Trans Mountain Corporation has a lot of work to do in 2022 if it hopes to meet the target in-service date for its expanded pipeline and its capital budget of $12.6 billion.
Trans Mountain can only pray Mother Nature does not throw more wildfires, floods or plagues at it this year.
According to recent third quarter financial reports, the project is only half built and 71 per cent of the $12.6 billion capital budget spent.
That’s probably not surprising, given all the setbacks the project has faced, from legal, political and regulatory ones, to the COVID-19 pandemic and, more recently, flooding in November that shut down the existing pipeline for three weeks.
According to the 2021 third quarter financial reports of Canada Development Investment Corp. (CDEV) -- the Crown corporation responsible for the publicly owned Trans Mountain Corporation -- the project was somewhere between 37% and 55% complete, depending on which yardstick is used.
While actual physical construction was approximately only 37 per cent complete, the project overall, including “upfront costs of permitting, regulatory approval, advance purchase of materials and financial carrying costs” puts the project at 55 per cent complete, the CDEV report notes.
As of the first nine months of 2021, Trans Mountain spent $3.5 billion on the expansion project. In total, $9 billion has been spent on the expansion, with $4.3 billion spent in 2020 and $1.2 billion spent in 2018 and 2019.
As for operating revenues, in the first nine months of 2021, the existing pipeline generated $349 million in revenue and $164 million in earnings before interest, taxes, and depreciation (EBITDA). That's up slightly from the same period of 2020 -- $333 million in revenue and $155 million in EBITDA.
In December 2020, the Parliamentary Budget Officer issued a report that warned the project could face more delays and cost escalations.
That report noted that the pipeline expansion project – a twinning project that will increase its capacity from 300,000 to 890,000 barrels per day – was estimated in 2013 to have a capital cost of $5.4 billion and in-service date of December 2019. That was when the pipeline was still owned by Kinder Morgan (NYSE:KMI).
The estimated capital cost was increased twice, first to $6.8 billion then $7.4 billion, and its in-service date was moved to December 2020.
Endless legal, political and regulatory obstacles delayed the project to the point where Kinder Morgan announced it would abandon the expansion project, resulting in the Trudeau government buying the existing pipeline and the TMX project for $4.5 billion and assuming responsibility for its completion.
After the Trudeau government bought the pipeline and TMX project, the estimated capital cost rose again to $12.6 billion and a new in-service date set at December 2022.
Trans Mountain isn’t saying whether it thinks it can still meet its December 2022 in-service date on budget.
“Trans Mountain has not announced an update to the project’s cost or schedule,” the company said in a emailed response to BIV News.
Since the Trans Mountain pipeline is a batched pipeline that can move either crude oil or refined fuels, its expansion could provide Lower Mainlanders with some relief in the price they pay for gasoline, if the expansion results in more refined gasoline and diesel products moving from Alberta refineries to B.C. One of the reasons B.C. has comparatively high gasoline prices is the lack of local refining capacity.