Trans Mountain pipeline construction costs balloon again, this time to $30.9B
CALGARY — The estimated cost of the Trans Mountain pipeline expansion project has increased once 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. blamed the latest cost overruns on a number of factors, including inflation, labour and supply chain challenges, flooding in B.C. and unexpected major archeological discoveries along the route.
The new price tag is a 44 per cent increase from the $21.4 billion cost projection placed on the pipeline expansion project a year ago, and more than double an earlier estimate of $12.6 billion.
Previous cost increases were blamed on the COVID-19 pandemic, scheduling pressures related to permitting processes, and route changes to avoid culturally and environmentally sensitive areas, among other things.
“Canada has among the world’s highest standards for the protection of people, the environment, and Indigenous participation when building major infrastructure projects," said Trans Mountain Corp. CEO Dawn Farrell in a news release Friday.
"By including these commitments into the Project design and development from the beginning, we have ensured the Project will provide economic benefits to Canadians well into the future."
Trans Mountain Corp. said it is now in the process of securing external financing to cover the remaining cost of the project.
The 1,150-km Trans Mountain pipeline is Canada's only pipeline system transporting 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 Canadian crude oil production growth and ensuring access to global energy markets.
However, even before the latest cost increase, some critics were suggesting the project no longer makes economic sense.
For Trans Mountain Corp., a big reason why rising costs are so problematic is that it has no way to recoup them. Due to existing contractual agreements with shippers, only 20 per cent 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 shift product on a pipeline, and they are how the pipeline company makes money).
A report from the Parliamentary Budget Officer last June found the federal government stands to lose money from its investment in the pipeline, and suggested that if the project were cancelled at that time, the government would need to write off more than $14 billion in assets.
Trans Mountain was bought by the federal government for $4.5 billion in 2018, after previous owner Kinder Morgan Canada Inc. threatened to scrap the pipeline's planned expansion project in the face of environmentalist opposition.
The federal government has indicated it does not wish to be the long-term owner of Trans Mountain, and intends to launch a divestment process after the expansion project has been "further derisked."
Several Indigenous-led initiatives have previously indicated their intent to pursue ownership of the pipeline.
Construction of the project is currently close to 80 per cent complete, with mechanical completion expected to occur at the end of this year, and the pipeline expected to be in-service in the first quarter of 2024.
This report by The Canadian Press was first published March 10, 2023.
Amanda Stephenson, The Canadian Press