The Trans Mountain pipeline expansion project, currently owned by the Canadian government, is on the brink of a severe setback due to overregulation.
Trans Mountain Corp. has warned of a potential two-year delay and billions in losses if the Canada Energy Regulator does not reconsider a recent decision.
“The company building the Trans Mountain pipeline expansion is warning the project’s completion could be delayed by two years if the Canada Energy Regulator does not allow a previously rejected request for a pipeline variance,” the corporation disclosed in a regulatory filing.
This delay, termed “catastrophic” by Trans Mountain Corp., stems from the regulator’s refusal to permit a change in the pipeline’s construction in a challenging section. The project, which is more than 97% complete, aims to boost the pipeline’s capacity from 300,000 barrels per day to 890,000 barrels per day.
The federal government initially purchased the pipeline for $4.5 billion, although costs have now escalated to $30.9 billion.
This significant increase is largely due to regulatory hurdles, environmental opposition, and construction difficulties, particularly in a mountainous area between Hope and Chilliwack, British Columbia.
Trans Mountain said the hard rock conditions and fractured areas within the bedrock have allowed high rates of water ingress, causing complications, reported Reuters.
“If the [horizontal directional drill] fails and Trans Mountain is required to implement an alternative installation plan, the TMEP schedule will likely be delayed by approximately two years, and Trans Mountain will suffer billions of dollars in losses,” said Trans Mountain Corp.
Earlier this month, the Canada Energy Regulator’s decision denied Trans Mountain’s request to install a smaller diameter pipe in a 1.4-mile (2.3-km) section of the pipeline’s route.
If the decision remains unchanged, the Crown corporation cautions that it could lead to a potentially “catastrophic” delay of two years, accompanied by billions in additional losses.
The project has faced opposition from environmental groups and regulatory compliance issues.
“Canada’s onerous and uncertain regulatory environment continues to hurt the investment attractiveness of the country’s oil and gas industry,” noted Elmira Aliakbari, director of the Fraser Institute’s Centre for Natural Resource Studies, according to Rebel News.
Anticipated to be operational early next year, the Trans Mountain Corp. now faces the possibility that its $30.9 billion pipeline project might be delayed until December 2024. This comes after the company discovered the need to potentially alter the original pipeline route, a move that could save $86 million in extra costs.
The Stk’emlúpsemc te Secwépemc First Nation has raised objections to Trans Mountain’s planned modification of the pipeline route through a region called Pípsell.
“It is a concern, there’s no question. First, the delay, and second, the cost,” Tristan Goodman, the president and CEO of the Explorers and Producers Association, expressed.
Previously, TMC had attempted to obtain external financing for the project.
“As we committed to Canadians last year, no additional public money will be invested in this project as construction is completed,” Freeland told the press in February 2022.
“The federal government does not intend to be the long-term owner of the project, and we will launch a divestment process in due course.”
To prevent additional setbacks, the company overseeing the project has requested that the regulator decide on their appeal by January 9.
Currently, the Trans Mountain pipeline expansion project anticipates starting oil shipments by the end of March 2024, with producers increasing their output in preparation for enhanced access to refineries in both California and Asia.
At present, the construction of the pipeline expansion is nearly complete, standing at 97%.
