An attempt to score a quick tax-cut coup is stretching out into a federal case for TransCanada PipeLines Ltd., with governments that stand to lose the money being offered a chance to put up a fight. The National Energy Board has put off deciding even whether it has to approve the action until TransCanada explains itself much more fully. At the same time, the NEB is working on a procedure for collecting reactions by the provincial governments which stand to lose money as a result of the scheme. All have been officially informed by the board.

In a letter to the company, the NEB said it wants “further and better” particulars to flesh out a promise made by TransCanada to stay under federal jurisdiction. The plan calls for TransCanada to cut its annual corporate tax bill by more than C$8 million (US$5.3 million) and pare about C$75 million (US$50 million) off deferred taxes. The feat would be accomplished by completing TransCanada’s two-year-old takeover of Nova Corp. with a formal, legal corporate amalgamation that would make the entire combination a resident of Alberta.

TransCanada maintains the step is only a legal maneuver that will let it take advantage of lower tax rates in Nova’s home Alberta. TransCanada has assured the board it has no hidden agenda. The pipeline said it was taking the action for tax purposes only, and that it would not affect federal jurisdiction over a long-distance gas transportation system created by a national charter with hard-won support from Parliament half a century ago.

The NEB’s letter to the pipeline, citing a landmark ruling on amalgamations by the Supreme Court of Canada, said more than a promise is needed: “Despite the declared intentions of TransCanada, it appears to the board that in law there may be a change in the regulatory regimes to which the amalgamated entity will be subject.” The document directed TransCanada to provide a complete explanation of how Alberta’s Gas Utilities Act and its Public Utilities Board Act will apply to the proposed legal combination, including how the provincial legislation will affect the current regulatory regime. The NEB also wants similar explanations of potentially changed relationships with authorities in other provinces.

TransCanada has the matter under study, after it was unable to provide the answers by a mid-May deadline. At the same time, the NEB said it is working on a procedure for collecting responses from the provincial governments affected by the switch in taxes.

TransCanada has told the board that its plan would more than double Alberta’s share of its provincial taxes from 31%. Ontario’s share would drop to about 18% from 38%. TransCanada would also cut in half its tax burdens in Quebec, Manitoba, Saskatchewan and British Columbia.

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