MPs Mull Toll Hike to Offset Losses on Trans Mountain Pipeline: Report

MPs Mull Toll Hike to Offset Losses on Trans Mountain Pipeline: Report
Construction of the Trans Mountain Pipeline is seen underway in Kamloops, B.C., on Sept. 1, 2020. The Canadian Press/Jonathan Hayward
Amanda Brown
Updated:
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The Commons Natural Resources Committee said the operators of the Trans Mountain Pipeline should think about increasing user tolls to reduce the beleaguered project’s escalating taxpayer losses, according to its report.

“The pipeline operator may be unable to charge high enough tolls to cover the costs of the Trans Mountain expansion,” said a committee report, titled “Federal Assistance to Canada’s Natural Resources Sectors,” as first reported by Blacklock’s Reporter.

“The committee heard the pipeline’s toll structure was only designed to cover the expansion’s original cost estimate of $7.4 billion plus 20 to 25 percent of any additional capital cost increases,” it said.

In its submission to the Canada Energy Regulator, Trans Mountain Corp. said the provisional toll proposal would entail the pipeline operator shouldering approximately two-thirds of the increased construction expenses for its expansion project, which has faced significant delays.
“The approved toll methodology is essentially a cost risk-sharing framework, and Trans Mountain’s applied-for interim fixed tolls would result in Trans Mountain bearing more than two-thirds of the construction cost increases for the project since 2017,” Trans Mountain’s lawyer Sander Duncanson said in the filing.

Shippers expected to pay the higher tolls have said the proposed increases are too high.

“The cost of completing Trans Mountain expansion has risen significantly over time,” wrote MPs. “At the time of the purchase the construction costs of Trans Mountain were estimated at $7.4 billion. However, in 2022 the Trans Mountain Corporation estimated the project would cost $21.4 billion.”

In 2018, the federal government purchased the pipeline from Kinder Morgan for $4.4 billion after it became apparent the original owners were ready to abandon the project. At that time, the finance department had budgeted $17.7 billion to purchase and expand the project’s pipeline from Edmonton to Burnaby, British Columbia.

Revised estimates have reached almost $31 billion.

In a report published in June 2022, the Parliamentary Budget Office said net losses on the project could reach $2.7 billion when rising interest rates are taken into account.

On Sept. 18, the natural resource committee urged the Crown corporation responsible for the pipeline, to “review the toll structure of the Trans Mountain expansion project and propose modifications to the toll structure as necessary to reduce the risk to taxpayers,” beyond which it did not elaborate.

The line needs to be sold, Prime Minister Justin Trudeau told reporters on Aug. 24. “The federal government is not in the business of running pipelines,” he said.

When asked by a reporter if the government would have to prepare taxpayers for news of a loss, Mr. Trudeau said the government is “confident the business case for the Trans Mountain Pipeline remains solid.”

The expansion is set to significantly increase the crude oil flow from Alberta to B.C., ramping it to 890,000 barrels per day. It is hoped work on the expansion will be finished by December, however, if regulators do not approve a request for a route alteration, April 2024 could be the earliest projected completion date.