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Cost of Trans Mountain expansion soars to $12.6B

Ian Anderson, the president and CEO of Trans Mountain, is set to announce Friday the projected cost of building the pipeline expansion has increased significantly from an initial cost estimate of $7.4 billion to $12.6 billion, CBC News has learned.

That figure includes $1.1 billion already spent on construction by the previous owner of the project, Kinder Morgan, before Ottawa bought the project amid legal uncertainty.

The construction cost is in addition to the money the federal government spent to purchase the existing pipeline and the expansion plans, and another $600 million Ottawa is providing for “reserve for cost impacts,” bringing the total price tag for the Trans Mountain investment to approximately $16.2 billion.

According to three sources close to the issue, the increase in cost is due in part to the August 2018 Federal Court of Appeal decision that struck down cabinet’s initial approval of the project.

As a result of the court’s ruling, the government had to make a number of accommodations to Indigenous communities along the route, as well as meet additional environmental standards — changes that added roughly $3 billion to the construction price tag.

In addition, the court’s decision delayed construction on the pipeline by about a year, which resulted in increased labour costs.

The company estimates the expansion’s in-service date to be December of 2022.

Anderson is expected to say Friday that the cost increase wasn’t unexpected, and the returns on the project, once completed, will cover the increase.

During the federal election, the Liberals pledged to invest corporate tax revenue from the pipeline into cleaner sources of energy and projects that pull carbon out of the atmosphere.

The federal government purchased the existing Trans Mountain pipeline for $4.5 billion in May of 2018, after the original proponent, Kinder Morgan, pulled out because of increased political and environmental opposition to the project.

The expansion would twin the existing pipeline, which runs more than 1,000 kilometres between Edmonton and Burnaby, B.C. It would triple the amount of bitumen flowing through the pipeline to nearly 900,000 barrels a day.

The project is also set to expand the terminal in B.C. and, as a result, tanker traffic is expected to increase by nearly seven-fold a month.

According to the federal government, the pipeline and terminal would produce 400 megatonnes of greenhouse gas emissions a year, create 15,000 jobs during construction and generate about $47 billion in revenue for different levels of government over the first 20 years of its operation.

CBC

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