Trans Mountain pipeline construction costs balloon again
The estimated cost of the Trans Mountain pipeline expansion project has risen again, this time to $30.9 billion.
That’s the latest figure from Trans Mountain Corp., the federal Crown Corporation that owns the pipeline. On Friday, Trans Mountain Corp. blame the latest cost overruns on a number of factors, including inflation, labor and supply chain challenges, BC floods, and unexpected major archaeological discoveries along the route.
The new price tag is a 44 percent increase from the $21.4 billion cost estimate placed on the pipeline expansion project a year ago, and more than double a previous estimate of $12.6 billion.
Previous cost increases have been attributed, among other things, to the COVID-19 pandemic, planning pressure related to permitting procedures and route changes to avoid culturally and environmentally sensitive areas.
“Canada has one of the world’s highest standards for the protection of people, the environment and Indigenous participation in building major infrastructure projects,” Dawn Farrell, CEO of Trans Mountain Corp., said in a press release Friday.
“By incorporating these commitments into the design and development of the project from the start, we have ensured that the project will deliver economic benefits to Canadians well into the future.”
Trans Mountain Corp. said it is now in the process of securing outside funding to cover the remaining costs of the project.
The 1,150km Trans Mountain Pipeline is Canada’s only pipeline system that transports oil from Alberta to the west coast.
The expansion will increase the pipeline’s capacity from 590,000 barrels per day to a total of 890,000 barrels per day, supporting growth in Canadian crude oil production and ensuring access to global energy markets.
But even before the latest cost hike, some critics suggested the project no longer makes economic sense.
For Trans Mountain Corp. is a major reason why rising costs are so problematic that there is no way to recoup them. Due to existing contractual arrangements with shippers, only 20 percent of the increased capital costs can be passed on to oil companies in the form of increased tolls. (Tolls are the rates oil companies pay to move product on a pipeline, and they’re how the pipeline company makes money).
A report from the parliamentary budget officer last June found that the federal government is at risk of losing money from its investment in the pipeline, and suggested that if the project were canceled at that point, the government would have to forfeit more than $14 billion in assets. write off.
Trans Mountain was purchased by the federal government for $4.5 billion in 2018 after previous owner Kinder Morgan Canada Inc. had threatened to scrap the planned pipeline expansion project despite opposition from environmentalists.
The federal government has indicated it does not want to be Trans Mountain’s long-term owner and plans to initiate a divestment process after the expansion project “takes further risks.”
Several Indigenous-led initiatives have previously indicated their intention to take ownership of the pipeline.
Construction on the project is currently nearly 80 percent complete, with mechanical completion expected by the end of this year, and the pipeline expected to be commissioned in the first quarter of 2024.
This report from The Canadian Press was first published on March 10, 2023.