Construction of the Trans Mountain pipeline costs swell again – this time to $30.9 billion

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. attributed the latest cost overruns to a number of factors, including inflation, labor and supply chain issues, flooding in British Columbia and unexpected major archaeological discoveries along the road.

The new price represents a 44% increase from the $21.4 billion cost estimate placed on the pipeline expansion project a year ago, and more than double an earlier estimate of $12.6 billion. billions of dollars.

Previous cost increases have been blamed on the COVID-19 pandemic, planning pressures related to permitting processes, and route changes to avoid culturally and environmentally sensitive areas, among others.

“Canada has one of the highest standards in the world when it comes to protecting people, the environment and involving Indigenous peoples when building major infrastructure projects,” said Trans Mountain Corp CEO ., Dawn Farrell, in a press release Friday.

“By including these commitments in the design and development of the project from the start, we have ensured that the project will provide economic benefits to Canadians for a long time. »

Trans Mountain Corp. said it is now in the process of securing external funding to cover the remaining cost of the project.

The 1,150 km Trans Mountain Pipeline is the only pipeline system in Canada carrying oil from Alberta to the West Coast.

Its 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.

However, even before the latest cost increase, some critics suggested that the project no longer made economic sense.

1:51Trans Mountain pipeline will be a net loss for Ottawa, says Parliamentary Budget Officer

For Trans Mountain Corp., one of the main reasons rising costs are so problematic is that it has no way to recoup them.

Due to existing contractual arrangements with shippers, only 20% of 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 through a pipeline, and this is how the pipeline company makes money).

A report by the Parliamentary Budget Officer last June found that the federal government stood to lose money from its investment in the pipeline and suggested that if the project was canceled then, the government should write off more than $14 billion in assets.

1:01Freeland says Trans Mountain will receive no additional public funds as pipeline coast soars

Trans Mountain was bought by the federal government for $4.5 billion in 2018, after former owner Kinder Morgan Canada Inc. threatened to scrap a planned pipeline expansion in the face of environmental opposition.

The federal government has indicated that it does not want to be the long-term owner of Trans Mountain and intends to initiate a divestment process once the expansion project has been “de-risked further”.

Several Indigenous-led initiatives have already indicated their intention to own the pipeline.

Construction of the project is currently nearly 80% complete, with mechanical completion expected by the end of this year and the pipeline expected to be commissioned in the first quarter of 2024.

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