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Trans Mountain Corp. updates Expansion Project cost and schedule

Published by , Editorial Assistant
World Pipelines,

As Trans Mountain enter the second half of construction on the Expansion Project, and after more than a decade of review, engagement, planning and engineering, this complex and large-scale project is making steady progress and setting new standards for major pipeline project execution, while overcoming significant challenges and obstacles.

Trans Mountain has completed a full review of its project schedule and cost estimates. With all work fronts now active, mechanical completion of the project is anticipated to occur in 3Q23. The total project cost has increased from CAN$12.6 to CAN$21.4 billion. This estimate includes the costs of all known project enhancements, changes, delays and financing, including impacts of the COVID-19 pandemic and the substantial preliminary impacts of the November 2021 BC floods in the Hope, Coquihalla and Fraser Valley areas.

“The progress we have made over the past two years is remarkable when you consider the unforeseen challenges we have faced including the global pandemic, wildfires, and flooding,” said Ian Anderson, President and CEO of Trans Mountain Corp. “At every step of the way, we have found solutions and responded. As a result, the project is advancing with significantly improved safety and environmental management, and with a deep commitment to ensure this project is being built the right way.”

Notwithstanding the cost increase and revised completion schedule, the business case supporting the project remains sound. Canada will benefit from the economic and tax contributions made by the project once it is in operation. Trans Mountain will pay billions in taxes and royalties to the federal and provincial governments through the construction and operation of the project over the next 20 years. In addition, Trans Mountain will make payments to British Columbia of between CAN$25 million and CAN$50 million annually, for a total contribution over a 20-year period of up to CAN$1 billion. These funds are to be used by the BC Clean Communities programme to fund local environmental projects in the province. In addition, Trans Mountain has negotiated agreements with local governments across BC and Alberta dedicating more than CAN$16 million to community legacy projects such as trails and recreational infrastructure improvements that will have positive and lasting impacts on the lives of thousands of Canadians.

The project proudly embodies unprecedented levels of involvement, and shared decision making, with Indigenous Peoples and communities. Through job creation, procurement opportunities, partnerships, and involvement in the environmental management and oversight process, long-term legacy and economic benefits for Indigenous Peoples are being created. Approximately 11% of the project workforce is Indigenous and Trans Mountain has close to 4000 contracts with Indigenous businesses and partnerships worth over CAN$2.7 billion. Route changes and new construction techniques have been undertaken as a result of continuous Indigenous engagement and the project now has Mutual Benefit Agreements (MBAs) with 69 Indigenous communities.

The overall change in project costs is summarised by the following material impact areas: project enhancements, scheduling pressures, safety and security requirements, financing costs, as well as other external challenges including the COVID-19 pandemic and the impacts of the 2021 BC flooding. Project enhancements total approximately CAN$2.3 billion of the increase. This includes a substantial increase in trenchless construction activity, significantly more MBAs with Indigenous communities that provide enduring economic benefits, the installation of advanced leak detection systems, and new unplanned scope and route changes that avoid culturally and environmentally sensitive areas.

Schedule pressures total approximately CAN$2.6 billion of the increase and include permitting processes required for the several thousand permits that are required for the project, and significant construction challenges in both marine and difficult terrain which have extended the schedule into late 2023.

The project has had to contend with generational events such as the COVID-19 pandemic and recent extreme weather in BC. These events, combined with contractor productivity shortfalls in some areas, have resulted in a CAN$1.7 billion increase. The combined effects of extreme weather and COVID measures is approximately CAN$1.4 billion.

Safety and security requirements total approximately CAN$500 million of the increase. These cost impacts include the voluntary two-month stand-down across the project in late 2020, including the related termination and replacement of a major construction contractor, additional safety and security measures across the project and worker safety measures during the extreme heat and fires in BC last year.

Financing costs have increased by approximately CAN$1.7 billion. The increase in financing costs will be incurred due to the increased cash expenditure required to construct the project, and the extended construction schedule. Financing costs include interest paid to Trans Mountain’s owner for money borrowed for the project as well as an imputed non-cash cost of equity capital provided by the owner of the project.

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