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CALGARY — The company building the Trans Mountain pipeline expansion now estimates the project's costs will come in 10 per cent higher than its May 2023 estimate of $30.9 billion.
That's according to a regulatory filing Trans Mountain Corp. provided to the Canada Energy Regulator on Monday. It represents the latest in a series of cost increases for the high-profile project, which in 2017 was estimated to cost just $7.4 billion.
In the filing, Trans Mountain Corp., which is a Crown corporation, said the latest tally is subject to the receipt of final costs and expenses once the pipeline project is complete.
The company said it will need approximately three months following the completion of construction before it can provide a final cost estimate.
Trans Mountain Corp. also said in Monday's filing it continues to work towards an in-service date for the pipeline expansion in the second quarter of this year, with commencement of firm service contracts slated for May 1.
RBC Capital Markets analyst Greg Pardy said in a note to clients that the new date represents a one-month delay from its prior start date.
The Trans Mountain pipeline, which is owned by the federal government, is Canada's only oil pipeline to the West Coast. Its expansion will increase the pipeline's capacity to 890,000 barrels per day from 300,000 bpd currently.
The expansion project, for which construction is more than 98 per cent complete, has been underway for more than three years. Canadian oil producers have already begun ramping up production in expectation of the additional export capacity, which is expected to improve the prices Canadian oil companies receive.
But Trans Mountain Corp. has been racing against the clock as it deals with difficulties drilling through hard rock in B.C.'s Fraser Valley between Hope and Chilliwack.
A company spokesperson said earlier this month that the latest problems are related to an obstruction discovered while attempting to pull the pipe into the hole drilled for it.
The ballooning costs of the project are expected to reduce the sale price the federal government can hope to achieve when it sells the pipeline. The government has already launched talks with more than 120 Western Canadian Indigenous communities whose lands are located along the pipeline route, to find out if any of them are interested in acquiring an equity stake.
But Trans Mountain has previously told the regulator that the project's rising price tag has been "reasonably and justifiably incurred."
It has said the project has been affected by "extraordinary" factors that include evolving compliance requirements, Indigenous accommodations, stakeholder engagement and compensation requirements, extreme weather and the COVID-19 pandemic.
This report by The Canadian Press was first published Feb. 27, 2024.
Comments
Two things:
First, the apparently complete ineptitude, displayed in recent decades, to bring significant works projects through to completion in Canada. I have no idea if it is mere corruption and graft (everyone wants to be a billionaire), if our engineering and project management professionals ain't what they used to be, or what. It's mind-boggling to me. Doesn't matter the project, from a simple pedestrian bridge over a two-lane roadway, to a pipeline, to shipbuilding, to an LRT that's allergic to cornering. Has something fundamental changed?
We can't all be idiots and/or grifters.
Second, the our federal gov't's attempts to sell off the TMX to First Nations seems, at worst, cynical colonialism. "We know it's an expensive white elephant, so let's try and get these guys to take it off our hands."
It's getting more difficult to feel proudly Canadian, these days.
Feel free to offer substantive counter-examples to make this beaver slap his tail a little more energetically! :)
Canadian infrastructure projects still perform better than those in the U.S., where the average project delay is a little over three years [vs 1 in Canada]. And the cost over runs are larger. https://www.canadianconsultingengineer.com/energy/study-finds-average-c….
The problem is not our construction or engineering ability, it is the politics of under estimation in order to get pet projects approved. These politics seem to be alive and well inside large corporations as well as government.
If you want the chapter and verse, check this book out of your local library:
How Big Things Get Done, economic geographer Bent Flyvbjerg and journalist Dan Gardner
Thanks, Alan.
I'm glad you referenced that particular book; I listened to the audiobook version of it last summer and I need to listen once or twice more to get a good handle on the material.
Still, it's hard to fathom how a world leader in a field (rail people-moving, say) can't apparently deliver a system whose parts interwork effectively. Or the crushing opportunity costs of a pipeline of medium length; one wonders what other purpose B$35 could have been put to. Or the "need" to bring in foreign temporary workers, earning much less than domestic trades and in dodgy working conditions, to construct... whatever: transit projects or condo towers.
A 10% increase brings the total to $34 billion. Why is this not mentioned in the article? Presumably Trans Mountain did not mention it, and did not want it mentioned. It is the journalists job to find out things that the company does not want known.
I'd like to expand on Ken Panton's comment "if our engineering and project management professionals ain't what they used to be". Competent design and project management professional engineers don't have to rely on non-disclosure agreements (NDA's) to guide a $34 Billion infrastructure project to completion. Yet Trans Mountain Corp (TMC) and Kinder Morgan Canada have relied on NDAs to silence the following parties:
- the independent Fire Protection Auditors PLC to provide an independent assessment on the fire risks of the existing tanks on Burnaby Mountain. The NEB dismissed PLC off the Project in 2019.
- the local governing authority (City of Burnaby Building Department) that would have assessed whether the tank farm expansion met current seismic codes. (Feb, 2022 - CER Ruling TMC could ignore Burnaby Bylaws)
- the local Burnaby Fire Department and their Fire Chief from raising any fire protection issues on the Expansion Project. Not only that, from raising fire protection issues for the Burnaby Community surrounding the Tank Farm, outside the Tank Farm perimeter. (The CER (Canada Energy Regulator) hasn't issued a decision letter yet that clearly admits the Burnaby Fire Department can't protect their own citizens living around the Tank Farm from the effects of a Tank Farm Fire) (Date unknown because CER hasn't clearly issued the decision letter)
The Trans Mountain Company itself donates funds to the local universities but they also come with NDA's that prevent the University Engineering Department (UBC) from commenting on Trans Mountain's Projects. (Another issue for journalists to investigate - why is the UBC Engineering Department prevented on commenting on an Engineering Project? Don't they teach engineering to the students that could now be on the Expansion Project. What is Trans Mountain afraid of?
I've been investigating the tank farm expansion since 2017 and in nearly 45 years of practice as a structural engineer, I've never heard of an engineering project that required any NDTs until this one. As David Huntley stated, where are the journalists to look into this. The City of Burnaby Fire Department have a duty to protect Burnaby Citizens yet Trans Mountain Corp can silence that voice? It's absurd that they or anybody could silence them!
One correction to my post - the CER replaced the NEB and actually dismissed PLC off the Burnaby Terminal Expansion Project in 2019.
I hope there is a backup plan for these pipelines in the future such as running long distance grid wiring or ways to flex the infrastructure to create microgrid offshoots for the communities they pass through....either electrical or geothermal. Some kind of silver lining for this white elephant of a project.
RE COST OVER RUNS OF $ 27Billion are hard to fathom but Trans Mountain Corp does have a large contingent of lawyers on staff and the numerous hearings and resubmittal of the same requests when an initial one is denied (Reduced pipe diameter to fit in the existing hole they drilled through a hard drilling section west of Hope). The out of this world cost estimate (Billions) and additional time required (2 year delay) if the request is denied must cost something. Sending 4 or 5 Lawyers to each CER Hearing for each request for a change cost item. Having Lawyers respond to Access To Information Requests for the name of the Kinder Morgan Design Structural Engineer on the Burnaby Terminal Expansion Project over a 5 year period must cost something. None of these are construction costs yet they are included in the overall cost. How about Trans Mountain Corp separating the overall cost into the actual cost of construction, the total cost to maintain the legal department for about 7 or 8 years, the cost of security to repel the protesters, the additional cost of climate change (Sorry, they're responsible for that) and the wages and bonuses of the Head Office Staff at Trans Mountain Corp. A 'normal' Engineering firm would have one or two Lawyers on Staff. What are we paying as taxpayers for Kinder Morgan Canada and Trans Mountain Corp's Lawyers?