of your mandate is. You did make some comments earlier that were a bit political about what you thought might be government motivations.
Is it in your mandate as Parliamentary Budget Officer to share opinions and create analysis of what government might be thinking, or what the motivations from government might be, other than pure numbers on the prices?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
My mandate is to provide analysis and information to parliamentarians related to issues of importance and issues they are studying, including things that have an impact on the national economy.
Liberal
Julie Dabrusin Liberal Toronto—Danforth, ON
Is there any kind of political analysis that goes into that?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
No, and I don't think I made any political comments, if that's what you are referring to. I think I was answering the question as to what could be the factors that impact the sale value or the price that a buyer would be willing to pay for the pipeline and what types of factors could influence the price that the buyer would consider offering to the government.