In a ruling posted to its website late Friday, the regulator gave its blessing to the pipeline giant to change its routing methodology in a 2.3-kilometre stretch of construction in B.C.’s Fraser Valley.
Trans Mountain’s engineers had initially applied to the regulator to dig a 36-inch pipe through a stretch of mountainous terrain near Hope, B.C. However, the company later discovered that hard rock formations would make boring through a pipe that wide very challenging.
Last fall, the company applied to the regulator to reduce the pipe size to 30 inches, a move its engineers said would not impede the flow of oil gushing through the pipeline.
The regulator, for its part, initially rejected that application, citing unconvincing evidence from the company that the alteration would ensure the integrity of the pipe and the oil flowing through it.
“The Commission of the Canada Energy Regulator has determined that Trans Mountain did not adequately address concerns about pipeline integrity and related environmental protection impacts,” the regulator cited in its reasons for rejecting the application.
This prompted Trans Mountain to issue a particularly stern warning – that refusing to grant it permission to drill a smaller pipe would lead to a “catastrophic” two-year delay and billions of losses as a result.
On Friday, Trans Mountain’s lawyer, Sander Duncanson, appeared at a hearing before the Canadian Energy Regulator in Calgary to argue that the company had taken all the necessary steps to ensure that the pipe size variance would be safe and built to stringent standards.
“The commission must be mindful that every day counts now,” Duncanson told the commissioners.
Upon hearing reassurances from Trans Mountain, the regulator agreed with the company’s second, updated application.
The Commission of the #CER has approved Trans Mountain’s variance application with conditions: https://t.co/OOFJF0pCOm. The reasons for the decision will be released in the coming weeks. Trans Mountain can now use 30-inch pipe for the 2.3-km section near the Fraser River in B.C. pic.twitter.com/gpzAJ3FSJ5
The pipeline, purchased for $4.7 billion from a Texas energy giant by Justin Trudeau’s Liberal government in 2018, has incurred an additional $31 billion in construction costs. This puts the current overall cost of the project’s acquisition and construction at $35 billion.
Last month, on the Friday before Christmas, an additional $2 billion in commercial loan guarantees was announced on Export Development Canada’s website. This loan guarantee pushes the total amount of government-backed loans provided to Trans Mountain by a group of Canadian banks up to $18 billion.
Robyn Allan, an independent economist whose decade-long costing calculations have demonstrated remarkable accuracy, told Global News the additional $2 billion in loan guarantees was because Trans Mountain knew it needed more money, beyond the $35 billion already incurred to acquire and build the project, to get the job done.
“They know they’re not going to have enough to get them through now, they went out and borrowed another $2 billion,” she said.
The feds have backstopped other major infrastructure projects in Canada to the tune of billions. For example, Ottawa gave the massively over-budget Lower Churchill Hydroelectric project in Labrador loan guarantees on $9.2 billion in bond debt borrowed from 2013 to 2017, debt which is still owing.
But Trans Mountain’s case is precarious, Allan and other experts Global News spoke with say, because the company will only be able to pay off the debts with tolls, or fees, it charges shippers to pump oil through the line. And, as it stands, the fees currently approved to be charged to those oil companies will only cover about half the cost of the pipeline.
Pipeline Prospects
Not all analysts are sour on the pipeline’s prospects.
Last June, Bank of Nova Scotia analyst Robert Hope published a report estimating that Trans Mountain might generate a profit (before interest and taxes) of $2.4 billion in 2025 and $2.6 billion in 2026 as oil starts gushing from Alberta to an ocean port in Burnaby, B.C.
The analyst suggested Trans Mountain was worth $26 to $29 billion.
Stephen Ellis, a strategist with Morningstar, a financial services firm, believes the line is “very much needed” to move Canadian crude to tidewater. But, he estimates the pipeline’s maximum value at no more than $15 billion.
This, Ellis says, means a massive write-off from the federal government is in the cards — which, ultimately, would be borne by Canadian taxpayers.
“If this were a private firm,” he told Global News, “we […] would not necessarily be in the situation that we are now because I doubt that a private firm would have underwritten this level of valuation and this level of financial spending.”
Circuitous, costly road for Trans Mountain
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Trans Mountain has cited a number of reasons, from supply chain challenges and soaring inflation to less productive rookie, “green-hand” labourers and unforeseen weather events, as reasons behind the massive cost overruns.
On Friday, the energy regulator’s commissioners alluded to the fact that it’s taken a decade, and billions in unforeseen construction costs, to get the job done.
But the pipeline company’s lawyer, Duncanson, cited the complexity of building an 1,100-kilometre pipeline as a reason for the “unforeseen” events.
Nonetheless, the expansion project’s final price tag will almost certainly be more than $35 billion — once the final construction bill, and debt servicing costs, which Allan estimates in the range of $2 billion a year once oil starts following, are taken into account.
In April 2022, Ottawa agreed to defer the interest payments on Trans Mountain’s debt so that the company could stay solvent and finish the job. In accounting terms, this is known as “interest in kind.”
But once the loan terms are up in August 2025, incidentally, just weeks before an anticipated federal election, that interest debt will need to be paid back, in addition to the $31 billion in construction loans.
“As soon as that project’s operating, they can no longer [defer the interest],” Allan says.
“So that $2 billion in interest [costs] we’re talking about will have to become an expense.”
HALIFAX – Ottawa is negotiating a $500-million bailout for Nova Scotia’s privately owned electric utility, saying the money will be used to prevent a big spike in electricity rates.
Federal Natural Resources Minister Jonathan Wilkinson made the announcement today in Halifax, saying Nova Scotia Power Inc. needs the money to cover higher costs resulting from the delayed delivery of electricity from the Muskrat Falls hydroelectric plant in Labrador.
Wilkinson says that without the money, the subsidiary of Emera Inc. would have had to increase rates by 19 per cent over “the short term.”
Nova Scotia Power CEO Peter Gregg says the deal, once approved by the province’s energy regulator, will keep rate increases limited “to be around the rate of inflation,” as costs are spread over a number of years.
The utility helped pay for construction of an underwater transmission link between Newfoundland and Nova Scotia, but the Muskrat Falls project has not been consistent in delivering electricity over the past five years.
Those delays forced Nova Scotia Power to spend more on generating its own electricity.
This report by The Canadian Press was first published Sept. 16, 2024.
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
