TC Energy pegs Coastal GasLink costs at $14.5 billion — up nearly 30%
The company says that construction of its pipeline is 83% complete but warned that should construction extend into 2024, building costs could surpass an additional $1.2 billion.
The estimated cost of the Coastal GasLink pipeline has increased by 29% to $14.5 billion, according to TC Energy Corp. The company attributes the uptick to unexpected construction issues and rising labour costs.
The Calgary-based company released the new price tag for the project Wednesday, up from an estimated $11.2 billion last July — a significant increase from a previous cost projection of $6.6 billion.
"We are disappointed with the increase in the Coastal GasLink Project costs," said TC Energy chief executive François Poirier in a release.
Poirier reassured Canadians that the company's focus remains solely on completing this critical energy infrastructure safely and at the lowest possible cost.
The Coastal GasLink project is a 670-km natural gas pipeline spanning northern British Columbia to the Liquified Natural Gas (LNG) Canada processing and export facility in Kitimat, BC.
The Kitimat LNG export facility is more than 70% complete and is expected to deliver its first LNG shipment to global export markets by mid-decade.
TC Energy said Wednesday that construction of its pipeline is 83% complete but warned that should construction extend into 2024, building costs could surpass an additional $1.2 billion.
They hope to complete the project by the end of 2023.
In an emailed statement, LNG Canada said it continues to monitor Coastal GasLink's cost and schedule developments.
"While we cannot disclose specifics, a commercial agreement is in place that addresses risk allocation," reads the statement.
TC Energy attributed a shortage of skilled labour and contractor underperformance and disputes to the rising costs. They also noted that unexpected events like drought and erosion, and sediment control challenges contributed accordingly.
The company recognized an impairment to its equity investment in Coastal GasLink in its fourth-quarter 2022 financial results.
As a result, they revised their overall 2023 capital expenditure outlook to approximately $11.5 to $12.0 billion, reflecting the deferral of certain project spending, expected cost-saving initiatives, and incremental funding requirements associated with the Coastal GasLink pipeline.
The taxpayer-owned Trans Mountain pipeline expansion project also observed higher than estimated costs rising from $12.6 billion to an estimated $21.4 billion.
The expansion increases oil transportation capacity from Alberta to the West Coast.
The federal government said in February that it would no longer subsidize the Trans Mountain pipeline expansion project, with its price tag skyrocketing well beyond the initial purchase price of $4.5 billion. Deputy Prime Minister Chrystia Freeland said Trans Mountain Corp. would need third-party funding to complete the project through banks or public debt markets.
Trans Mountain Corp. blamed its surging cost projections on the COVID pandemic and November 2021 flooding in B.C.
Among other factors to the higher estimated costs are increased security costs to work sites due to the presence of environmentalist groups, who oppose the construction of traditional energy infrastructure.
Trans Mountain Corp. has faced several incidents at its sites over the past year, which TC Energy has also experienced.
Last February, a group of unknown assailants attacked a Coastal GasLink site near Houston, B.C., injuring employees and damaging heavy equipment. According to the RCMP, 20 people armed with axes stormed security guards, costing millions in damage.
Their whereabouts remain unknown, and a $100,000 reward remains open for information concerning the incident.
In November, five protesters opposed the construction of Coastal GasLink in a contentious blockade that lasted several days. They pled guilty to criminal contempt for defying a court injunction that prohibited their demonstration.
The assailants either received $500 fines or a punishment of 25 hours of community service.
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