The operator of Canada’s Trans Mountain pipeline and oil shippers are in talks to resolve a shipping cost dispute that has deterred usage of Canada’s only east-west pipeline and hindered the government’s plan to sell it.
Documents filed with the Canada Energy Regulator on Tuesday by Trans Mountain Corp and a group of oil shippers including Cenovus Energy, Canadian Natural Resources, and ConocoPhillips Canada said the parties are having “active commercial discussions.”
The talks could settle how much the companies pay to ship oil on the expanded 890,000-barrel-per-day pipeline, which offers direct access to China and other Asian markets at a time Canada is trying to diversify oil exports away from the United States.
A Trans Mountain spokeswoman confirmed in an email on Wednesday that talks are underway and said the company is requesting regulatory proceedings be halted to allow time for an agreement.
Canada’s Energy Regulator said it is reviewing the request. The shippers did not immediately reply to a request for comment. The more than two-year-old tolling dispute has added uncertainty to the Canadian government’s plans to eventually sell the Trans Mountain pipeline.
Ottawa, which bought the pipeline for C$4.5 billion ($3.21 billion) in 2018 to rescue the expansion project after years of regulatory delays and cost increases, began informal talks in 2023 with Indigenous groups along the pipeline’s route to explore their interest in a potential equity stake.
Analysts say it would be difficult for an Indigenous group or private sector buyer to commit to purchasing the pipeline until the tolling dispute is settled and Trans Mountain’s long-term revenue potential is clear.
FINAL TOLL UNCERTAINTY
The C$34 billion expansion completed in 2024 tripled the pipeline’s capacity, but the final price tag was nearly quintuple a 2017 estimate.
While approximately 70% of cost overruns will be borne by Trans Mountain Corp, the remaining more than $9 billion are to be covered by tolls under a formula agreed to by shippers and approved by the Canada Energy Regulator more than a decade ago.
Contracted shippers now pay nearly twice what Trans Mountain had estimated in 2017. Spot shippers pay even higher rates.
Some shippers have pushed back against the higher tolls, arguing they are not responsible for cost overruns incurred during construction. The Canada Energy Regulator had been set to hold a hearing on the tolls next month. Since the expansion’s startup in May 2024, the Trans Mountain pipeline has been less full than its operator had earlier forecast, in part because its higher tolls are deterring utilization.
If the final toll structure comes in below what Trans Mountain is looking for, it will make it harder for the pipeline to recoup its construction costs and could impact its potential selling price, analysts say.
Trans Mountain CEO Mark Maki said in June he believes the Canadian government can recover its investment in the pipeline, but should hold off on the sale until uncertainties around tolling and utilization are resolved.
(Reporting by Amanda Stephenson in Calgary; Editing by Caroline Stauffer and Bill Berkrot)