KM Trans Mountain pipeline common carrier approved
KM Trans Mountain Pipeline
The Canadian National Energy Board finds that Trans Mountain pipeline would satisfy its common carrier obligations. Trans Mountain pipeline system currently in operation has a capacity of 300,000 bpd. The future proposed expansion is to approximately 890,000 bpd.
http://www.neb-one.gc.ca/clf-nsi/rthn...
http://goo.gl/rZ9f4
The Board finds, on balance, that the toll methodology as proposed by Trans Mountain will produce tolls that will be just, reasonable and not unjustly discriminatory.
In the Board's view, the fact that concessions were made by Trans Mountain and commitments were made for significant volumes of firm capacity, on equal terms, by a wide variety of shippers, support the finding that the Open Season was fair and transparent.
Trans Mountain was of the view that the proposed toll methodology is the result of negotiations with sophisticated committed shippers and the resulting balance of terms and risks was just and reasonable. The proposed amount of the toll must allow the regulated company a reasonable opportunity to recover its costs and to earn a fair return.
Trans Mountain stated that it made an investment decision based on a return on investment that was acceptable, taking into account the cash flow generated by the negotiated tolls that were agreed to by Trans Mountain and Firm Service Shippers. The investment decision criteria included a targeted unlevered internal rate of return in the typical range of 12 percent (12%) to 15 percent (15%).
Trans Mountain indicated that its approach to assessing potential new pipeline investment is to apply a hurdle rate and when this hurdle is met, Trans Mountain and its investors have the confidence needed to assume all applicable risks inherent in this investment.
If Trans Mountain believes it has a reasonable opportunity to recover its cost of capital under the proposed toll methodology, the Board is of the view that the requirements of the Fair Return Standard are met.