Trans Mountain pipeline may be delayed another two years over latest regulatory setback

The Canadian Energy Regulator (CER) ruled against installing a smaller diameter pipe in a mountainous section of the Trans Mountain pipeline expansion (TMX). Should the decision not be reversed, taxpayers would incur a two-year delay and billions more in losses.

  • By Alex Dhaliwal
  • December 16, 2023
  • News
Trans Mountain pipeline may be delayed another two years over latest regulatory setback
THE CANADIAN PRESS/Darryl Dyck
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The government-owned Trans Mountain pipeline expansion (TMX) project has suffered its third construction delay this fall in British Columbia — courtesy of the rugged terrain. The Trudeau Liberals are facing incredible hurdles after encountering difficult drilling conditions in a mountainous area between Hope and Chilliwack.

The Canadian Energy Regulator (CER) denied their application earlier this month to install a smaller diameter pipe in a 1.4-mile (2.3-km) section of the pipeline's route — a decision Trans Mountain Corp (TMC) challenged on December 14.

Should the decision not be reversed, the Crown corporation warns of a possibly "catastrophic" two-year delay and billions more in losses.

The federal government purchased the pipeline for $4.5 billion in 2018, but costs have spiraled out of control to $12.6 billion, then to $21.4 billion and most recently to $30.9 billion. 

As of writing, the pipeline expansion project has faced environmental opposition and regulatory hurdles — with Kinder Morgan Canada Inc. threatening to cancel the project once upon a time. 

Once completed, the 300,000 barrel-per-day pipeline expansion would nearly triple the flow of barrels to 890,000 barrels and open access for Canadian crude in Asiatic markets. However, regulatory delays and hefty budget overruns have beset the project.

In Thursday's letter, TMC said the hard rock conditions and fractured areas within the bedrock have allowed high rates of water ingress, causing complications, reported Reuters. Unless rectified with a smaller-diameter pipe, the problems are likely to worsen, it said.

"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," the company said.

The stop work order represented the latest in a string of delays for the project that will nearly triple the flow of crude from Alberta to B.C. once completed.

In September, Stk'emlúpsemc te Secwépemc First Nation disputed a proposed change by Trans Mountain to the pipeline route through an area known as Pípsell, reported Global News.

The Nation claims rerouting the pipeline 1.3 kilometres would 'severely jeopardize' a "cultural keystone place" as the Crown corporation would employ a more disruptive construction technique rather than the agreed upon 'micro-tunneling.'

The regulator met with representatives from Trans Mountain and SSN in Calgary and resolved the matter on October 20. They approved the route change application for fear of a 10-month construction delay on the initial route to next December.

"This delay could result in an estimated $2 billion of lost revenue for Trans Mountain and cause negative impacts on shippers and other parties," said a company spokesperson. 

But in November, work on the pipeline expansion again halted — this time for safety-related non-compliances in a wetland area near Abbotsford.

After correcting the issues raised by the regulator, the Crown corporation received notice to resume work. 

According to a Fraser Institute survey of senior oil and gas executives last year, 82 respondents said uncertainty in Canada concerning environmental regulations, disputed land claims, and the cost of regulatory compliance are significant impediments to future investment.

Out of the 15 energy jurisdictions in the survey, Wyoming ranked 1st in attractiveness for investment, followed by Texas (2nd) and Oklahoma (3rd). Alberta ranked 12th, and B.C. ranked 14th. 

"The message from investors is clear — Canada's onerous and uncertain regulatory environment continues to hurt the investment attractiveness of the country's oil and gas industry," said Elmira Aliakbari, director of the Fraser Institute's Centre for Natural Resource Studies and co-author of the latest Canada-US Energy Sector Competitiveness Survey. 

"The federal government's stance on petroleum production has deterred investment," it reads. "An overall hostility to petroleum companies in Canada that is very palpable in Eastern Canada [has derided] the oil and gas sector." 

Trans Mountain Corp earlier tried to secure external financing to fund the project after Deputy Prime Minister Chrystia Freeland said the pipeline would require third-party funding through banks or public debt markets.

"As we committed to Canadians last year, no additional public money will be invested in this project as construction is completed," Freeland told reporters 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," she added.

TMC has urged the regulator to reach a decision on its appeal no later than January 9 to avoid further delays.

As of writing, TMX is still projecting to ship oil by the end of March 2024, with producers raising their output in anticipation of expanded access to refineries in California and Asia.

Construction of the pipeline expansion is 97% complete.

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