Workers lay pipe during construction of the Trans Mountain pipeline expansion on farmland, in Abbotsford, B.C., on Wednesday, May 3, 2023.The company building the Trans Mountain pipeline has submitted evidence to support its claim that oil companies must pay more in tolls in light of the pipeline project's mounting costs.THE CANADIAN PRESS/Darryl Dyck
CALGARY – The company building the Trans Mountain pipeline expansion has submitted evidence to support its claim that oil companies must pay more in tolls in light of the pipeline project’s mounting costs.
In a new regulatory filing, Trans Mountain Corp. calls the increased capital costs of the pipeline expansion project – which have ballooned to a projected $30.9 billion from a 2017 estimate of $7.4 billion – “reasonably and justifiably incurred.”
The Crown corporation said in written evidence submitted Friday to the Canada Energy Regulator that the project has been affected by “extraordinary” factors that include evolving compliance requirements, Indigenous accommodations, stakeholder engagement and compensation requirements, extreme weather and the COVID-19 pandemic.
“Over the last several decades, Canadians have placed greater emphasis on environmental and regulatory oversight, rights of Indigenous peoples, mitigation of socio-economic impacts and landowner rights when building a major project,” Trans Mountain Corp. said in its filing.
“These requirements increased costs of the project.”
The Trans Mountain pipeline, which was bought by the federal government in 2018, is Canada’s only oil pipeline to the West Coast. Its nearly complete expansion project will increase the pipeline’s capacity by 590,000 barrels per day to a total of 890,000 barrels per day, improving access to export markets for Canadian oil companies.
But Trans Mountain Corp. and its oil company customers are currently engaged in a dispute over tolls, the term for the fees the pipeline company will charge to ship oil on the expanded pipeline.
Trans Mountain wants to charge oil companies a benchmark toll that is nearly twice the amount of a 2017 estimate, as it seeks to recoup some of the expansion’s spiralling capital costs.
It has already been granted permission by the Canada Energy Regulator to charge that higher toll once the pipeline expansion is operational, but only on an interim basis until the regulator makes a final decision.
In its filing, Trans Mountain points out that 70 per cent of the project’s cost overruns will be borne by the pipeline company and will have no affect tolls.
The remaining third, which works out to approximately $9.1 billion, is considered “uncapped costs” which increase tolls in accordance with a formula agreed to by shippers and approved by the regulator more than a decade ago.
The Crown corporation also says that because of the project’s cost overruns, it expects only “modest returns” on its investment in the first few years of the expanded pipeline’s operation. It says that any toll level below what Trans Mountain has applied for “could impact Trans Mountain’s ability to meet its financial obligations.”
In a separate regulatory filing last week, Trans Mountain Corp. reapplied for a previously rejected request for a pipeline variance. The company said it must alter the size of pipe for a section of pipeline in B.C. due to construction difficulties drilling through hard rock.
If it is not granted the variance, the company warned, the project’s completion – which was supposed to occur in early 2024 – could be delayed by two years.
This report by The Canadian Press was first published Dec. 18, 2023.
