Canadian government-owned Trans Mountain Corp. pleads with the country's energy regulator to reverse a recent decision that could stall its oil pipeline expansion by two years and inflict billions in losses, Reuters reported last Thursday.

In a letter submitted on December 14, Trans Mountain argues that the Canada Energy Regulator's (CER) refusal to allow a variance in construction methods for a 1.4-mile section in British Columbia poses a "catastrophic" risk to the project.

The company had requested using smaller diameter pipe due to unexpectedly hard rock encountered during drilling between Hope and Chilliwack.

Trans Mountain warns that proceeding with the larger-diameter pipe as currently approved could compromise the borehole, forcing a complete change in installation plans and causing immense delays and financial harm.

The company claims complications due to water ingress are already amplified by the existing rock conditions, and forcing larger pipes through could exacerbate these issues, leading to a potential two-year delay and "billions of dollars in losses."

"If the (horizontal directional drill) fails and Trans Mountain is required to implement an alternative installation plan, the TMEP schedule will likely be delayed by approximately two years, and Trans Mountain will suffer billions of dollars in losses," the company stated in the letter.

The$23.05 billion (C$30.9-billion) Trans Mountain Expansion Project (TMEP) is already over budget and behind schedule, aiming to triple oil shipments from Alberta to Canada's Pacific coast once operational.

Its initial startup date is slated for March 2024, and Trans Mountain is urging the CER to make a decision on the variance by January 9th to adhere to the current timeline.

Analysts believe Trans Mountain's new information significantly increases the likelihood of the variance being approved.

"Given the new information provided by Trans Mountain, the CER will likely approve its request," stated Michael Dunn, an analyst at Stifel, in a recent note.

Concerns about potential delays have already impacted Canadian heavy crude, widening the discount compared to the North American benchmark. The situation fuels the anxiety of oil producers who had increased their output in anticipation of the expanded export options.

The CER's response to Trans Mountain's plea and its ultimate decision on the variance will hold significant weight for the future of the embattled TMEP project and the fate of Canada's crude oil industry.