Canadian taxpayers will be on the hook for another $2-billion fossil fuel subsidy if the National Energy Board accepts the latest request from the federal Crown corporation that now operates the existing Trans Mountain pipeline, economist Robyn Allan reports in a National Observer exposé.
“If the NEB approves the toll application Trans Mountain has filed with it, it will shift the burden for the roughly $3 billion Ottawa paid to buy the regulated assets onto Canadians, rather than into tolls charged to shippers where the recovery of these costs belongs,” Allan writes. She discovered that “unacceptable burden” after reviewing Trans Mountain’s January 4 application for toll rates between 2019 and 2021.
“Pipeline companies make money by charging tolls to fossil fuel companies that ship oil and gas on their pipelines,” Allan explains. “Trans Mountain entered into private discussions with its shippers last fall to determine the tolls that would be charged from 2019 to 2021 since its most recent three-year settlement expired December 31, 2018. The outcome of those discussions resulted in favourable terms for the oil industry borne on the backs of hard-working Canadians.”
Observer previously reported that taxpayers’ purchase of the Trans Mountain pipeline from Houston-based Kinder Morgan Ltd. could cost more in interest charges than the highly-touted revenue the government will take away from existing pipeline operations, Allan notes. Then the Parliamentary Budget Office concluded that Ottawa may have paid Kinder Morgan $1 billion more for the pipeline than it was worth.
Thanks to the buyout, “if Trans Mountain’s shippers don’t pay for the purchase of the legacy line in tolls charged to them, then Canadian taxpayers will,” she writes. “If the NEB approves the sweetheart deal, not only will Trans Mountain continue to operate at a huge loss, none of the principal on its debt to purchase the assets will be recovered.”
Allan calculates that the toll agreement would bring Trans Mountain only $68 million per year, compared to actual annual costs of $741 million—a far cry from the government’s original promise to taxpayers that the “investment represents a fair price for Canadians” with a “real return on investment.”
The deal between federally-owned Trans Mountain and its shippers was negotiated behind closed doors, but the National Energy Board does have the authority to approve or reject the proposal, go back to Trans Mountain with questions, or hold a hearing, Allan notes. The right course of action, she adds, is for the NEB to “tell Trans Mountain to go back and negotiate a toll agreement with shippers that reflects the terms Finance Minister Bill Morneau promised Canadians—terms that deliver on the promise that buying an aging pipeline was a good deal.”
For his part, Morneau “has the authority and responsibility to protect the treasury and Canadian taxpayers,” she adds. “He could ensure that his officials take steps to direct Trans Mountain to withdraw its industry-biased application because it ignores the Finance Minister’s clear direction that Trans Mountain be managed on commercial terms.”