Auditor general details Keystone XL investment
Some of the province’s planned spending on loan guarantees for the Keystone XL pipeline expansion project will be out the door before U.S. president-elect Joe Biden is sworn in as president of the United States on January 20.
Along with the $1.5 billion in equity stake that is due on December 31, the province’s $6-billion loan backstop will take effect on January 1, 2021.
Premier Jason Kenney said in the summer that loan guarantee funds would not be spent prior to the pipeline project’s final approval.
The spending rollout was detailed in Auditor General Doug Wylie’s latest report, released earlier this month, and during his office’s Tuesday appearance before the Standing Committee on Public Accounts.
Assistant auditor general Eric Leonty told the committee that “based on what’s contained in the government financial statements and what the underlying agreements contain” the $6-billion loan backstop begins at the start of the new year.
That runs counter to remarks Kenney made this summer.
“The $6-billion loan guarantee only comes into effect to support construction following the swearing-in of the next American president,” Kenney said in question period on July 13.
At issue is Biden’s opposition to the pipeline and his campaign pledge to axe its construction.
In March, Kenney announced the province would be supporting TC Energy’s construction of the north-south pipeline to the tune of $7.5 billion. That includes a $1.5-billion equity stake in the pipeline and a $6-billion loan guarantee to the energy company that is backstopped by the Alberta Petroleum Marketing Commission (APMC).
Since then, $100 million of the equity contribution has already flowed to the pipeline, according to committee testimony.
The auditor general found APMC had not accounted for the $100 million that was due on March 31, per the deal, but it later made the adjustments.
“What we do know from our audit was that $100 million was due as of March 31, and that adjustment was made and is now reflected in the financial statements,” Leonty told the committee. The spending rollout was complicated by the fact the deal was announced on the last day of the province’s fiscal year, he explained.
Under the deal, TC Energy lent APMC the funds to make its initial payments for April, May and June back to the company monthly, Wylie’s report detailed. It started paying that back interest-free in July.
Meanwhile, the province must pay the remainder of a $1.5-billion equity commitment by December 31, 2020, per Wylie’s report. (The report calculates the figures in USD, but AB Today is using the province’s Canadian figures.)
Starting early next year, the loan guarantee portion of the deal will kick in, whereby APCM, through five newly created subsidiaries, extends $6 billion in credit to TC Energy.
APCM will receive a six per cent return on its $1.5-billion equity contribution, rising to 10 per cent in 2033, as well as a loan guarantee fee, per the government’s financial statements. The outstanding balance will be repaid by TC Energy one year after the pipeline’s completion.
Both Kenney and TC Energy executives have said they hope to highlight the union jobs that come with the pipeline’s construction. Federal Foreign Affairs Minister François-Philippe Champagne also promised to push for the pipeline to be built.
If built, the US$11.5 billion pipeline would run from Hardisty, Alberta, to refineries in Steele City, Nebraska, adding 830,000 barrels per day in capacity.