A publicly-traded unit of TransCanada Corp. has slashed its distribution by 35 per cent in the wake of changes to U.S. pipeline tax policy. TC Pipelines (TCP.N) cut the payout after an American court ruled the Federal Energy Regulatory Commission was unable to prove it could prevent energy infrastructure companies from double-dipping on a tax break.

Both TransCanada and TC Pipelines originally downplayed the impact of FERC’s decision in March, declaring that neither saw it as material to their balance sheets.

What a difference six weeks makes.

In a release Wednesday morning, TC Pipelines President Nathan Brown said the company was forced to cut its payout in a bid to preserve its financial position.  

“The recent actions by FERC in mid-March, with respect to the revised policy that would allow for no recovery of an income tax allowance in the cost-of-service rates of our pipelines with related follow-on impacts, have had a profound impact on us and many in our industry,” Brown said.

“The ultimate result is not precisely known but, if implemented as expected, will result in a material decrease in cash flows from our pipelines."