Where did the money go? All $31.9 billion of it..The on-going story of the Trans Mountain pipeline expansion continues to keep going from bad to worse after intervenors are demanding an audit of more than $20 billion in cost overruns..Now the shippers themselves are bristling at being forced to repay those egregious outlays in the form of higher tolls. .In a flurry of correspondence to the Canadian Energy Regulator (CER) this week, Cenovus, Suncor, Marathon and others — including First Nations — questioned the validity of the capital expenditures that swelled from an initial $7.4 billion to well over $30 billion and counting. That’s more than it cost to put a man on the moon..Now they want to know how it cost 414% more than budgeted and why. . TransMountain (TMX) expansion routeTransMountain (TMX) expansion route .“Such performance merits careful scrutiny by the Commission and shippers of Trans Mountain’s costs and their tolling implications,” Cenovus wrote..Trans Mountain says anchor shippers never agreed “to any limit on the amount” to recover ‘uncapped’ costs in the form of higher shipping fees; the producers counter they were never consulted or informed as to what those costs actually were — or are..It effectively amounts to “a blank cheque” to Trans Mountain for all uncapped costs, Cenovus wrote. “Not only is that suggestion commercially absurd, it is contrary to the overall scheme” of the contract provisions..Added Marathon: “This assertion that Trans Mountain ‘invested’ tens of billions of dollars and that shippers are now trying to unfairly change the bargain is repeated throughout the Trans Mountain response. The fundamental flaw… is that Marathon, like other shippers, never agreed or consented to… spending tens of billions of dollars. Instead, Marathon agreed only that Trans Mountain could incur ‘reasonable and necessary’ costs.”.Marathon complained it was informed of those notorious cost overruns, including the latest $9.5 billion increase on March 10, via a press release..“In light of the excessive tolls that Trans Mountain proposes (if approved) would allow Trans Mountain to profit off its cost overruns on the backs of shippers,” it added..In its own submission, Canadian Natural Resources called it an “untenable situation.”.“The tolls are too high and will harm the economic competitiveness of Canada's oil industry and the public interest.” .It also questioned the January 1, 2024 start date — which it says is now “probable” it could be pushed back well into the second half of next year due to the proposed rerouting around a sacred tree. Hearings into that particular debacle are slated for the end of September..Instead, CNRL wants the whole file audited..“There has been no detailed explanation for the cost increases provided other than generalized statements regarding floods and the pandemic,” it wrote..“In addition, because its sole shareholder is the federal government, Trans Mountain is not bound by the normal financial obligations or commercial constraints of other industry companies."."In this regard, Trans Mountain has adopted an overly-broad and misleading definition of ‘financial obligations.’”.Indeed, those obligations to 'shareholders' would be to taxpayers themselves — to the tune of $17 billion in unfounded liabilities and counting..That’s why opposition to Trans Mountain’s proposed tolls are shared by the pipeline opponents themselves, this time for being too low..According to the Tsleil‐Waututh Nation, the pipeline is financially insolvent and unable to recover costs under any tolling scenario. Each quarter it is delayed adds $1.2 billion in reduced revenues and carrying costs, it says..If the tolls reflected the actual unfounded costs — about $17 billion — it would cause “material uncertainty that casts substantial doubt as to Trans Mountain’s ability to continue as a going concern,” it said..“Without corporate shells and accounting wizardry, it would be clear that Trans Mountain is unable to meet its financial obligations under the toll methodology. This has direct implications on Trans Mountain’s (ability to) meeting financial obligations as they relate to Trans Mountain’s fictional capital structure, and the implications that flow from that structure.”.“In reality, Trans Mountain, including the expansion, is funded by 100% debt, and questions about meeting financial obligations must consider this reality.”
Where did the money go? All $31.9 billion of it..The on-going story of the Trans Mountain pipeline expansion continues to keep going from bad to worse after intervenors are demanding an audit of more than $20 billion in cost overruns..Now the shippers themselves are bristling at being forced to repay those egregious outlays in the form of higher tolls. .In a flurry of correspondence to the Canadian Energy Regulator (CER) this week, Cenovus, Suncor, Marathon and others — including First Nations — questioned the validity of the capital expenditures that swelled from an initial $7.4 billion to well over $30 billion and counting. That’s more than it cost to put a man on the moon..Now they want to know how it cost 414% more than budgeted and why. . TransMountain (TMX) expansion routeTransMountain (TMX) expansion route .“Such performance merits careful scrutiny by the Commission and shippers of Trans Mountain’s costs and their tolling implications,” Cenovus wrote..Trans Mountain says anchor shippers never agreed “to any limit on the amount” to recover ‘uncapped’ costs in the form of higher shipping fees; the producers counter they were never consulted or informed as to what those costs actually were — or are..It effectively amounts to “a blank cheque” to Trans Mountain for all uncapped costs, Cenovus wrote. “Not only is that suggestion commercially absurd, it is contrary to the overall scheme” of the contract provisions..Added Marathon: “This assertion that Trans Mountain ‘invested’ tens of billions of dollars and that shippers are now trying to unfairly change the bargain is repeated throughout the Trans Mountain response. The fundamental flaw… is that Marathon, like other shippers, never agreed or consented to… spending tens of billions of dollars. Instead, Marathon agreed only that Trans Mountain could incur ‘reasonable and necessary’ costs.”.Marathon complained it was informed of those notorious cost overruns, including the latest $9.5 billion increase on March 10, via a press release..“In light of the excessive tolls that Trans Mountain proposes (if approved) would allow Trans Mountain to profit off its cost overruns on the backs of shippers,” it added..In its own submission, Canadian Natural Resources called it an “untenable situation.”.“The tolls are too high and will harm the economic competitiveness of Canada's oil industry and the public interest.” .It also questioned the January 1, 2024 start date — which it says is now “probable” it could be pushed back well into the second half of next year due to the proposed rerouting around a sacred tree. Hearings into that particular debacle are slated for the end of September..Instead, CNRL wants the whole file audited..“There has been no detailed explanation for the cost increases provided other than generalized statements regarding floods and the pandemic,” it wrote..“In addition, because its sole shareholder is the federal government, Trans Mountain is not bound by the normal financial obligations or commercial constraints of other industry companies."."In this regard, Trans Mountain has adopted an overly-broad and misleading definition of ‘financial obligations.’”.Indeed, those obligations to 'shareholders' would be to taxpayers themselves — to the tune of $17 billion in unfounded liabilities and counting..That’s why opposition to Trans Mountain’s proposed tolls are shared by the pipeline opponents themselves, this time for being too low..According to the Tsleil‐Waututh Nation, the pipeline is financially insolvent and unable to recover costs under any tolling scenario. Each quarter it is delayed adds $1.2 billion in reduced revenues and carrying costs, it says..If the tolls reflected the actual unfounded costs — about $17 billion — it would cause “material uncertainty that casts substantial doubt as to Trans Mountain’s ability to continue as a going concern,” it said..“Without corporate shells and accounting wizardry, it would be clear that Trans Mountain is unable to meet its financial obligations under the toll methodology. This has direct implications on Trans Mountain’s (ability to) meeting financial obligations as they relate to Trans Mountain’s fictional capital structure, and the implications that flow from that structure.”.“In reality, Trans Mountain, including the expansion, is funded by 100% debt, and questions about meeting financial obligations must consider this reality.”
