Trans Mountain used to have environmentalists protesting its construction. Now oil companies are protesting too, this time over the high tolls it needs to charge to recover spiralling construction costs..Despite vowing to eliminate oil and gas 'subsidies' the federal government might be forced to write off more than $17 billion of the Trans Mountain pipeline’s debt or risk turning it into a stranded asset even before it comes into service next year..That’s because Trans Mountain’s proposed tolls barely cover half of its $31 billion price tag, four times the $7.4 billion it was expected to cost before the federal government took it over in 2018..That figure is higher than the $25.8 billion the US government spent to put a man on the moon..The expansion, which triples capacity to about 890,000 barrels per day, was supposed to provide a relatively faster and cheaper way to ship oil to Asia. .On June 1, the government-owned company applied to the Canadian Energy Regulator to set tolls of about $11 to ship a barrel of crude from Hardisty, near Edmonton to the marine terminal at Burnaby. .It was immediately opposed by shippers with LNG-term contracts — Imperial, Suncor, Canadian Natural Resources, ConocoPhillips and Cenovus have all applied as intervenors — that backstopped the project to begin with..By contrast, shippers on Enbridge’s mainline from Hardisty to Chicago pay a combined international toll that amounts to about $5..The higher toll structure means it could be cheaper to ship oil to China through the Gulf Coast through the Panama Canal..Among the original Trans Mountain contractors, producers are on the hook for 20% to 30% of the cost overrun, or nearly $9.1 billion from $1.8 billion in 2017. That still leaves about $17 billion the federal government is going to have to eat or pass onto taxpayers..If they were to pass on the full amount, Trans Mountain would have to charge a minimum of $22 to recover its unfounded liability. .At that rate, it would be cheaper for producers to break their contracts and keep the oil in the ground. Oddly enough, that’s exactly what the CER argued in its roadmaps to net-zero projections in June..The irony — or damage — isn’t lost on potential shippers..“The level of proposed increase in the tolls will negatively impact netbacks obtained by Canadian producers and may adversely and materially impact the overall competitiveness of Canada’s oil industry and the public interest,” CNRL said in its own letter to the CER. .Trans Mountain has asked for a decision by September, or it goes to a public hearing. Typically new tolls for a pipeline application aren’t approved until 30 days of its in-service date, which hasn’t been disclosed. .With only 85% of the line actually in the ground, there’s still plenty of time for more to go wrong.
