The federally-owned company behind the Trans Mountain pipeline expansion to the West Coast is calling more than $20 billion in cost overruns “just and reasonable” in its latest submissions to the Canadian Energy Regulator (CER).The company had been given a December 15 deadline to detail its cost estimates ahead of hearings next year to approve tolls — the price producers pay to ship their oil — when it is completed, presumably in the first quarter of next year.Assuming no further delays, the final tab for the government-owned line is $30.9 billion, well above its original $7.4 billion estimate and even the $9 billion-and-change major contracted shippers such as Canadian Natural Resources and Cenovus think is warranted under the circumstances..The appeal is important because those long-term committed producers — customers — are obligated to pay for those so-called ‘uncapped costs’ in the form of higher delivery charges.Last month, Trans Mountain applied to have those set at around $11 per barrel, depending on product type, or more than double what it would cost a comparable barrel of Western Canadian Select shipped to the Gulf of Mexico.In its submission, Trans Mountain says the additional costs were “reasonably and necessarily incurred” due to extended legal proceedings, the pandemic and generational floods in the Lower Mainland. Those included, but were not limited to, rerouting the line around a sacred native ‘prayer tree’ and hummingbird habitat.That’s why it thinks the producers should be obligated to pay, even though Cenovus in past submissions has called the notion “absurd” while CNRL says it threatens the economic viability of the entire Canadian oil industry..The outcome will determine how much of a loss the federal government will be forced to eat when it sells off its interest to the private sector, which was the plan all along. Numbers from the Parliamentary Budget Office suggest that could be well in excess of $11 billion.Undeterred, Trans Mountain laid out its case in a 51-page briefing that could be summed up in two words: ‘pay up.'“The methodology was approved by the (previous National Energy Board) on the basis that tolls determined in accordance with it would be just and reasonable and not unjustly discriminatory.”It’s just the latest in a long comedy of errors since the Liberal government bought the troubled project for $4.5 billion in 2018, including constitutional challenges, blockades, stop-work orders culminating in the pandemic.Although it presently sits at around 97% complete, work was stopped on one of the final remaining segments in the Fraser Valley after the CER denied an application to vary the route. If it isn’t approved, Trans Mountain said it could result in a two-year delay and add billions more onto the final price.
The federally-owned company behind the Trans Mountain pipeline expansion to the West Coast is calling more than $20 billion in cost overruns “just and reasonable” in its latest submissions to the Canadian Energy Regulator (CER).The company had been given a December 15 deadline to detail its cost estimates ahead of hearings next year to approve tolls — the price producers pay to ship their oil — when it is completed, presumably in the first quarter of next year.Assuming no further delays, the final tab for the government-owned line is $30.9 billion, well above its original $7.4 billion estimate and even the $9 billion-and-change major contracted shippers such as Canadian Natural Resources and Cenovus think is warranted under the circumstances..The appeal is important because those long-term committed producers — customers — are obligated to pay for those so-called ‘uncapped costs’ in the form of higher delivery charges.Last month, Trans Mountain applied to have those set at around $11 per barrel, depending on product type, or more than double what it would cost a comparable barrel of Western Canadian Select shipped to the Gulf of Mexico.In its submission, Trans Mountain says the additional costs were “reasonably and necessarily incurred” due to extended legal proceedings, the pandemic and generational floods in the Lower Mainland. Those included, but were not limited to, rerouting the line around a sacred native ‘prayer tree’ and hummingbird habitat.That’s why it thinks the producers should be obligated to pay, even though Cenovus in past submissions has called the notion “absurd” while CNRL says it threatens the economic viability of the entire Canadian oil industry..The outcome will determine how much of a loss the federal government will be forced to eat when it sells off its interest to the private sector, which was the plan all along. Numbers from the Parliamentary Budget Office suggest that could be well in excess of $11 billion.Undeterred, Trans Mountain laid out its case in a 51-page briefing that could be summed up in two words: ‘pay up.'“The methodology was approved by the (previous National Energy Board) on the basis that tolls determined in accordance with it would be just and reasonable and not unjustly discriminatory.”It’s just the latest in a long comedy of errors since the Liberal government bought the troubled project for $4.5 billion in 2018, including constitutional challenges, blockades, stop-work orders culminating in the pandemic.Although it presently sits at around 97% complete, work was stopped on one of the final remaining segments in the Fraser Valley after the CER denied an application to vary the route. If it isn’t approved, Trans Mountain said it could result in a two-year delay and add billions more onto the final price.
