Another day, another report out about the viability of the #transmountain that can be misconstrued by the activists…and if it can be misconstrued, you know it will be misconstrued. So let's see what it says

https://pbo-dpb.s3.ca-central-1.amazonaws.com/artefacts/92190f47fd14ad10e711d7e90963c3fbe28d48cfb2dc0195d8387d29694d37e0 #bcpoli #cdnpoli #StopTMX @sjmuir @nbennett_biv

What is says is that under most reasonable scenarios the Trans Mountain will be profitable for the government. It only ceases to be if the long-term discount rate goes sideways or if a change in demand reduces the amount it moves (more on that later) @TransMtn

The PBO report uses an extremely conservative long-term discount rate. Conservative because the analysis assumes a discount rate higher than what the government uses for its own projects and let’s be clear here, the Trans Mountain is absolutely a gov’t project now

Under the reasonable discount rate scenarios the #TMX makes sense under virtually all the in-service data scenarios that also maintain expected supply contract situations (more on that later) but let's imagine that these scenarios did not occur what would that mean? #bcpoli

Well it would mean that the project itself would not be profitable...much in the way virtually every infrastructure project in Canada is not profitable. We invest in infrastructure because it generates wealth and how does the #TMX generate wealth?

That would be the part of the report carefully ignored by the activists: Section 4 on the long-term effect on GDP by reducing the WTI-WCS differential. It is important because any significant increase in GDP means more revenue to the gov’t via taxes and royalties.

and what does the report say about that:

“That analysis determined that a reduction in the WTI-WCS price differential of US$5 per barrel would, on average, increase nominal GDP by $6.0 billion annually over 2019 to 2023". Remember that differential has been as high as $30/barrel

That $6 billion a year for every $5 reduction in differential is $24 Billion in GDP over only 4 years. Even if the pipeline lost a few hundred million on its overall construction value it would more than pay for itself in the improvement in GDP and government revenue. #cdnpoli

Put simply that is why gov’ts invest in infrastructure. By investing in critical infrastructure the gov’t generates wealth for the nation and the #transmountian looks likely to generate massive wealth to help pay for all the other services we rely on from Medicare to clean water.

Now let’s look at where I feel the report gets it wrong?

Well much like the CER report it makes a faulty assumption that if there is excess capacity in the overall transportation network then that excess capacity will be spread evenly across all means of oil transportation.

That assumption is, of course, incorrect. With excess transportation capacity the reductions will come based on costs to transport the oil, risks of oil transportation and markets served by the transportation medium rather than simply being spread evenly.

As an example: if there is excess capacity to the US by pipeline then oil-by-rail to those serviced markets will decrease since oil-by-rail is more expensive per barrel to the same place.

So let’s look at what this means to the #Transmountain

Well the obvious point (that I have reiterated many times before) is that the TMX is the only route that terminates on the West Coast. The West Coast serves markets in California, Washington State, British Columbia and, of course, Asia not serviced by the alternatives. #bcpoli

The suggestion that shippers will suddenly decide in 2035 to not lock in supply on the only pipeline that services the Parkland Refinery in Burnaby or BP on the Puget Sound makes zero sense. Shippers will lock into those markets same with supplies to the California refineries

The suggestion that shippers will go with the cost-of-service model, with all its uncertainties simply makes no sense. Shippers will continue to lock in their commitments because the #TransMountain is the only way they can affordably get their product to these markets.

To conclude: as I have written repeatedly #Transmountain will be a shipper of choice because unlike KeystoneXL it does not compete with the Enbridge system shipping to the US mid-west and Gulf Coast. So many of the PBO alternatives run counter to what we know about the oil market

So reading the PBO report with an informed eye one sees a project that will almost certainly be profitable while simultaneously serving a critical role in generating GDP (and gov't revenue) by decreasing the WTI-WCS price differential. It is a win-win project. #StopTMX #bcpoli