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Trans Mountain Pipeline ULC on Behalf of Trans Mountain Pipeline L.P. Application for Approval of Firm Service Recontracting, CER Letter Decision A8V4K7

Link to Decision Summarized

Oil – Rates

Application

Trans Mountain Pipeline ULC (“Trans Mountain”) applied for approval of firm service recontracting for 47,500 barrels per day (“bpd”) of capacity to the Westridge Marine Terminal for a period ending after six months or when additional capacity is made available on the Trans Mountain’s expanded system (“Expanded System”), whichever is earlier (the “Application”).

Decision

The CER approved the recontracting of firm service tolls for volumes delivered before the date that the Expanded System commences service (the “Commencement Date”). For recontracted firm service petroleum tendered before that date but delivered after the commencement of service (the “Firm Carryover Volumes”), the CER approved the applied-for tolls on an interim basis.

Pertinent Issues

A pipeline company must request an approval for the contracting of existing oil pipeline capacity demonstrating that the Energy Regulator Act (“CER Act“) requirements are met. The CER must be satisfied that: the company meets its common carrier obligations; the tolls charged are just and reasonable; and the company does not make any unjust discrimination in its tolls or service.

Common Carriage Obligation

When seeking to re-contract capacity on an oil pipeline, a company must establish that: (1) there was fair and equal opportunity to access the firm service offered by the company; and (2) sufficient access to capacity remains after firm service is implemented.

The CER was satisfied that the uncommitted capacity available to land and dock shippers, in combination with the open season process undertaken, was sufficient to enable Trans Mountain to continue to act in a manner consistent with its common carrier obligations.

Proposed Firm Service Fees

While Trans Mountain did not submit the firm service fees that specific shippers will pay under the transportation service agreements (“TSAs”), Trans Mountain submitted that the average value was $14.57 per barrel. The CER found that sufficient details of the firm service fee structure were disclosed to meet the requirements of s 229 of the CER Act. The CER was also satisfied that the firm service fees bid through the open season and the firm service toll methodology comply with the CER Act and that the firm service fees are just, reasonable, and not unjustly discriminatory.

Proposed Firm Service Tolls

The proposed firm service tolls are equal to the sum of the uncommitted toll from the applicable tariff and the firm service fee. The CER approved the proposed tolls in respect of the volumes delivered before the Commencement Date, as applied for.

Setting Interim Tolls for Firm Carryover Volumes

Suncor Energy Marketing Inc. (“Suncor”) and Phillips 66 Canada Ltd. (“Phillips 66”) were concerned that Trans Mountain sought approval of tolls for the Expanded System that are $7 to $10 per barrel higher than current tolls on the Trans Mountain pipeline. They were concerned that, under Trans Mountain’s proposal, firm service tolls for Firm Carryover Volumes would be equal to the firm service fee plus the Expanded System uncommitted tolls. Suncor and Phillips 66 submitted that it would be unjust and unreasonable to apply Expanded System tolls to Firm Carryover Volumes and Uncommitted Carryover Volumes, as these volumes will not benefit from the Expanded System capacity nor cause the costs related to the expansion.

The CER found that tolls for the Firm Carryover Volumes should be interim, pending further consideration. The CER noted that Trans Mountain’s applied-for approach, of setting tolls applicable to the Firm Carryover Volumes equal to the firm service fees plus the Expanded System tolls, aligned with the CER’s most recent decisions.

Other Matters

The CER approved the proposed treatment of the firm service fees, as contributing towards the Trans Mountain expansion project, as well as the proposed reporting of the collections and investments of the firm service fees.

Concerns further arose regarding a clause in the TSAs regarding the term shippers’ efforts and cooperation with the carrier to obtain regulatory approvals. The CER noted that shippers may interpret this clause as restricting their ability to raise concerns with the CER. The CER stated that no such restriction may be imposed in a transportation contract. Accordingly, the CER directed Trans Mountain to revisit this clause in future contracts.

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