CALGARY — The Trans Mountain pipeline expansion is getting more expensive, but the company planning to build it says the economic case for the project is still strong.
Kinder Morgan, the U.S. company behind the pipeline project, doesn't yet have a formal estimate of how the price tag has changed since its regulatory application was filed in December 2013.
Back then, the company was expecting a cost of $5.4 billion and its estimates for the economic impacts of the project were based on that number.
But on a conference call with analysts and investors last month, the head of Kinder Morgan's Canadian division said it's looking more like $6.8 billion — a figure that took into account where the loonie was trading against the U.S. dollar on that particular day.
Ian Anderson said foreign exchange swings were one factor behind the increase, but so were scope changes to the project — and delays.
Trans Mountain spokeswoman Ali Hounsell said the company will be able to pin down a more accurate figure once it knows precisely what conditions may be attached to a federal permit if it's approved. The National Energy Board has already announced 145 draft conditions, which the company has said are achievable.
"It's absolutely still a viable project. We're confident that our shippers are still very much interested and that this pipeline capacity that we're proposing is in high demand," she said.
The Trans Mountain pipeline has for decades shipped various petroleum products from around Edmonton to the Vancouver area and Washington state. The expansion project would nearly triple its capacity to 890,000 barrels a day, enabling oilsands crude to be shipped to lucrative Asian markets.
The project has faced pushback in the B.C. Lower Mainland, much of it related to concerns over increased oil tanker traffic moving through the Burrard Inlet.
Customers have the ability to back out of their contract to ship crude on the pipeline if the cost goes over $6.8 billion or the regulatory approval is pushed past the end of 2017.
"We're well within the bounds of all the contract commitments we have, both from a cost standpoint and a timing standpoint," Anderson said on the Oct. 21 call.
The NEB expects to make a recommendation to the federal cabinet by May.
Hounsell said there have been some changes to the project along the way that could affect its final price, such as deciding to tunnel through Burnaby Mountain, thicker pipe and routing changes.
Economist Robyn Allan, who has been critical of the project and the NEB's review of it, said it's unfortunate details of the project's costs had to come out toward the end of a 90-minute quarterly conference call with executives in Houston.
"We all know that they're under a legal obligation to be forthcoming, accurate, reliable with shareholders," said Allan, a former CEO of the Insurance Corp. of British Columbia.
"You would think that with a project of this importance to the Canadian public interest, that they would be compelled to behave to the same standard here in Canada."
Allan withdrew as an expert intervener in the NEB review of the project in May, describing the process as a "rigged game."
The new Liberal government has said it wants to make changes to the way in which the regulator conducts its environmental reviews for pipelines.
But earlier this week, Natural Resources Minister Jim Carr said the ongoing reviews of the Trans Mountain Expansion and TransCanada's (TSX:TRP) Atlantic-bound Energy East proposal are moving forward.
