In a crucial move for Canada's energy sector, the Canada Energy Regulator granted approval on Friday for a variance request from Trans Mountain Corp., allowing the construction of the long-anticipated Trans Mountain pipeline expansion to progress. This decision comes as a significant development for the project, which is now over 98% complete but faced hurdles in drilling through hard rock in British Columbia.
The approval, accompanied by certain conditions imposed by the regulator, signifies a green light for Trans Mountain Corp. to move forward with the construction of the pipeline variance. Although the specific reasons for the decision will be provided by the regulator at a later date, the immediate impact is the resumption of construction.
The Trans Mountain pipeline, currently Canada's sole oil pipeline to the West Coast, is undergoing expansion to increase its capacity from the existing 300,000 barrels per day (bpd) to an impressive 890,000 bpd. The expansion is seen as a vital step for the country's energy industry, with the heightened capacity expected to improve the pricing dynamics for Canadian oil companies.
Despite the project being more than 98% complete, Trans Mountain Corp. faced challenges in a particular stretch between the communities of Hope and Chilliwack in British Columbia. An initial request to use a different pipe size for this section was initially denied by the regulator due to concerns regarding the quality and integrity of the pipeline.
In response to the denial, Trans Mountain Corp. sought reconsideration, emphasizing that any delay could potentially extend the project's completion by up to two years. The company argued for the regulator's swift decision on altering the size, thickness, and coating of a 2.3-kilometer section, asserting its ability to address concerns related to the alternate pipe size.
During the recent hearing in Calgary, Trans Mountain Corp. stressed the urgency of a prompt decision, emphasizing the potential financial consequences of any delays. Lawyer Sander Duncanson, representing the company, highlighted that a week's delay could result in a significant loss of $50 million in oil shipping revenue.
The approval of the variance request is not only a relief for Trans Mountain Corp. but also a crucial milestone for the federal government, which owns the pipeline since its acquisition in 2018. The government took over the project from Kinder Morgan Canada with the aim of pushing the expansion to completion.
Despite the challenges faced during construction, including increased costs from the original estimate of $5.4 billion to the latest projection of $30.9 billion, Trans Mountain Corp. expressed optimism about overcoming the hurdles. The company attributed cost overruns to various factors such as compliance requirements, Indigenous accommodations, stakeholder engagement, extreme weather, the COVID-19 pandemic, and challenging terrain.
In response to the regulator's decision, Trans Mountain Corp. expressed appreciation for the timely response and pledged to proceed in compliance with the approved variance. As the project inches closer to completion, the energy sector anticipates the positive impacts of increased export capacity and improved market conditions for Canadian oil.
