Trans Mountain Expansion (TMX) project faces further delay following the Canada Energy Regulator (CER) decision to deny the company’s request for a variance on a section of the oil pipeline under construction in British Columbia, potentially delaying the 590,000 barrel-per-day (bpd) expansion.

As reported by Reuters on Tuesday, December 5, Trans Mountain sought permission to install a smaller diameter pipe in a 1.4-mile (2.3-km) section due to "very challenging" drilling conditions caused by hard rock formations in a mountainous area between Hope and Chilliwack.

The CER's decision, posted on its website, confirmed the denial without immediate explanation, citing Trans Mountain's request for an expedited process as the reason for the initial delay in justification.

During a November 27th hearing, Trans Mountain representatives argued that using smaller diameter pipe would save 59 days of construction time, allowing the project to maintain its target start date in late Q1 2024. Drilling a wider section for the larger diameter pipeline was deemed "unpredictable" by Trans Mountain, further emphasizing the potential benefits of the variance.

This latest setback adds to the troubled history of the TMX project, designed to triple crude shipments from Alberta to Canada's Pacific Coast, ultimately reaching 890,000 bpd upon completion.

Oil market participants in Calgary reported a widening of the discount on Canadian crude relative to the U.S. benchmark following the CER's announcement. With the original start date of March 2024 rapidly approaching and a string of construction-related issues already encountered, concerns regarding further delays are intensifying.

Trans Mountain, a Canadian government-owned crown corporation, confirmed in a statement that they are awaiting the CER's explanation for the variance denial. They also noted that construction on the project was over 97% complete.

The $22.78 billion (C$30.9 billion) project, initially proposed by Kinder Morgan in 2012, has faced repeated delays and cost overruns throughout its development. The Canadian government acquired the project in 2018 to ensure its completion.