A proposed Trans Mountain toll settlement that cuts long-term shipping charges by roughly 10 per cent is renewing questions about how much of the $34.5-billion pipeline expansion Canadian taxpayers will ultimately recover.
The settlement between Trans Mountain Corporation and its contracted oil-company shippers is before the Canada Energy Regulator. It follows a lengthy toll proceeding that was paused while the parties negotiated privately.
Eugene Kung, a lawyer with West Coast Environmental Law who helped prepare a submission for Tsleil-Waututh Nation, told Energi Media the new agreement reduces tolls even though the previous framework already recovered only about 45 per cent of the project’s construction cost.
“In terms of recovery of that $34 billion, it’s even worse,” Kung said.
Tsleil-Waututh Nation’s regulatory filing estimates the settlement could reduce Trans Mountain revenue by about $300 million in 2027 and lower the net present value of future revenue by another $2.5 billion. Its earlier expert evidence estimated a roughly $20-billion lifecycle shortfall under the previous toll framework.
The filing also challenges Trans Mountain’s assertion that the settlement will produce an internal rate of return of 5.5 to 6 per cent. Kung said the application does not disclose enough of the underlying modelling to independently reproduce that calculation or explain why a return in that range should now be considered adequate.
That benchmark is important because Trans Mountain previously cited substantially higher commercial return thresholds. Kung said the current settlement illustrates a broader regulatory problem created by public ownership: negotiated settlements normally receive deference because both the pipeline and its shippers are assumed to be commercially disciplined market actors.
“That same logic goes out the window when the company is owned as a Crown corporation,” he said.
Kung also argued that positive operating cash flow should not be confused with recovering the public investment in the project. Trans Mountain has distributed cash to its federal owner, but the pipeline’s full financing burden sits across a broader corporate structure and ultimately traces back to federal financing.
Lower tolls could also affect any future sale of the pipeline. A buyer would value the asset largely on the cash flow its tolls are expected to generate. Kung said agreeing to lower tolls therefore risks lowering the asset’s eventual sale value and increasing the amount the federal government may have to write off.
The issue has wider implications as Ottawa and Alberta advance planning for another West Coast oil pipeline. Kung warned against treating Trans Mountain as the model for financing new export infrastructure with public capital.
“Trans Mountain is a red flag,” he said. “It’s not a blueprint.”
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