Provincial Economies III

[casper]

Originally Posted by ssiguy

Well that's an awfully big investment from Honda. I must admit I was scared when I first heard the potential of Honda opening an EV plant in Ontario and the whopping amount of subsidies they would demand like VW in St.Thomas & Stellantis in Windsor. Those 2 plants could cost taxpayers nearly $30 billion over the next 25 years if the US IFA stays in effect. This $5 billion split between Ottawa & QP seems a lot more reasonable.

It is interesting that it will be a total investment of 4 plants but only the 2 in Alliston were confirmed today. Apparently, odds are on that one of the plants will definitely be going to St.Clair Township {Sarnia} but the other one is a bit more up in the air. Some have suggested it could end up going to Oxford country just east of London.

Good to see the feds (and Ontario) recognizing the dramatic shift away from oil and gas to more sustainable energy sources. If government is going to invest I think history is going to show they made the right choice.

As for all the talk about subsidies for oil and gas, the NGO are being creative in their accounting. At worse deceptive. Does not change the fact it is a subset industry. Trans-mountain is about getting the most return for the product we are already exporting. Solid decision, we can't trust the US to be the man in the middle.

[Truenorth00]

Originally Posted by ssiguy

In regard to all these EV plants going up in Ontario and the naysayers who say they won't be needed as EV sales are falling, that is very shortsighted and proceeds from the false assumption that these plants will only supply 100% electric vehicles.

We collectively have this idea that all EVs are 100% electric a la Telsa but that is not the case. An EV is exactly that, a vehicle that can run on electricity but that does NOT mean it can only run on electricity. PHEV and hybrid cars are also electric just not 100%. Hence these battery/car manufacturing plants will not only be supplying batteries for pure EVs but also PHEVs and crucially hybrids which are soaring in demand as Toyota can attest.

You don't need $15B worth of investment including cathode manufacturing to build PHEVs. That works be horrendous ROC and ROI, that would amount to basically losing money on every hybrid sold.

Your bias against EVs makes you blind to basic investment fundamentals. The battery makers partnering here wouldn't bother if they believed this was for PHEVs exclusively.

[Truenorth00]

Originally Posted by Hackslack

The liberals are complete fools in having bought TMX, when the private sector was wanting to do it all on their own.

Given the cost escalation and all the difficulties they've had, it's really hard to see how all of that is regulatory burden. This sounds like Friday night beer goggle level analysis.

I think there's a lower likelihood that industry would have finished this without a government bailout, even under a continued Harper government. Entire possible they would have started, seen the cost escalation and then just written it off and walked away.

It's all too convenient for oilbros to blame regulation for tens of billions in cost overruns than to admit their own underestimation or incompetence. Not to say that regulations didn't have an impact. But tens of billions? Can't buy that.

[YOWetal]

Originally Posted by Truenorth00

Given the cost escalation and all the difficulties they've had, it's really hard to see how all of that is regulatory burden. This sounds like Friday night beer goggle level analysis.

I think there's a lower likelihood that industry would have finished this without a government bailout, even under a continued Harper government. Entire possible they would have started, seen the cost escalation and then just written it off and walked away.

It's all too convenient for oilbros to blame regulation for tens of billions in cost overruns than to admit their own underestimation or incompetence. Not to say that regulations didn't have an impact. But tens of billions? Can't buy that.

The cost increase is almost all regulatory burden. People double an existing pipeline all over the world at a fraction of the cost. The question is how much of this new and existing burden is justified and how much exists also under a Harper government as you say. I think you are right when the private sector discovers a hummingbird and is told they need to shut down for 4 months they probably walk away from the whole thing and they might sue for expropriation of their foreign investment. Trudeau could have run a tighter ship but overall I think they can't be faulted for their handling of TMX. Other than politically it seems like a classic Liberal fudge of compromise that instead made both sides angry.

[Hackslack]

Originally Posted by Truenorth00

Given the cost escalation and all the difficulties they've had, it's really hard to see how all of that is regulatory burden. This sounds like Friday night beer goggle level analysis.

I think there's a lower likelihood that industry would have finished this without a government bailout, even under a continued Harper government. Entire possible they would have started, seen the cost escalation and then just written it off and walked away.

It's all too convenient for oilbros to blame regulation for tens of billions in cost overruns than to admit their own underestimation or incompetence. Not to say that regulations didn't have an impact. But tens of billions? Can't buy that.

The tens of billions is incurred cost during construction, which, if the government didn’t try to use “every tool in the toolbox” in the first place, it would have been the private sector incurring those construction costs, not the tax payer. Like the coastal gas link project built by TC Energy, they have massive overruns, in the multiple billions like TMX. Which also tells me that industry would have finished TMX without a government bailout, as being done by TC Energy and the CGL nat gas pipeline.

[Truenorth00]

Originally Posted by Hackslack

The tens of billions is incurred cost during construction, which, if the government didn’t try to use “every tool in the toolbox” in the first place, it would have been the private sector incurring those construction costs, not the tax payer. Like the coastal gas link project built by TC Energy, they have massive overruns, in the multiple billions like TMX. Which also tells me that industry would have finished TMX without a government bailout, as being done by TC Energy and the CGL nat gas pipeline.

I find it hard to believe that industry would have continued with a $35B project, given the ROI, as pointed out by the PBO audit. This kind of return horizon makes zero sense for private capital. And I'm fairly sure industry knows this, hence the political argument that it would have automagically worked out if it wasn't for Trudeau.

We're going to have a government change soon enough. And the O&G sector is going to get all the federal regulatory changes they could dream off. Let's see how much more gets built. I'm going to take the under on that bet. I don't think the feds can really run over the provinces as easily as the oilbros think. And I don't think the private sector is so spectacularly competent at construction that they don't blow the business cases for these ideas with investors who actually care about reasonable returns.

[YOWetal]

Originally Posted by Truenorth00

I find it hard to believe that industry would have continued with a $35B project, given the ROI, as pointed out by the PBO audit. This kind of return horizon makes zero sense for private capital. And I'm fairly sure industry knows this, hence the political argument that it would have automagically worked out if it wasn't for Trudeau.

We're going to have a government change soon enough. And the O&G sector is going to get all the federal regulatory changes they could dream off. Let's see how much more gets built. I'm going to take the under on that bet. I don't think the feds can really run over the provinces as easily as the oilbros think. And I don't think the private sector is so spectacularly competent at construction that they don't blow the business cases for these ideas with investors who actually care about reasonable returns.

If we look at Coastal link the cost doubled instead of quadrupled so a $15B project would have still made sense.

I think you are right without steam rolling provinces and Indigenous relations there is little that will change. The oilsands cap being removed will be a signal to investors but the timeline on those projects are very long so who wants to buy rights now only for a new government in 2029 to reinstate the rules.

[ssiguy]

Originally Posted by Truenorth00

You don't need $15B worth of investment including cathode manufacturing to build PHEVs. That works be horrendous ROC and ROI, that would amount to basically losing money on every hybrid sold.

Your bias against EVs makes you blind to basic investment fundamentals. The battery makers partnering here wouldn't bother if they believed this was for PHEVs exclusively.

Clearly you didn't read my post. Nowhere did I state that this plant was for "PHEVs exclusively". If you read it, {and it was only a few sentences long} you will see that battery plants and EV auto manufacturing plant does not mean that it necessarily will be exclusively for standard 100% electric vehicles as PHEV's and Hybrids are also electric vehicles. In other words, even if the demand for full electric isn't there and probably won't be by the end of construction, it can continue to build electric vehicles but they simply don't have to be 100% electric.

Why you didn't understand this, I'm sure I don't know and nor do I know how simply stating that the plant could also produce both batteries and cars that are also not 100% electric makes me "anti-EV" as you attest.

[Truenorth00]

Originally Posted by ssiguy

Clearly you didn't read my post. Nowhere did I state that this plant was for "PHEVs exclusively". If you read it, {and it was only a few sentences long} you will see that battery plants and EV auto manufacturing plant does not mean that it necessarily will be exclusively for standard 100% electric vehicles as PHEV's and Hybrids are also electric vehicles. In other words, even if the demand for full electric isn't there and probably won't be by the end of construction, it can continue to build electric vehicles but they simply don't have to be 100% electric.

Why you didn't understand this, I'm sure I don't know and nor do I know how simply stating that the plant could also produce both batteries and cars that are also not 100% electric makes me "anti-EV" as you attest.

Okay. Let me rephrase. Nobody builds facilities that cost tens of billions to facilitate majority of production for vehicles with 15 kWh batteries. That would be an insane waste of capital. They are spending $15B and building on site cathode manufacturing because they want to produce nearly a quarter million EVs annually. If those vehicles were majority PHEV they have easily wasted about half those billions.

[Xelebes]

Originally Posted by YOWetal

The cost increase is almost all regulatory burden. People double an existing pipeline all over the world at a fraction of the cost. The question is how much of this new and existing burden is justified and how much exists also under a Harper government as you say. I think you are right when the private sector discovers a hummingbird and is told they need to shut down for 4 months they probably walk away from the whole thing and they might sue for expropriation of their foreign investment. Trudeau could have run a tighter ship but overall I think they can't be faulted for their handling of TMX. Other than politically it seems like a classic Liberal fudge of compromise that instead made both sides angry.

I drink with people who have worked on it. The work has been pretty steady. There have been relatively little regulatory stoppages.

[casper]

Originally Posted by YOWetal

If we look at Coastal link the cost doubled instead of quadrupled so a $15B project would have still made sense.

I think you are right without steam rolling provinces and Indigenous relations there is little that will change. The oilsands cap being removed will be a signal to investors but the timeline on those projects are very long so who wants to buy rights now only for a new government in 2029 to reinstate the rules.

LNGCanada was the driver for Coastal Gas Link not the other way around. The pipeline was always going to play second fiddle to the terminal.

Nearly 10 years ago I was at an LNG Conferance in Vancouver where there 10 LNG terminal in consultation or pre-engineering. All waiting a final investment decision. The consensus at the time was 1 or 2 out of the 10 would be built.

Trans-mountain is a very different beast. The private sector looked at the cost, the risk profile of building a pipeline through those mountain ranges and then compared that to the cost structure of going through the US. They passed. Trans-mountain is about protecting Canadian interests to export independently from the US and not be held ransom by US political concerns.

[P'tit Renard]

Originally Posted by WarrenC12

Corporations allow a ton of flexibility. RRSPs have pretty strict rules around contributions and withdrawals, and of course are subject to personal income tax rates, the highest of all tax rates. You can't even take advantage of income splitting with your spouse.

RRSP have strict rules about contribution limits which is a percentage of your employment income, but the withdrawals aren't that strict unless you're specifically taking it out for the Home Buyer's Plan or Life Learning Plan. Plenty of people withdraw from their RRSP when their taxable income for the year is low (e.g. on leave, travel/rest between switching jobs, time off after severance), so that they can purposely avoid the highest tax rates.

For Canadian private corps, it sounds like you're operating under the outdated Chretien-Harper era SBD rules. Since Trudeau came to power, they have severely restricted income splitting with the TOSI rules, and enacted the passive income clawback of the small business rate deduction. Also, aggregate investment income in a Canadian private corp is taxed at a high rate, with an extremely punitive prepayment of tax that's only partially refunded after the Canadian private corp declares a dividend. After integration, the tax paid on investment income by the corp + tax paid on the dividends is in the ballpark of a high-income individual who earned the investment income individually.

RRSPs are a useful tool, but not as good as TFSAs.

TFSA of course is the gold star, one of Harper's greatest legacies to encourage Canadians to save by copying the US IRA Roth.