NEB Provided Kinder Morgan with $136 million to fund Trans Mountain Pipeline Application

City of Burnaby News Release

June 30, 2014

For immediate release

The City of Burnaby has received a shocking study that reveals that the National Energy Board provided Kinder Morgan with a pre-approved $136 million war chest to push its new pipeline through Burnaby. The company passes those costs on to consumers, and faces no risk.

The study, by economist and former ICBC CEO Robyn Allan, examines previous NEB hearings into Kinder Morgan’s application to expand the Trans Mountain pipeline and tank farm, and investor statements, and confirms that Kinder Morgan received NEB approval in 2011 to charge a $1.45/barrel surcharge on oil shipped through the existing pipeline to fund the current application.

Under the arrangement, Kinder Morgan is allowed to collect a “Firm Service Fee” from shipper oil companies to amass the $136.3 million earmarked for Kinder Morgan’s pre-development costs. The Firm Service Fee averages $1.45 per barrel of oil (which converts to approximately one cent per litre in added gasoline costs).1

The study then points out that in ‘tolling hearings’ in 2012-13 on this project (where public intervenors were excluded), Kinder Morgan confirmed that all costs for the present application were being paid out of the Fee, with no additional costs to Kinder Morgan or proposed shippers. Allan points out that Kinder Morgan Canada President Ian Anderson later explained the deal to his investors by stating that if “the project doesn’t succeed or we don’t get the permits, all the development costs are being covered by the Firm service fees that we are collecting so there is no risk there to us.”

Allan states that the NEB approved fund is generating “deep pockets” for Kinder Morgan, and “effectively enables a financially unconstrained advancement of Kinder Morgan’s interests.” The risk instead is borne by the communities along Kinder Morgan’s chosen route. “Consumers are funding the security for Kinder Morgan investors, but where is the funding for people whose homes, schools, and businesses are at risk?” says Allan. “They didn’t get $136 million to protect their interests.”

Mayor Corrigan says: “This is shocking and unfair. The NEB approved this agreement in advance, and is now sitting in judgment of the resulting application. The NEB has authorized only $1.5 million dollars for all other intervenors. How fair is that?” The Mayor notes: “The company gets their costs paid by the consumer, but Burnaby and our citizens have to pay our own costs to protect ourselves. The integrity of the National Energy Board is seriously compromised here. It appears they have already made up their mind.”

Kinder Morgan applied for NEB approval of the Firm Service Fee in November 2010, and was given approval in December 2011. Two years later, Kinder Morgan applied to the NEB for approval of a new pipeline routed through Burnaby, a tripling of the oil storage capacity in the City, and a new marine terminal capable of increasing oil tanker traffic from five to 34 tankers per month. The public was not allowed to participate in the 2010/2011 hearings or in the 2012/13 tolling hearings.

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For more information:
Mayor Derek Corrigan, City of Burnaby
604-294-7340

Robyn Allan,
1-604-962-4160
Robyn Allan’s study is available at: www.robynallan.com

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