The estimated cost of the Trans Mountain pipeline expansion project has increased once more, this time to $30.9 billion.
That’s the most recent figure from Trans Mountain Corp., the federal Crown corporation that owns the pipeline.
On Friday, Trans Mountain Corp. blamed the most recent cost overruns on quite a few aspects, including inflation, labour and provide chain challenges, flooding in B.C. and unexpected major archeological discoveries along the route.
The brand new price tag is a 44 per cent increase from the $21.4 billion cost projection placed on the pipeline expansion project a 12 months ago, and greater than double an earlier estimate of $12.6 billion.
Previous cost increases were blamed on the COVID-19 pandemic, scheduling pressures related to permitting processes, and route changes to avoid culturally and environmentally sensitive areas, amongst other things.
“Canada has among the many world’s highest standards for the protection of individuals, the environment, and Indigenous participation when constructing major infrastructure projects,” said Trans Mountain Corp. CEO Dawn Farrell in a news release Friday.
“By including these commitments into the Project design and development from the start, we’ve ensured the Project will provide economic advantages to Canadians well into the longer term.”
Trans Mountain Corp. said it’s now within the technique of securing external financing to cover the remaining cost of the project.
The 1,150-km Trans Mountain pipeline is Canada’s only pipeline system transporting oil from Alberta to the West Coast.
Its expansion will increase the pipeline’s capability from 590,000 barrels per day to a complete of 890,000 barrels per day, supporting Canadian crude oil production growth and ensuring access to global energy markets.
Nevertheless, even before the most recent cost increase, some critics were suggesting the project now not makes economic sense.
For Trans Mountain Corp., an enormous reason why rising costs are so problematic is that it has no solution to recoup them.
Resulting from existing contractual agreements with shippers, only 20 per cent of the increased capital costs might be passed on to grease firms in the shape of increased tolls. (Tolls are the rates oil firms pay to shift product on a pipeline, and so they are how the pipeline company makes money).
A report from the Parliamentary Budget Officer last June found the federal government stands to lose money from its investment within the pipeline, and suggested that if the project were cancelled at the moment, the federal government would wish to jot down off greater than $14 billion in assets.
Trans Mountain was bought by the federal government for $4.5 billion in 2018, after previous owner Kinder Morgan Canada Inc. threatened to scrap the pipeline’s planned expansion project within the face of environmentalist opposition.
The federal government has indicated it doesn’t want to be the long-term owner of Trans Mountain, and intends to launch a divestment process after the expansion project has been “further derisked.”
Several Indigenous-led initiatives have previously indicated their intent to pursue ownership of the pipeline.
Construction of the project is currently near 80 per cent complete, with mechanical completion expected to occur at the tip of this 12 months, and the pipeline expected to be in-service in the primary quarter of 2024.
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