Kinder Morgan Inc. is taking flak over a plan to jack up fees on its Trans Mountain pipeline to cover costs associated with oil spill safeguards as the company seeks approval for a threefold expansion of the conduit.
U.S.-based Kinder Morgan is proposing an increase of roughly 8 per cent to fees paid by oil company shippers in order to bolster the industry's ability to respond to a large marine oil spill, according to documents filed with regulators.
The change, set to take effect as early as June 1, would tack a 28-cent-a-barrel surcharge on shipments from the company's Westridge dock, where the pipeline ends in Burnaby, B.C. – a pinch point in the energy industry's long-running effort to dramatically boost exports of Alberta's landlocked crude.
The levy is supported by the Canadian Association of Petroleum Producers. But U.S. refiner Phillips 66 and a trading unit of PetroChina Co. Ltd. oppose it, arguing that they should not have to pay for services today in support of an expanded pipeline that they may never use.
The spat highlights fault lines in the industry's approach to beefing up existing oil-spill safeguards as it seeks public support for a series of multibillion-dollar pipelines designed to transport growing volumes of oil sands crude to richer global markets.
It also marks another chapter in a series of disputes over tolls on the Pacific-bound pipeline, as some of the world's largest oil companies jostle over rights to limited export capacity. Companies currently pay a premium for regular access to the loading dock, the jumping-off point for exports to Asia and the U.S. west coast.
Kinder Morgan says the new fees are needed now to accelerate investments in spill-response capacity. It has pledged to refund oil company shippers that use its Westridge dock the cost of the new surcharge from June through December of this year. A new funding mechanism covering 2016 and beyond will be proposed by Oct. 31, the company said in filings.
The levy will enable the industry-funded Western Canada Marine Response Corp. to hire about 100 additional staff and invest roughly $100-million in response services and equipment, including five new bases along the proposed tanker route, said Mike Davies, senior director, marine development with Trans Mountain.
The spill-response agency is funded through a per-tonne fee on petroleum loaded from terminals within a specific catchment area. The agency then bills Kinder Morgan, which passes the cost on to shippers.
"It's a very significant investment in spill-response capacity, and in order for it to be in place in time for our projected in-service date [of 2018], they need to begin investments now," Mr. Davies said in an interview, playing down objections to the proposal.
However, in documents filed with the National Energy Board this month, PetroChina International (Canada) Trading Ltd. called the new measures "inappropriate" and urged the regulator to reject them.
"It would be inappropriate for Trans Mountain to charge these costs to current Westridge Marine Terminal shippers, some of which may no longer even be Westridge Marine Terminal shippers after the in-service of [the expanded pipeline]," the company said.
The $5.4-billion Trans Mountain expansion, to 890,000 barrels a day, is supported by more than a dozen major oil companies. But it has stoked anxiety over the potential for a large spill to overwhelm emergency crews in B.C.'s Lower Mainland.
Those concerns were reinforced in April after a bunker-fuel spill fouled waters in scenic English Bay, within sight of downtown Vancouver, prompting a sharp rebuke from the city's mayor.
Still, company officials, including chairman and chief executive officer Richard Kinder, have pledged to forge ahead with the expansion over the objections of local leaders if the project is approved.
They have also stuck to a projected start date of late 2018, even as the timeline for a rival Pacific pipeline proposed by Enbridge Inc. slips into the next decade.