The Daley Note: September 19, 2023
The Trans Mountain Pipeline expansion (TMX) faces the prospects of more delays to finish construction, putting a 1Q24 target at risk for the Canadian project.
Last Monday (September 11), Trans Mountain requested approval from the Canadian Energy Regulatory (CER) to change its approved route and use an alternative construction method through 0.8 miles (1.3 km) of land native to the Stk’emlupsemc te Secwepemc Nation (SSN) in the Jacko Lake area of British Columbia.
Citing technical challenges, Trans Mountain seeks permission to revise the route and use open-trench and horizontal drilling for construction, rather than a trenchless method involving micro-tunneling.
The SSN is contesting the request due to surface disturbances on land that has “profound spiritual and cultural significance.” The initial complaint stems from a July 11, 2023 filing by the SSN outlining its concerns with deviating from the approved route and construction methods.
If Trans Mountain’s request is denied, it could translate to C$25.7–87.7MM of additional project costs and delay completion by up to nine months, the pipeline said in a regulatory filing.
The latest stumbling block could add to a record of delays and cost overruns. Construction on the 590 Mb/d expansion began in 2019. TMX, which twins Trans Mountain from Edmonton, AB to Burnaby, BC, has faced challenges from the pandemic, difficult mountain terrain, archeological discoveries and lower labor productivity. Earlier this year, Trans Mountain raised its cost estimate for the project to C$30.9 billion, about four times the original budget.
While further delays would be a blow to constrained Canadian producers, companies like Enbridge (ENB) and TC Energy (TRP) should benefit. According to East Daley Analytics’ Crude Hub Model, these companies will see pipelines continue to run full out of Western Canada until the expansion begins service (see chart).
The CER is holding public meetings September 18-19 to discuss the proposal. If the request is approved, Trans Mountain said it would still be on schedule to meet an 1Q24 in-service deadline. - Kristine Oleszek Tickers: ENB, TRP.
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