Trans Mountain Corp. granted pipeline variance by energy regulator

The Canada Energy Regulator has approved a request for a pipeline variance from the company building the Trans Mountain pipeline.

The regulator said Friday evening it will release the reasons for its decision in the coming weeks.

At an oral hearing in Calgary, the Crown corporation behind the project urged the regulator to make a decision quickly on whether the company will be allowed to change the size, thickness and coating of a 2.3-kilometre stretch of pipe between the communities of Hope and Chilliwack, B.C.

Just hours after the hearing wrapped up, the CER announced it had approved Trans Mountain's variance application with conditions. The reasons for the decision will be released in the coming weeks, the statement said.

Lawyer Sander Duncanson, who represented Trans Mountain Corp. at the hearing, said that for each week the project's completion is delayed, the pipeline company expects to lose $50 million in lost oil shipping revenue.

"The commission must be mindful that every day counts now," Duncanson said.

"An extra week of deliberations, or a condition that requires an extra week or two before Trans Mountain can start up the expansion, may not seem like a big deal. But it will have real, material impacts."

Racing against clock

Trans Mountain Corp. is racing against the clock to complete the expansion project, which will boost the capacity of Canada's only oil pipeline to the West Coast to 890,000 barrels per day from 300,000 bpd currently.

The project's completion had originally been expected in the first quarter of this year, but Trans Mountain Corp. has run into difficulties drilling through hard rock in B.C.

Its initial request to use a different size of pipe for the location in question was denied by the regulator due to concerns about pipeline quality and integrity.

But Trans Mountain Corp. then asked the regulator to reconsider, saying in December that the project could face a worst-case scenario of a two-year delay in completion if it is not allowed to alter its construction plans.

On Friday, the company argued it can address all of the regulator's concerns about the sourcing and integrity of the alternate pipe size, and urged the regulator to avoid imposing conditions that would result in a "material" delay to the project.

The company has said the pipeline can enter service within one month of mechanical completion of the project.

Completion eagerly anticipated

The Trans Mountain pipeline is owned by the federal government, which purchased it in 2018 in an effort to get the expansion project over the finish line after it was scuttled by previous owner Kinder Morgan Canada.

Its completion is eagerly anticipated by Canada's oil industry, which has been preparing to ramp up output in expectation of additional export capacity.

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

Trans Mountain Corp. has blamed the ballooning costs on a number of things, including evolving compliance requirements, Indigenous accommodations, stakeholder engagement and compensation requirements, extreme weather, the COVID-19 pandemic and challenging terrain.

"When you operate in a technically challenging environment, sometimes things that are unforeseen happen," Duncanson told the regulatory panel Friday.

"I'm cautiously optimistic that this is the last [problem]."