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Trans Mountain Project Dodges a Bullet

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The Daley Note: September 29, 2023

Canadian regulators have approved a request to modify the permits for a section of the Trans Mountain Pipeline expansion (TMX), avoiding a potentially long construction delay.

On Monday (September 25), the Canada Energy Regulator (CER) granted a request by Trans Mountain to change the route and construction method through lands native to the 0.8 miles of Stk’emlupsemc te Secwepemc Nation (SSN) in British Columbia.

Citing technical challenges, Trans Mountain had sought permission to move the pipeline over 0.8 miles (1.3 km) and use open-trench and horizontal drilling for construction of the segment, rather than a trenchless method involving micro-tunneling. The SSN had contested the request, citing surface disturbances on the land.

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With the new permit in hand, Trans Mountain believes it can meet a current target to begin service on the expansion by the end of 1Q24. TMX is already several years behind schedule, and an adverse ruling by the CER would have added up to nine months to the construction timeline, Trans Mountain said in an earlier filing.

The approval is welcome news to producers in Western Canada counting on TMX to open new markets. The project will loop Trans Mountain from Edmonton, AB to Burnaby, BC, adding 590 Mb/d of crude oil takeaway to the Pacific Coast (see figure).

Once operational, East Daley expects TMX to impact oil markets across North America. Shippers on Enbridge (ENB) and TC Energy (TRP) pipeline systems are likely to divert some volumes to Trans Mountain, while US refiners and pipelines in the Midwest and Gulf Coast will see more competition to import Canadian barrels.

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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