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Trans Mountain Pipeline ULC Trans Mountain Expansion Project Application Pursuant to Subsection 69(1) of the Canadian Energy Regulator Act Mountain 3 Horizontal Directional Drill Variance Application, CER Reasons for Decision

Link to Decision Summarized

Oil and Gas – Facilities

Application

Trans Mountain Pipeline ULC (“Trans Mountain”) filed an application requesting a variance of Certificate of Public Convenience and Necessity OC-065 (the “Certificate”). The variance involved a change to the diameter, wall thickness and coating of pipe in a segment of 2300 meters (“m”) in the Black Pines to Burnaby Tank Terminal segment of the Trans Mountain Expansion Project (“TMEP”) from kilometer post (“KP”) 1064.4 to KP 1066.7 (the “Variance”).

Decision

The CER denied the Variance application. The CER found that any benefits of the Variance were outweighed by drawbacks concerning material quality and in-line inspection (“ILI”) capability, including an inadequate consideration of environmental protection.

Pertinent Issues

Trans Mountain submitted that the current horizontal directional drilling (“HDD”) execution plan requires continuation of reaming to the 48-inch diameter to accommodate pullback of the nominal pipe size (“NPS”) 36 pipeline. Trans Mountain stated that progress of the 48-inch reaming operation is unpredictable, with the risk of tool loss and additional delay, and that the Mountain 3 obstacle is currently on the TMEP’s critical path. To reduce the risk of delays in the completion of the HDD and overall TMEP, Trans Mountain developed an NPS 30 contingency option that would, if implemented, involve the installation of NPS 30 pipe within the 42-inch ream. This would avoid the need to complete the 48-inch ream pass that is required to accommodate the pullback of the NPS 36 pipeline. Trans Mountain stated that implementing the contingency option can be completed in 55 to 60 fewer days than it will take to complete the 48-inch ream and install an NPS 36 pipeline.

Engineering

The CER had serious concerns regarding material quality and ILI capability that were not sufficiently addressed in Trans Mountain’s evidence, which did not provide sufficient detail, definitive conclusions and supporting documentation.

Acknowledging that Mountain 3 is a challenging HDD because of the hardness of the rock encountered, the CER determined that the encountered technical challenges were identified in the feasibility study and geotechnical assessments carried out for this HDD. The CER found that, while Trans Mountain described a potential consequence scenario of a challenging 48-inch ream pass, it did not provide quantitative information regarding the likelihood of HDD abandonment. Accordingly, the CER could not precisely determine the risk level associated with the completion of the remaining 1225 m of the 48-inch ream pass.

Trans Mountain did not mention water ingress posing a risk to the HDD until the matter was raised in information request (“IR”) responses and during oral questioning. Trans Mountain did not demonstrate that the present risk associated with the HDD completion is greater than when it initially planned the HDD.

The CER had concerns with the quality of materials that Trans Mountain procured to construct the Variance. Trans Mountain’s evidence lacked the documentation required to demonstrate that the steps it took in procuring the materials for the Variance were equivalent to the measures required by its Quality Management Protocol (“QMP”). Trans Mountain failed to demonstrate that the quality of materials acquired for the proposed Mountain 3 Variance was equivalent to those procured for the balance of the TMEP. The CER did not accept Trans Mountain’s argument that its QMP does not apply to the Variance. The CER noted that the quality of materials cannot be compromised due to Trans Mountain’s urgency to remove the Mountain 3 HDD from the TMEP’s critical path.

If the Variance was approved, Trans Mountain would not have the ability to inspect the 138.4 km section of pipeline between the Hope Station and Burnaby Terminal for all threats until pig traps were installed on either end of the NPS 30 segment or new dual-diameter inspection tools were developed, built, validated and made commercially viable. As a result, the CER found that Trans Mountain failed to demonstrate that it could ensure a level of safety and integrity for the 138.4 km section of the pipeline between the Hope Station and Burnaby Terminal that is equivalent to the rest of the TMEP. ILI is a necessary component of any robust integrity management plan. Therefore, the CER had serious concerns with the operation of the pipeline between the Hope Station and Burnaby Terminal without full ILI capability at the commencement of operations. The CER was not persuaded that safe operation of the Variance and protection of people, property, and the environment can be assured to the level of the remainder of the TMEP without access to the full suite of ILI tools relied on by Trans Mountain’s integrity management plan.

Economics

The CER determined that each month of change to the TMEP in-service date will result in approximately $200 million in lost or gained revenues for Trans Mountain.

Environmental and Socio-Economic Effects

The CER found that the Variance’s contemplated change in pipe diameter, with no impact on routing or method of construction, would not directly involve any change to the environmental or socio-economic effects already considered and approved for the TMEP.

Rights and Interests of Indigenous Peoples

The CER determined that Trans Mountain sufficiently engaged with Indigenous peoples, following a direction from the CER. The CER determined that after a sufficient notification, no concerns were raised by Indigenous communities regarding the Variance.

Engagement

The CER found that those potentially impacted by the Variance were provided with sufficient notice and had the opportunity to file comments with the CER.

Conclusion

Weighing the concerns about material quality and ILI capability against the Variance’s potential benefits to the TMEP’s mechanical completion and in-service dates, the CER found that approval of the Variance would not be in the public interest.

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