Trans Mountain pipeline cost hits $7.4 billion

Few oil shippers back out of commitments to use new line

File photo of twinning of a previous section of the Trans Mountain pipeline near Jasper.

The Trans Mountain pipeline expansion is a go commercially, according to Kinder Morgan officials, who say almost none of the oil shippers that previously committed to use the new line have opted to pull out or scale back.

Critics of the pipeline had questioned its economic justification, arguing that it had been proposed at a time of sharply higher oil prices, which collapsed over the past few years.

The final cost estimate of the project is $7.4 billion, according to Kinder Morgan, which recalculated the tolls it will charge shippers and gave them a chance to cover their share of development costs and withdraw from their commitments to use a combined 708,000 barrels per day, or 80 per cent of pipeline capacity, for 15 to 20 years.

RELATED: Oil pipeline construction to use cut and cover through Chilliwack residential area

Only three per cent of those commitments were turned back, representing a volume of 22,000 barrels per day that will be put out to market again. Kinder Morgan kept 20 per cent of the pipeline’s capacity in reserve to sell on the spot market.

“In spite of the many changes in the markets over the five years since our customers signed on, we knew commercial support for this project remained strong,” Kinder Morgan Canada president Ian Anderson said.

The latest jump in the project cost, from a previous $6.8-billion estimate, resulted from new requirements to use thicker pipe, extra drilled crossings in environmentally sensitive areas, and tunnel through Burnaby Mountain.

Kinder Morgan also reached a deal with the B.C. government in January to provide the province with up to $1 billion in payments over 20 years to go to an environment protection and enhancement fund.

There are 157 conditions on the project set by the National Energy Board and another 37 set by B.C.

Prime Minister Justin Trudeau approved the project last November, calling it good for Canada and “safe for B.C.”

Various First Nations, environmental groups and municipalities plan to challenge the project in court.

The twinning of the existing 60-year-old pipeline will nearly triple Trans Mountain’s capacity, resulting in a seven-fold increase in tanker traffic through Vancouver harbour.

Anderson said the next steps for Trans Mountain include arranging financing and making a final investment decision ahead of an expected fall construction start.

In Chilliwack, the Kinder Morgan is considering digging a trench for the pipeline through backyards to avoid drilling underground through an aquifer that the local city council wants protected.

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