Ottawa’s promise of $500 million a year once Trans Mountain’s expansion is operational is a work of fiction


15 February 2020

 

Letter to Finance Minister Morneau

Ottawa’s claim of $500 million a year in additional corporate tax revenue from Trans Mountain’s expansion is a work of fiction based on an assessment undertaken by Kinder Morgan’s Texas-based consultant in 2015.

The figure refers to additional corporate tax revenue that is expected to come from tar sands producers, such as Suncor, Cenovus, Husky, and Canadian Natural Resources, not from tax revenue related to Trans Mountain.

The estimate requires that the price of oil increases not only on the barrels of crude shipped down Trans Mountain but on every barrel supplied from Western Canada, every year, for twenty years.

Ottawa’s tax revenue estimate is predicted by applying the federal tax rate to increased tar sands producer revenues for every barrel they supply. Producer revenues are net of transportation costs—net of pipeline tolls. Tolls for Trans Mountain are determined by the project’s capital cost. When the estimate was made, Kinder Morgan’s consultant relied on toll rates for a $5.4 billion project budget. The project is now expected to cost $13.2 billion (with contingencies and reserves). When a current project cost is considered, producer revenues effectively disappear and so do any tax revenues related to them.

The methodology upon which Ottawa’s $500 million in additional corporate tax revenue is based is fatally flawed and the study riddled with errors in fact and judgement. Facts tell us there will not be additional corporate tax revenue from Trans Mountain’s expansion and therefore Ottawa’s claim of $500 million a year flowing to fund a clean economy is a lie.

I have written to Finance Minister Morneau and provide to him the facts that prove his claim of an additional $500 million a year is a work of fiction. As a Minister of the Crown he needs to stop misleading Canadians with fabricated figures and promises that cannot be kept. The letter is available here.

 
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