CER Approves New Trans Mountain Toll Framework

The Canada Energy Regulator has approved a new toll framework for the Trans Mountain Pipeline System, ending a long-running dispute between the Crown-owned pipeline and its oil-company customers.

The settlement allows Trans Mountain to contract up to 90 per cent of its 890,000 b/d nominal capacity, up from the previous 80 per cent. The regulator said the negotiated tolls are “just and reasonable” and concluded that enough capacity would remain available for other shippers.

The agreement resolves disputes over how the costs of the Trans Mountain expansion should be shared and cancels the RH-002-2023 toll proceeding.

Lower Tolls, Bigger Taxpayer Question

The regulatory settlement does not resolve a larger financial question hanging over the $34.5-billion expansion: how much of the public investment will ultimately be recovered.

Energi Media interviewed Eugene Kung of West Coast Environmental Law in August about the proposed settlement. Kung helped prepare a regulatory submission for Tsleil-Waututh Nation challenging the economics of the deal.

“In terms of recovery of that $34 billion, it’s even worse,” Kung said of the proposed lower tolls.

The Tsleil-Waututh filing estimated 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 settlement nevertheless gives Trans Mountain something valuable: greater commercial certainty. More of the system can now be placed under long-term contracts, making future revenue more predictable.

The CER said no party with a commercial interest in the resulting tolls opposed the negotiated settlement.

TMX As A Test Case

Kung argues that positive operating cash flow should not be confused with recovering the capital invested in the pipeline. That distinction could become increasingly important if Ottawa eventually sells Trans Mountain, because a buyer will value the asset partly according to the cash flow its tolls can generate.

The decision also lands as Ottawa and Alberta discuss the possibility of another West Coast oil pipeline. That makes the financial experience of Trans Mountain relevant well beyond this regulatory proceeding.

“Trans Mountain is a red flag,” Kung told Energi Media. “It’s not a blueprint.”

The expanded Trans Mountain system entered service in 2024, increasing nominal capacity from about 300,000 b/d to 890,000 b/d and providing Canadian oil producers with substantially greater access to Pacific export markets.