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Ships are moored in the Strait of Georgia off of Vancouver. The National Energy Board has come under fire for restricting the number of people permitted to participate in the review process for the proposed Trans Mountain pipeline expansion project in British Columbia.GRAEME ROY/The Canadian Press

Burnaby Mayor Derek Corrigan says he's shocked by a report that claims the National Energy Board authorized a special fee that allowed Kinder Morgan to build up a $136-million "war chest" to pursue expansion of the Trans Mountain pipeline.

The report by Robyn Allan, an independent economist who has been critical of large energy projects in B.C., was released Sunday and was given in advance to the City of Burnaby, which is fighting to stop the pipeline expansion.

The report states that in an unprecedented ruling in 2011 the NEB agreed to let Kinder Morgan start charging a "firm service fee" of $1.45 for each barrel of oil shipped from its West Coast facility. That fee was intended to raise funds from five major shippers to pay for pre-development costs on the Trans Mountain expansion project.

In a brief statement, Kinder Morgan defended the fee, saying it is working within the guidelines of the NEB and is faced with significant costs in preparing its application.

"Development of a project such as the Trans Mountain expansion entails significant study and environmental and engineering work such that Kinder Morgan and its customers are collectively sharing the development cost risk for the project," said company spokesman Andrew Galarnyk in an e-mail. "The commercial terms for the project were previously approved by the National Energy Board."

But Mr. Corrigan said it is "shocking" that the NEB approved the deal, which he feels gives the proponent an unfair advantage. "Her coming out with this information was really quite surprising to me," he said of Ms. Allan's report. "I never thought for a moment that this was the way they were operating – that in essence there was a no risk proposition for the private sector in regard to making this kind of application."

He said the NEB's impartiality has been brought into question by the deal. "Imagine if big companies were coming in to do zonings [in Burnaby], to make a lot of profit in our city and we were giving them the authority to tax our community to make their rezoning applications," Mr. Corrigan said. "Who would think for a moment that our consideration could be fair under those circumstances if we'd already made up our mind that they are not going to have to accept any risk?"

Mr. Corrigan noted that the NEB has a relatively small amount of funding – about $1-million – set aside for interveners, and the imbalance of Kinder Morgan having $136-million is upsetting to people.

"They feel the game is rigged, that the favouritism for the multinational corporations that are imposing their will is significant," Mr. Corrigan said. "To make the odds 136 to one, I mean you get better odds as the long shot in the Kentucky Derby."

Ms. Allan said she was researching Kinder Morgan's financial capabilities when she came across the NEB ruling granting the company permission to pre-fund its expansion application through a fee. "The normal course of business when companies want to undertake major capital investments is their shareholders take the risk," she said. "[But] it's really Canadians who are bearing the costs of this application."

Ms. Allan said she doesn't think any such pre-funding arrangement has ever been made before by the NEB.

The NEB could not be reached for comment on Sunday.

"The approval of Kinder Morgan's firm service fee by the Board was precedent setting," Ms. Allan's report states. "The NEB effectively granted Kinder Morgan a right to guaranteed shipper surcharges in order to build a regulatory approval process 'war chest' available to the pipeline company to draw on, when and as needed, to fund capacity expansion applications for its Trans Mountain pipeline system."

Ms. Allan is a former CEO of the Insurance Corporation of British Columbia. In recent years she has issued several financial reports critical of oil pipelines in B.C. and of development of the Alberta oil sands.