Trans Mountain’s Fee Plan for Fossil Customers Represents $2-Billion Taxpayer Subsidy
Logga Wiggler/PixabayCanadian 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.
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“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.”
Any future energy subsidy from the Canadian taxpayer has to build alternative energy infrastructure. On an epic note, this change of direction could assist the millions of species at risk of extinction. On a minor note, alternative energy infrastructure construction may be just what the Albertan economy requires.
The oil market moves too quickly for the Canadian government to make dynamic decisions. In other words, bureaucrats are out of their league in the fast moving oil market. We could not predict that the US would be a major exporter, when only a few years ago, they were not able to export. https://www.reuters.com/article/us-oil-europe-usa-analysis/with-iran-squeezed-out-u-s-oil-takes-on-new-rivals-in-europe-idUSKCN1Q019W
More free rides for oil and gas??
The sun is setting folks, for the industry and the Liberals!
I have heard ecomonist Robyn Allan analyse this Tar Sands fiasco many years ago, and I find it hard to believe that our current government is still getting us deeper and deeper into Harper’s original unbelievable legacy. When will this tax payer subsidized madness stop.
I guess Trans Mountain figured they got such a sucker deal with the sale of the pipeline at 25% over market value, that they might as well go back to the well again and see if we can be suckered on another deal. These guys clearly aren’t stupid … just greedy.
That money could buy and install a lot of solar panels. How many people would switch to electric vehicles if they could buy them for the same price as a gas powered one?
Our governments all need to stop subsidizing a dying industry, and put people to work on clean energy solutions.
Let’s look at this realistically. The toll rates discussed in the article are for the existing pipeline as the expansion has yet to be built. The earliest the expansion would be ready would be the end of 2021. The expansion will triple the capacity of the pipeline. New tolls will be negotiated prior to the expanded pipeline becoming operational. Income figures above would be at least tripled with triple the product flowing. Financial Post estimates positive cash flow in year one of 126 million.