Northern Pipeline Agency Quarterly Financial Report (unaudited) For the Quarter Ended September 30, 2016

Statement outlining results, risks and significant changes in operations, personnel and programs

1. Introduction

This quarterly financial report should be read in conjunction with the Main Estimates and Supplementary Estimates (A), as well as Canada’s Budget 2016. It has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by Treasury Board. This quarterly financial report has not been subject to an external audit or review.

1.1 Authority, Mandate and Programs

The Northern Pipeline Agency (“the Agency”) was created by legislation in 1978 to carry out federal responsibilities in relation to the planning and construction in Canada of the Alaska Highway Gas Pipeline (AHGP) project by Foothills Pipe Lines Ltd. (Foothills). The pipeline is to carry natural gas from Prudhoe Bay, Alaska, to the lower 48 states. Foothills is now owned by TransCanada PipeLines Limited (TCPL).

Further details on the Agency’s authority, mandate and programs are available in Part II of the 2016-2017 Main Estimates.

1.2 Basis of Presentation

This quarterly financial report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the Agency’s spending authorities granted by Parliament, and authorities used by the Agency are consistent with the Main Estimates and Supplementary Estimates (A) for the 2016-2017 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework.

The authority of Parliament is required before monies can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes. As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year.

Although the Agency uses the full accrual method of accounting to prepare and present its annual unaudited financial statements that are part of the Departmental Performance Report and its Annual Report, the spending authorities voted by Parliament remain on an expenditure basis.

2. Highlights of the Second Fiscal Quarter and Comparative Results

This Quarterly Financial Report reflects the result as at September 30, 2016, including Main Estimates and Supplementary Estimates (A), and the details presented in this report focus on and compare the second quarter results of 2016-2017 with those of 2015-2016.

2.1 Authorities Available for Use and Planned Spending for the Year

As at September 30, 2016, the Agency has authorities available for use of $751,835 in 2016-2017 compared to $750,775 in 2015-2016, for a slight increase of $1,060 mainly due to the increased cost of the employee benefits plan.

In 2016–2017, and to align with reduced AHGP project activities in the foreseeable future, the Agency has scaled down its operations while continuing to fulfil Canada’s obligations as set out in the Northern Pipeline Act (the Act) and the Agreement under the Act.

2.2 Authorities Used and Amounts Expended during the Second Quarter

During the second quarter in 2016-2017, the Agency spent $24,337 or 3% of the total funding available, compared to $63,043 or 8% of the total funding available in the same period of 2015-2016, for a net decrease of $38,706. The key differences are as follows:

Expenditures on Personnel salaries decreased by $39,380 between the second quarter of 2016-2017 and second quarter of 2015-2016, as the Agency has scaled down its personnel costs.
Expenditures on Professional and special services increased by $4,860 between the second quarter of 2016-2017 and the second quarter of 2015-2016, as the Agency incurred management services support from the National Energy Board.
Expenditures on Rentals decreased by $2,553 between the second quarter of 2016-2017 and the second quarter of 2015-2016, as the Agency was invoiced for a reduced level of rental services provided in the second quarter.
No contribution funds were issued in the second quarter of 2016-2017, nor were there funds issued in the second quarter of 2015-2016.

3. Risks and Uncertainties

In planning for an efficient and effective review and regulation of the project, the Agency must adapt to project developments by the proponent, i.e., to carry out its responsibilities and to make the necessary preparations in concert with the pace of the project’s development.

3.1 Risk Mitigation Framework

The Agency identifies and responds to the pace of the project’s development by continual corporate-level forecasting, tracking and management of issues that could affect or require a response from the Agency. For example, on March 30, 2012, ExxonMobil, ConocoPhillips, BP and TCPL announced a work plan to assess liquefied natural gas (LNG) exports from south-central Alaska as an alternative to a natural gas pipeline through Canada. In February 2013, TCPL notified the Agency that no further work is planned on the AHGP for now, and of their intentions to maintain the AHGP assets in Canada. To align with the reduction in the AHGP project activities for the foreseeable future, the Agency has scaled down its operations, while continuing to fulfill Canada’s obligations as set out in the Act.

4. Significant Changes in Relation to Operations, Personnel and Programs

On August 1, 2016 Christyne Tremblay replaced Bob Hamilton as Commissioner of the Agency.

There were no other significant changes to operations, personnel and programs during the second quarter of 2016-2017.

Original signed by:

Christyne Tremblay,
Commissioner

November 28, 2016
Ottawa, Canada

Wayne Marshall,
Director of Operations

November 16, 2016
Calgary, Canada

**Table 1: Statement of Authorities (*unaudited*)** (in dollars)
Budgetary Authorities
	Fiscal year 2016-2017			Fiscal year 2015-2016
	*Total available for use for the year ending March 31, 2017	Used during the quarter ended September 30, 2016	Year-to-date used at quarter-end	*Total available for use for the year ending March 31, 2016	Used during the quarter ended September 30, 2015	Year-to-date used at quarter-end

Net Operating expenditures - Vote 1	701,095	11,652	25,392	701,215	50,653	108,002
Statutory Authority - Employee Benefit Plans	50,740	12,685	25,370	49,560	12,390	24,780

Total Budgetary Authorities	751,835	24,337	50,762	750,775	63,043	132,782

* Includes only Authorities available for use and granted by Parliament at quarter-end: Main Estimates and Supplementary Estimates (A).

**Table 2: Budgetary Expenditures by Standard Object (*unaudited*)** (in dollars)
Expenditures:
	Fiscal year 2016-2017			Fiscal year 2015-2016
	*Planned expenditures for the year ending March 31, 2017	Expended during the quarter ended September 30, 2016	Year-to-date used at quarter-end	*Planned expenditures for the year ending March 31, 2016	Expended during the quarter ended September 30, 2015	Year-to-date used at quarter-end

Personnel	345,740	15,815	34,758	344,560	55,195	120,846
Transportation and communications	4,000	-	-	30,000	-	-
Information	750	-	-	1,000	-	-
Professional and special services	379,095	8,461	13,575	298,215	3,601	7,600
Rentals	10,000	1,578	3,946	60,000	4,131	4,220
Repair and maintenance	250	-	-	1,000	-	-
Utilities, materials and supplies	2,000	-	-	5,000	116	116
Acquisition of machinery and equipment	-	-	-	1,000	-	-
Transfer Payments	10,000	-	-	10,000	-	-
Other subsidies and payments	-	(1,517)**	(1,517)	-	-	-

Total net budgetary expenditures	751,835	24,337	50,762	750,775	63,043	132,782