The Regulations Amending the Crown Corporation General Regulations, 1995 (SOR/2024-78) introduces changes designed to facilitate the operations of the Canada Development Investment Corporation (CDEV) and its subsidiaries concerning the Trans Mountain Expansion Project (TMEP). These amendments fall under subsection 92(2) of the Financial Administration Act and align with the broader objectives of the Government of Canada to manage and eventually divest the Trans Mountain Pipeline System effectively.

A key change is the exemption of certain Crown corporations and their wholly-owned subsidiaries from the requirements of Section 91 of the Financial Administration Act. This includes the Canada Growth Fund Inc. and CDEV concerning transactions related to the operation or divestiture of the Trans Mountain Pipeline System. This exemption enables these entities to organize and manage their operations more efficiently without needing to seek Governor in Council (GIC) approval for specific transactions.

The regulatory changes are primarily driven by the ongoing construction of the TMEP, which aims to twin an existing pipeline from Edmonton to the Canadian West Coast, increasing its capacity from 300,000 barrels per day to 890,000 barrels per day. The Government of Canada purchased the Trans Mountain Pipeline System in August 2018 as a strategic investment in the national interest, anticipating that the expansion project would create thousands of jobs and generate substantial tax revenue. A 2023 assessment by Ernst & Young reported that the project has already produced $2.9 billion in tax revenue and is projected to contribute $112.2 billion to Canada’s GDP over the next two decades.

As the TMEP nears completion, targeted for late spring 2024, the need for regulatory flexibility has become increasingly apparent. CDEV and its subsidiaries must operate swiftly within a competitive energy market, especially concerning the incorporation of new subsidiaries for various functions, including marketing pipeline capacity, enhancing insurance coverage, and facilitating Indigenous ownership. The amendments seek to eliminate bureaucratic delays that could impede CDEV and TMC’s ability to respond to market conditions and operational demands effectively.

In particular, TMC has outlined several specific functions related to its operations. First, it plans to create a subsidiary to manage and market the remaining 20% of TMEP capacity that is not currently contracted. Given that 80% of the pipeline capacity is covered by long-term contracts, this subsidiary is crucial for maximizing revenue and maintaining competitiveness in the market. Second, TMC is exploring the establishment of a captive insurance subsidiary to optimize its risk management and broaden its insurance coverage, a common practice in the energy sector that would help meet financial obligations under the Canada Energy Regulator Act.

These changes are intended to ensure that the involved entities can act swiftly to capitalize on market opportunities, engage effectively with Indigenous communities, and fulfill the Government of Canada’s objectives concerning economic participation and national interest.

Canada (SOR/2024-77) May 22, 2024