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Canada Guarantees Loans For Trans Mountain Pipeline Expansion

Canada’s federal government has guaranteed loans of $2.23 billion (C$3 billion) to the corporation building the Trans Mountain expansion project to triple the capacity of oil flows from Alberta to the Canadian Pacific Coast.

The Trans Mountain Expansion project has been dragging on for years and faces environmental opposition and rising construction costs.

Fierce opposition in British Columbia has forced Kinder Morgan to reconsider its commitment to expand the Trans Mountain pipeline, which would increase the daily capacity of the pipeline to 890,000 barrels per day (bpd) from 300,000 bpd. So the Government of Canada reached an agreement with Kinder Morgan back in 2018 to buy the Trans Mountain Expansion Project and related pipeline and terminal assets.

Last year, the federal government of Canada guaranteed a loan of $7.45 billion (C$10 billion) to Trans Mountain Corporation (TMC).

Also last year, the federal Finance Minister Chrystia Freeland said that Canada would not be investing more public money in the project.

The loan guarantees are common practice and not new public spending, Finance Ministry spokeswoman Marie-France Faucher told Reuters on Friday.

“The federal government does not intend to be the long-term owner of the project and will launch a divestment process in due course,” Faucher said in a statement.

The expansion project is still commercially viable, she added.

Costs for the project have quadrupled since 2017, to $23 billion (C$30.9 billion), from $5.5 billion (C$7.4 billion) planned six years ago, according to Reuters’ estimates.

Construction on the Trans Mountain Expansion Project was approximately 82% complete as of the end of March, TMC said earlier this week. 

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Trans Mountain anticipates mechanical completion of the project to occur at the end of this year, while commercial service is expected to occur in the first quarter of 2024. The pipeline has long-term contractual commitments for 80% of 890,000-bpd capacity, the corporation said.

By Tsvetana Paraskova for Oilprice.com

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