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Kinder Morgan in a wrangle BC government, City of Vancouver, accuse Trans Mountain operator of sidestepping expansion questions in advance of NEB hearings Gary Park For Petroleum News
Kinder Morgan is now facing the same buffeting as rival Enbridge as it enters the regulatory phase of its plan to triple its shipments of oil sands bitumen to the British Columbia coast and Washington state for possible export to Asia.
Having initially avoided the public rage that has surrounded Enbridge’s Northern Gateway proposal, Kinder Morgan has become embroiled in a wrangle over plans to increase volumes on its Trans Mountain system to 890,000 barrels per day from 300,000 bpd.
Both the British Columbia government and the City of Vancouver have been riled by what they see as Kinder Morgan’s responses to questions that are preceding a National Energy Board hearing that is expected to start in 2015.
The city said Kinder Morgan answered only 248 of about 400 questions it submitted, while the provincial government said responses to more than 70 information requests it submitted to the company were inadequate.
The city and province have filed notices of motion asking the NEB for an order “that Trans Mountain provide a full and adequate response” to its questions.
More than 10,000 questions Overall, Kinder Morgan has been swamped 10,000 questions filed by hundreds of groups and individuals who have been granted intervener status by the regulator.
Under new federal rules for regulatory reviews of major resource projects - implemented after the Northern Gateway hearings - there is a fixed timeline to complete the process, while the NEB has decided not to allow direct oral questioning of company officials.
Sahtu Johnston, deputy city manager, said the process is “very restrictive ... it’s become quite undemocratic.”
“As interveners we are trying to fully evaluate the proposal and to prepare our experts and our expert testimony to ask the right questions and formulate an opinion,” he said.
The city said the applicant was unwilling to “share important documents” on its emergency management and environmental compliance plans.
A statement by the British Columbia Environment Ministry said its requests dealt with maritime and land-based oil spill responses, prevention and recovery systems.
In a number of cases, Kinder Morgan’s responses “do not provide sufficient information,” making it difficult to decide whether the proposal will include “world-leading” methods of clean up.
The city said the responses it received made clear that the company would not cover first responder costs incurred by Vancouver in the event of a disaster, raising questions about the economic feasibility of the project.
Andrew Weaver, the sole Green Party member of the British Columbia legislature, said Trans Mountain “failed to provide full and adequate responses” to his 500 questions and “made a significant error in determining that the requested information is not relevant.”
The company said in a statement that given the “unprecedented” volume of requests it “provided robust response to the questions asked that were in the scope of the regulatory review.”
It said interveners will have another chance to question the company and to submit evidence later this year.
‘Firm service fee’ authorized On a separate matter, Kinder Morgan is also feeling the heat because of an NEB decision authorizing it to charge a “firm service fee” of C$1.45 per barrel for oil shipped from its Vancouver terminal to build a fund of C$136 million from five shippers to pay for pre-development costs on the Trans Mountain expansion.
The report was compiled by Robyn Allan, an independent economist who has opposed major energy projects in British Columbia and oil sands development in Alberta, and was turned over to the City of Burnaby, a municipality in Metro Vancouver, which is trying to block the project.
Kinder Morgan in a statement to the Globe and Mail said the commercial terms for the project were approved by the NEB in 2011 and allows Kinder Morgan and its customers to share the costs of a study and environmental and engineering work.
Burnaby Mayor Derek Corrigan said the NEB decision is “shocking” because it gives the proponent an unfair advantage and sets up a no-risk proposition for Kinder Morgan in making its application, while allocating only C$1 million for interveners.
Allan said approval of the firm service fee set a precedent for the NEB by granting Kinder Morgan “a right to guaranteed shipper surcharges in order to build a regulatory approval process ‘war chest.’”
Ian Anderson, Kinder Morgan’s Canadian president, said Allan’s report did not fully explain the facts of what he described as a “fairly complex agreement” with shippers.
In a statement, he said five shippers attempting to grow overseas markets secured “firm service” on an oversubscribed pipeline by paying the premium over normal pipeline tolls, with Trans Mountain agreeing to put the money “in reserve to help pay for system improvements, including expansion development plans.”
Subsequently, Anderson said, Trans Mountain struck agreements with expansion shippers to use the firm service fees to cover development cost risk for the expansion project if it was approved and built in a timely fashion.
He said Allan has overlooked the fact that revenue realized by shippers for barrels exported beyond North America “will ultimately be higher than they could otherwise attract selling into the North American market. Otherwise, they would never voluntarily pay more for firm dock service.”
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