Regulator denies Trans Mountain's pipeline variance request

Workers lay pipe during construction of the Trans Mountain pipeline expansion on farmland, in Abbotsford, B.C., on May 3, 2023. THE CANADIAN PRESS/Darryl Dyck

The Canada Energy Regulator has denied a request by Trans Mountain Corp. for a variance on a section of pipeline in B.C., a development that the company has said could delay construction of the ongoing expansion project and push back the pipeline's start date.

The regulator issued its ruling Tuesday, but — for the purpose of expediency — did not provide its reasons for the decision. It said it will provide its written reasons at a later date.

Trans Mountain Corp., the crown corporation that is building the pipeline expansion, had applied for the variance after running into what it said were construction challenges related to hard rock between Chilliwack and Hope, B.C.

The company had requested permission to use a different diameter, wall thickness and coating for a 2,300-metre section of pipeline than it had originally been approved for.

At a recent oral hearing in Calgary, Trans Mountain Corp. said that being denied the variance could add an additional 55 to 60 days to the project's construction schedule.

This could mean, argued chief project execution officer Corey Goulet at the hearing, that Trans Mountain may not be able to complete the project in time for an anticipated first-quarter 2024 start date.

"We'd be at least, you know, a month after our plan, maybe more," Goulet said, according to the official transcript of the hearing.

The development is only the latest in a string of construction-related hurdles that have plagued the Trans Mountain expansion project.

The pipeline is Canada's only oil pipeline to the west coast. Its expansion will boost the pipeline's capacity to 890,000 barrels per day from 300,000 bpd currently and improve access to export markets for Canadian oil companies.

But the project's costs have spiralled through the course of construction from an original estimate of $5.4 billion to the most recent estimate of $30.9 billion.

Earlier this fall, Trans Mountain Corp. also applied to the regulator for permission to alter the route for a 1.3-km stretch of pipe in the Jacko Lake area near Kamloops, B.C., due to difficulties drilling a tunnel.

The regulator granted that request, even though a B.C. First Nation opposed the route alteration.

Trans Mountain has been racing against the clock to complete the project on schedule in order to prevent additional cost overruns as well as the approximately $200 million per month in lost revenue it would incur if the pipeline doesn't begin shipping oil as early as expected.

Last week, a group of oil shippers including Canadian Natural Resources Ltd., Marathon Petroleum, Parkland Refining, PetroChina Canada Ltd. and Suncor Energy Inc. wrote a letter to the Canada Energy Regulator emphasizing the importance of a timely completion of the pipeline expansion project.

"However, should the variance lead to any adverse effects or unforeseen impacts affecting the shippers, it is imperative that Trans Mountain bears all responsibility for rectifying these issues in a timely and reasonable manner and at its sole cost, risk and expense," the shippers' letter stated.

Trans Mountain testified at the hearing that using a different diameter and thickness of pipe for a 2,300-metre section of the project would not reduce the overall volumes of oil that could be transported by the expanded pipeline.

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This report by The Canadian Press was first published on Dec. 5, 2023.