Trans Mountain Corporation Provides Update on the Expansion Project
Mar. 10, 2023
Trans Mountain Corporation today announced an update for the Trans Mountain Expansion Project (the Project). Construction of the Project is close to 80 per cent complete, with mechanical completion expected to occur at the end of 2023, and the pipeline will be in-service in the first quarter of 2024. Once completed, the pipeline system will have nearly tripled its capacity, representing an increase of 590,000 barrels per day to a total of 890,000 barrels per day.
The expanded pipeline will be a key piece of Canada’s energy infrastructure that provides a much-needed route to west coast tidewater for direct access to international markets, including the United States and Asia. Such access will achieve global market pricing for Canadian crude oil, which is periodically sold at a discount, while supporting Canada’s energy security.
The total Project cost is now estimated to be approximately $30.9 billion. Trans Mountain is in the process of securing external financing to fund the remaining cost of the Project. The Project capacity is primarily committed to 11 shippers representing a mix of Canadian and international producers and refiners who are contracted for 80 per cent of the available capacity under long-term, take-or-pay transportation contracts for 15 and 20 years. The remaining 20 per cent of the capacity on the expanded system will be available through market mechanisms.
Estimated costs are attributed to several factors including Trans Mountain’s commitment to ensuring Project and community safety, protection of culturally significant sites for Indigenous Peoples, environmental preservation, and completing a quality long-term pipeline. Specific factors for cost increases include high global inflation and global supply chain challenges; unprecedented floods in British Columbia; unexpected major archaeological discoveries; challenging terrain between Merritt and Hope; earthquake standards in the Burnaby Mountain tunnel; unexpected water disposal costs in the Sumas Prairie; and issues regarding densely populated areas between Sumas and Burnaby.
“Canada has among the world’s highest standards for the protection of people, the environment, and Indigenous participation when building major infrastructure projects. By including these commitments into the Project design and development from the beginning, we have ensured the Project will provide economic benefits to Canadians well into the future,” said Dawn Farrell, President and CEO of Trans Mountain Corporation.
An independent economic impact assessment for the Project was conducted by Ernst & Young LLP (EY) in March 2023. The assessment stated that during construction between 2018-2023, the Project is estimated to contribute $52.8 billion in gross output, $26.3 billion in gross domestic product (GDP), including $11 billion in wages and more than 67,423 full-time equivalents (FTEs), and $2.9 billion in tax revenue. After completion, EY expects that Trans Mountain’s expanded operations will contribute $17.3 billion in gross output, $9.2 billion in GDP, including $3.7 billion in wages and more than 36,066 FTEs, and $2.8 billion in tax revenue over the next 20 years.
Trans Mountain has generated more than $4.8 billion in contracts with Indigenous businesses, which is 25 per cent of total contracts awarded to date and has employed over 3,000 Indigenous workers.
“I am particularly proud that throughout development and construction, Trans Mountain has maintained unprecedented levels of Indigenous collaboration and partnership. Over 140 Indigenous groups have been engaged to ensure we protect the land, the water, the wildlife, and significant archaeological sites. Trans Mountain has gone far beyond simple engagement by creating economic partners for generations to come,” continued Farrell.
Project Construction Background:
The Project consists of installing approximately 992 kilometres of 36-inch and 42-inch diameter pipe, reactivating 193 kilometres of pipe, and constructing 12 new pump stations, 19 new storage tanks at existing terminals in Burnaby, Sumas, and Edmonton, and three new berths at Westridge Marine Terminal in Burnaby, B.C. Once completed, the capacity of the pipeline system will increase by 590,000 barrels per day to a total of 890,000 barrels per day.
Trans Mountain plans to deliver oil to its Westridge Marine Terminal in Burnaby during the first quarter of 2024. The Alberta portion of the Project is complete. All pump stations across both provinces are complete. Berth 1 at the Westridge Marine Terminal is scheduled to be commissioned in May 2023.
The revised cost estimate is a result of several factors:
- Increased global inflationary pressures and global supply chain challenges over the period.
- Cost escalations associated with required construction solutions for the Burnaby Mountain Tunnel.
- Significant cost increases associated with building major infrastructure in densely populated areas from Sumas to Burnaby.
- Cultural preservation activities following significant archaeological discoveries through sacred spaces in the Lower Mainland resulted in over 83,000 artifacts rightfully being returned to Indigenous communities for cultural protection.
- The expanded Project scope and construction schedule adjustments ultimately required as a result of the catastrophic flooding in B.C. were extensive and included redeployment of resources into urgent civil recovery operations.
- Challenging terrain and geography from Merritt to Hope that required significant geotechnical engineering and innovation in construction practices to ensure Project completion in 2023.
- Significantly increased water disposal costs associated with the high-water table in the Sumas Prairie.
- Lower than expected contractor productivity resulting from:
- Demanding geography and challenging weather conditions.
- Unavoidable external factors such as wildfires and catastrophic floods in B.C., high water tables, and additional archaeological finds.
- Labour shortages and an increase in “green-hand” labourers as markets tightened for skilled workers.
As with all projects of this size, risks to the final costs and schedule will remain as work is completed through 2023. The current cost estimate does not include reserves for extraordinary risks that can impact projects of this nature.