Building the Trans Mountain Expansion Project

Foreword

On February 3, 2020, the Trans Mountain Corporation’s (TMC) Board of Directors approved a total cost estimate of $12.6 billion to bring the Trans Mountain Expansion Project into service by the end of 2022. This cost-estimate will be presented to the Government of Canada as part of the process to obtain the necessary approvals of the corporation’s capital costs. The Government of Canada and the Board of Directors of TMC consider the Project to be commercially viable at this cost.

The Project as it stands today is very different from the project that Kinder Morgan estimated in 2017. It has been designed to a higher standard for environmental protection, undergone rigorous consultation with Indigenous groups and will support union jobs in British Columbia and Alberta. These enhancements have improved the Project, ensured that construction proceeds in the right way, and that it will support the Canadian economy today and into the future.

In addition, the new cost estimate is significantly more detailed than the previous owner’s public estimate on the cost of a number of project essentials, such as detailed engineering assessments and detailed construction work plans.

As stated previously, it is not the intention of the government to be a long-term owner of TMC. When the time is right, Canada will divest TMC to a new owner or owners who can ensure operations continue in a manner that protects the public interest.  

Background

In 2017, Kinder Morgan publicly announced a Project cost estimate of $7.4 billion (including financing costs), with an estimated in-service date of December 2019. The estimate did not include a final detailed engineering assessment and all of the detailed work plans. In addition, the estimate did not reflect the potential for schedule delays and increased labour costs.

On August 30, 2018, the Federal Court of Appeal (FCA) found that the National Energy Board had not adequately considered Project-related impacts of marine shipping and Canada did not properly execute its legal duty to consult with Indigenous peoples in relation to the Project. The government accepted the FCA’s findings and the Governor-in-Council (GIC) directed the NEB to conduct a reconsideration of the Project. In parallel, the government engaged in a renewed consultation process in accordance with the FCA’s guidance.

The NEB published its Reconsideration Report on February 22, 2019 — in accordance with the FCA’s direction for a focused review. The NEB’s report found that the Project is in the Canadian public interest and should be approved, subject to 156 binding conditions. In addition, the NEB made 16 recommendations to the government related to environmental protection measures focused on marine issues.

On April 18, 2019, the government announced that, in order to continue its Crown consultations, it was extending its decision-making timeline from May 22, 2019, to June 18, 2019. This action responded to requests from Indigenous communities for more time to complete the consultations. The resulting Crown Consultation and Accommodation Report concluded that Canada had met its duty to consult and addressed the issues identified in the FCA’s 2018 decision.

On June 18, 2019, the GIC approved the Project, directing the NEB to issue a Certificate of Public Convenience and Necessity as well as an environmental assessment decision statement.

Shortly after the approval, TMC publicly disclosed its expectation that the Project cost estimate would rise above the 2017 estimate of $7.4 billion and that TMC would release a new estimate once it had more confidence in the duration and nature of remaining regulatory processes.

Construction

On August 22, 2019, TMC officially re-started construction on the Project.  Currently, pipe is being laid in Spread 1 (Greater Edmonton) and work is underway at Burnaby Terminal, Westridge Marine Terminal, Edmonton Terminal, Spread 2 (Yellowhead) and at pump stations in British Columbia and Alberta. It is expected that during construction 5,500 people will be employed in construction, engineering, monitoring and finance related jobs.

Although subject to various contingencies and assumptions, TMC expects the Project to enter into service by the latter half of 2022.

Economic benefits

Construction of this Project will create thousands of middle class jobs—in construction, engineering, monitoring, and more—many of which will provide opportunities for Indigenous communities along the pipeline route. The Department of Finance estimates that additional corporate tax revenues could be around $500 million per year once the Project is online.

This money, as well as any profit from the divestment of TMC, will fund Canada’s future clean economy--profits will be invested in clean energy projects that will power our homes, businesses and communities for generations to come.

The Project will create economic benefits for many Indigenous communities through contracting, financial compensation, and employment and training opportunities. To date, TMC has signed agreements with 58 Indigenous communities worth over $500 million and the Project, when complete, will generate over $1 billion of Indigenous-based contract awards. The government is also committed to engaging Indigenous communities on further economic participation in the expansion.

Indigenous economic participation  

In July 2019, the Minister of Finance launched the first step of a multistep engagement process regarding the possibility of Indigenous economic participation. In launching this first step, the Minister highlighted four principles that would inform the engagement process:

• Potentially impacted Indigenous communities could have an opportunity for meaningful economic participation in the expansion;
• Participation of Indigenous communities could help the economic development of their communities in keeping with the spirit of reconciliation;
• The Government of Canada invested in Trans Mountain to benefit all Canadians; and
• That the expansion will be built and operated on a commercial-basis.

A “What We Heard” report was published on the Department of Finance Canada website in December 2019 and included feedback on the next steps in the engagement process. The government is reviewing the feedback from the initial engagement and is currently developing the approach for further engagement.