Trans Mountain Pipeline Receives Expansion Loan

WEDNESDAY, JANUARY 17, 2024


The Canadian Federal Government has reportedly issued a taxpayer-backed loan guarantee for up to $2 billion for the completion of the currently over-budget Trans Mountain pipeline.

According to a report from Canada’s National Observer, the pipeline is about 97% complete, though the final 16 kilometers (almost 10 miles) have held construction challenges, including recent concerns over the integrity of the pipeline’s coating.

Project Background

Owned by Canada Development Investment Corporation (CDEV)—also known as the Crown Corporation—the pipeline moves roughly 300,000 barrels of crude per day and stretches 1,150 kilometers (roughly 715 miles) from Edmonton, Alberta, to the West Coast of British Columbia in Burnaby.

There are 23 active pump stations between both locations. Trans Mountain reported that its pipeline consists of 827 kilometers of 24-inch pipe, 150 kilometers of 36-inch pipe and 170 kilometers of 30-inch pipe—although, where the system connects with the Trans Mountain Puget Sound Pipeline at the Sumas delivery point, the infrastructure is made up of 16 to 20 inch pipe and runs for 111 kilometers.

In 2018, energy infrastructure company Kinder Morgan announced the suspension of all non-essential activities and related spending connected to the Trans Mountain pipeline expansion project. At the time, the 6.8 billion Canadian dollars ($5.09 billion) Trans Mountain Pipeline Expansion was still in progress and hadn’t reached Burnaby.

The decision reportedly stemmed from British Columbia’s resistance to the project, along with Kinder Morgan's unwillingness to saddle shareholders with the additional risk that comes with construction costs ramping up from $200 million to $300 million a month.

At the time, former Alberta Premier Rachel Notley indicated that her government was open to buying the pipeline to ensure the project was completed. Previously, Kinder announced delays in obtaining permits for the project in 2017.

By June 2018, the Canadian government followed through on its interest in purchasing the pipeline and bought the infrastructure from Kinder Morgan for $3.47 billion, a deal that Prime Minister Justin Trudeau hoped would expedite the project’s completion. 

The following year, Trudeau announced that pipeline project had been approved once more, emphasizing that money made from the pipeline would be reinvested into green energy endeavors. The expansion is also a move to reduce dependency on selling petroleum to the States, as the pipeline will move product to the Pacific for delivery to Asia.

Finally, in June 2020, Trans Mountain issued a statement announcing that it had experienced a spill at its Sumas Pump Station in Abbotsford, British Columbia, near Native American reservation the Sumas First Nation.

According to the company’s initial estimates, the pipeline lost between 940 and 1,195 barrels (150,000 to 190,000 liters) of light crude. Sumas First Nation Chief Dalton Silver reported that it was the fourth spill the reservation had endured in 15 years.

Both Trans Mountain and the federal Transportation Safety Board were investigating what caused the spill.

To clean up the loss of free-standing oil, the following day crews and trucks were employed around the clock in order to recover and transport the materials to an approved facility for disposal. The same day, company officials reported that the sites permanent groundwater and air monitoring systems hadn’t identified any risk to the public or community but is continuing to watch over the situation.

Project Update

In a December news release from the Canada Energy Regulator, it was stated that the concerns outweighed any potential benefits for a faster completion of the Trans Mountain Expansion Project.

The Commission found that the drawbacks outweighed Trans Mountain’s stated benefits. Specifically, it had concerns, including:

  • Quality of Materials: Trans Mountain reportedly did not show compliance with its Quality Management Program. The company did not show that the quality of materials for the 30-inch pipe would meet the standard of those used in the rest of the TMEP;
  • In-line Inspections: Trans Mountain reportedly did not demonstrate how they would conduct in-line inspections before starting work on the full 138.4-kilometre pipeline section between Hope and the Burnaby Tank Terminal. Without in-line inspections (ILI), they reportedly could not ensure the safety and integrity of this section of pipe to the same level as the rest of the TMEP; and
  • Pipeline Integrity and Environmental Protection: Trans Mountain reportedly did not properly address potential environmental impacts from material quality changes and lack of ILI capability. It also did not provide satisfactory responses or solutions to address the Commission’s requests for additional information.

On Dec.14, 2023, Trans Mountain filed a new variance application for the same pipeline section. Trans Mountain reportedly asked the regulator to reverse its decision, claiming that failing to do so could delay the project by about two years and cause the Crown corporation to “suffer billions of dollars in losses.”

A hearing was held Jan. 12 on Trans Mountain’s request, leading to CER reportedly stating that it would allow the Crown Corporation to use 30-inch diameter pipes instead of 36-inch diameter pipes.

However, the Crown Corporation has reportedly stated that there will be more delays unless the Canada Energy Regulator allows it to use smaller pipes for a stretch of challenging construction conditions between Hope and Chilliwack, British Columbia.  

Also, Simon Fraser University professors Tim Takaro and David Huntley reportedly submitted documents explaining extensive concerns about the plan and the need to take the time to evaluate the changes to materials and coatings.

The regulator reportedly denied this application in early December 2023, referencing concerns about safety and pipe integrity, among others.

Additionally, Trans Mountain recently underwent a $1-billion loss in its third-quarter financial statement, stating that the reason is that interest rates on its billions of dollars of loans rose from 1.85% to the Canadian prime rate of 6.6%.

Other factors had reportedly included the timing and cost to finish the project, the toll structure and what will happen when the initial contracts with oil shippers expire.

“This is an eye-watering number in terms of a writedown, but it's only probably one-20th of what's to come,” said Eugene Kung, a staff lawyer at West Coast Environmental Law.

According to September financial statements, $16.5 billion of Trans Mountain’s debt was guaranteed with taxpayer dollars. Analyses by several experts reportedly projected that the federal government would have to forgive all this debt and more because of the accumulation of interest.

Trans Mountain stated that it expects construction to end in early 2024 and commercial operations to begin at the end of the first quarter of 2024.

   

Tagged categories: Business matters; Coatings; Construction; Environmental Controls; Funding; Government; Health and safety; Infrastructure; Infrastructure; Jobs; NA; North America; Oil and Gas; Ongoing projects; Pipeline; Pipelines; Pipes; Program/Project Management; Protective Coatings; Safety

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