(Reuters) — The Canada Energy Regulator said on Wednesday it denied a variance request from the Trans Mountain expansion project because the application did not adequately address concerns about pipeline integrity and environmental protection impacts.
Trans Mountain had asked to be allowed to install smaller-diameter pipe in a 1.4-mile (2.3 km) section of the oil pipeline's route after encountering "very challenging" drilling conditions due to the hardness of the rock in a mountainous area between Hope and Chilliwack in the province of British Columbia.
The CER denied that request on Dec. 5.
In a statement outlining reasons for its decision, the CER said it had concerns about the quality of materials Trans Mountain planned to use, and that Trans Mountain did not demonstrate how it would conduct in-line inspections or adequately address potential environmental impacts.
"These concerns outweighed the benefits for earlier completion of the Trans Mountain Expansion Project (TMEP)," the regulator said.
Trans Mountain, which originally said granting the variance would save 59 days of construction time, did not immediately respond to a request for comment.
Last week the Canadian government-owned corporation asked the regulator to reverse its variance decision on the grounds that it could cause a "catastrophic" two-year delay and billions of dollars in losses.
Trans Mountain asked the CER to make a decision no later than Jan. 9 to allow the project to stick to its current construction schedule.
The expanded pipeline is meant to start shipping crude by the end of the first quarter of 2024. The risk of further delays is weighing on Canadian crude prices.
The CER decision was yet another setback for the long-delayed project, intended to triple shipments of crude from Alberta to Canada's Pacific coast to 890,000 barrels per day once it starts operating.
Prime Minister Justin Trudeau's Liberal government bought the troubled project in 2018 to ensure the expansion went ahead, but costs have ballooned to C$30.9 billion ($23.11 billion), more than four times the original budget.
Asked what a two-year delay might mean for the federal government's plans to sell the pipeline once it is complete, Canada's deputy prime minister, Chrystia Freeland, told reporters in Calgary the government was "absolutely committed" to getting the project done.