The current Trans Mountain pipeline between the oil-producing province of Alberta and the west coast is routinely oversubscribed, and the expansion has had strong support from Canadian oil sands shippers.

But it also faces strong opposition from environmentalists and communities along its route, with critics from First Nations chiefs to the mayor of Burnaby, where it terminates, vowing civil disobedience to disrupt construction.

In a statement, Kinder Morgan said the tolls increased in part because of conditions imposed by the National Energy Board regulator and project changes as a result of public feedback such as thicker pipe walls.

It did not say how much the tolls rose, but it said last month the project's cost was then estimated at C$6.8 billion.

The 3 percent of capacity that was turned back will be offered to the industry again starting Thursday via an "open season" process, the company said.

In November the Canadian government approved Kinder Morgan's plan to nearly triple its crude pipeline to 890,000 barrels per day.

Since receiving the final cost estimate and revised tolls, some existing and prospective shippers traded capacity among themselves, resulting in the 3 percent drop, the company said.

The remaining 97 percent of Trans Mountain capacity are under contract with existing or new shippers, and the company maintains "strong" commercial support for the project, Kinder Morgan said.

The biggest U.S. pipeline company said next steps for the project include arranging financing and a final investment decision.

People familiar with the process told Reuters last month that Kinder Morgan had begun talks with institutional investors including major Canadian pension funds and private equity firms.

(Reporting by Ethan Lou in Calgary, Alberta, and Swati Verma in Bengaluru; Editing by Chizu Nomiyama and Andrew Hay)