Is it a screenplay or a PhD thesis?

Robyn Allan laughs after a nonstop hour during which the economist has elaborated on a previous hour-long conversation explaining why the Trans Mountain Expansion Project should be stopped in its tracks.

Kinder Morgan is just days away from its fish-or-cut-bait deadline by which time — May 31 — the company wants to be assured of political alignment on the “path forward” for the project, or else. Allan doesn’t have a crystal ball. “Anything can happen,” she says. But what she is clear about is that due process has not been followed.

Allan is the former CEO of the Insurance Corporation of British Columbia and was an expert economics intervenor in the National Energy Board hearing on the Trans Mountain pipeline project. She started looking at the Trans Mountain proposal subsequent to her review of the Northern Gateway Pipeline Project, so she’s been picking through the Kinder Morgan file for seven years.

That timeline ties to the Stephen Harper go-go oil era, the passage of Bill C-38 (the emasculation of federal environmental assessments), amendments to the National Energy Board and an electioneering Justin Trudeau promising an overhaul of the devitalized NEB. When asked in the summer of 2015 if his redo of the NEB would apply to Kinder Morgan, Trudeau replied, “yes, yes, yes …that process needs to be redone.”

The prime minister must have been nervous in November 2016, announcing that the Kinder Morgan pipeline expansion had been approved after all. The future look: two parallel pipelines, including “reactivated existing segments,” shipping 890,000 barrels daily of crude oil, primarily diluted bitumen. Asserting that his government would “use today’s wealth to create tomorrow’s opportunity,” Trudeau championed the “15,000 new, middle class jobs” the project would create.

Robyn Allan saw red, and launched into one of those rabbit hole exercises trying to find the data source, only to come up with a Kinder Morgan website reference in which the oil company bizarrely cites a figure from the Conference Board of Canada. Even if you reject Allan’s description of the jobs number as a “scam,” the federal government appears to have offered no evidence to support the 15,000 figure, and certainly can’t argue long-term job creation when the lion’s share of the jobs, whatever the number may turn out to be, are short-term pipe, tank and terminal construction jobs. Allan estimates that the true early years number is less than 20 per cent of that 15,000.

Allan is in the business of collecting data and economic modelling. Sitting in a slant of sunlight in a Toronto coffee shop — she has travelled from her home in B.C. to attend a screening and panel discussion for Directly Affected, Zack Embree’s documentary take on Trans Mountain and what Embree calls “the deeply unsettling hijacking of process” — Allan reflects on this new era in which data are less available (Statistics Canada) and data aggregators are less helpful than they used to be. The cumulative effect, she says, has been “a climate shift in terms of protection of the public interest.”

This was starkly apparent during the NEB hearing into Trans Mountain, during which no oral cross-examination was allowed. “We had this situation where cross-examination was not allowed. So you ask yourself, ‘Is this a hearing?’…What makes economics function is the ability to make sure that the information you are getting is trustworthy.” In the absence of that, she says, there arises a “denigration of proper oversight.”

The NEB recommended approval of the project in May 2016. The report is more than 500 pages, but the attention to project financing is light, and curious. “Trans Mountain said that the expected capital cost for the Project is approximately $5.5 billion,” the report states. “ Financing would be arranged by Trans Mountain’s parent company, Kinder Morgan Energy Partners, L.P. (KMP).” The board noted that growth projects have conventionally been financed by the company on a 50-50 debt-equity basis.

Yet five months earlier, the parent company, Kinder Morgan Inc., announced that it was slashing its dividend for the first time ever, that any debt funding would further impair its slumping investment grade rating and that the stock had taken such a hit that equity was “no longer an economic source of expansion capital.”

It looked to Canada for help. A new public entity, Kinder Morgan Canada Ltd., was created, rolling in all of the company’s Canadian assets. Thirty per cent of that company was sold to the public last spring. In a conference call with analysts last July, Steve Kean, CEO of Kinder Morgan Inc., noted that the parent company’s balance sheet was significantly strengthened by using the share issue proceeds of the new company to pay down the parent company’s debt.

What happened to Kinder Morgan Energy Partners? That company was delisted all the way back in October 2014, a year and a half before the NEB submitted its report. Meanwhile, the cost estimate for Trans Mountain, which had risen to $6.8 billion months before the NEB’s report, was now $7.4 billion.

“I filed a motion in November 2014, saying can we please have a stay and look at whether or not this restructuring is in the public interest,” Allan says. “The board refused to do it.”

In its report the NEB does acknowledge the dramatic change of affairs. “Some intervenors argued that Trans Mountain had misled the Board by not providing it with market-related evidence that demonstrates significant changes to Trans Mountain’s source of financing, financing structure and KMI’s financial position, stability or ability to finance the Project. The Board is not persuaded by the arguments put forth by the City of Vancouver and others that KMI would not have the ability to finance the Project.”

Six months later Prime Minister Trudeau was giving the green light to the project in a speech touting the respect accorded Indigenous peoples and strong environmental protections. Recent reporting by the National Observer, including memos and emails acquired through access to information requests, challenges the degree to which the Trudeau government met its obligations to consult with Indigenous groups under the Constitution Act of 1982.

There’s the due process piece again, Allan says.

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Meanwhile, Finance Minister Bill Morneau is selling a new line that other investors will be eager to step in if an agreement isn’t reached by next Thursday. Allan can’t see how that could possibly work. As for Kinder Morgan, the company says it is not updating its cost estimate at this time.

jenwells@thestar.ca

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