Controversial Pipeline in B.C. Continues to Increase its Cost, Sending Share Values Down

On Wednesday, TC Energy Corp., a North American pipeline operator, announced a much higher cost estimate to finish its problematic Coastal GasLink project, driving share prices down.

The 670-kilometre pipeline, first proposed in 2018, will carry natural gas from B.C.’s Peace River region into the Shell PLC-led LNG site on the northwest coast of British Columbia. This will be the country’s first liquified natural gas export terminal.

KKR & Co Inc, Alberta Investment Management Corp, and TC are the owners of the pipeline, which has been afflicted by issues like protests regarding environmental concerns, inflation, and mountainous terrain that has required TC to transport pipe with ski lifts.

The original estimate for the Coastal project was C$7 billion, which has been increased by 70% in July to the new estimate of C$11.2 billion. The new estimate is C$14.5 billion, a 30% increase from the prior estimate. The s ignificant increase was considered to be slightly above expectations by analysts at BMO, Scotiabank, and RBC.

The corporation stated that the price increase was due to a lack of workers, inadequate performance by contractors, and harsh weather conditions.

If development takes until 2024 or later, TC estimates an additional C$1.2 billion in costs.

RBC analyst Robert Kwan said: “Given the history of cost overruns … we believe that the cost and timing of the project will be an overhang for the stock.”

CEO François Poirier said the rise was discouraging, but he reaffirmed the company’s commitment to achieving mechanical completion by the end of 2023. The project is already 83% complete.