Energy East axed
TransCanada cancels plans for Energy East pipeline and Eastern Mainline.
CALGARY — TransCanada Corp. (TSX:TRP) has cancelled its $15.7-billion proposed Energy East pipeline, cutting off a potential conduit to bring more western Canadian oil to eastern refineries and overseas export markets.
CEO Russ Girling cited nonspecific “changed circumstances” for the decision in a brief news release Thursday morning. The Calgary-based company refused to give further explanation.
That led to speculation from all sides as to what the circumstances were, with critics arguing cancellation was prompted by low oil prices and the lack of commercial need for the project and supporters casting the blame on costs and delays from federal government regulatory meddling.
The decision comes a month after TransCanada asked the National Energy Board to put regulatory hearings on hold. It said it had to review an NEB panel’s decision to allow consideration of greenhouse gas emissions caused by producing and processing the oil transported in the pipeline, an unprecedented expansion of the scope of the inquiry.
“It’s a blow. It’s being portrayed as a business decision, but it’s more than that,” said Chris Bloomer, CEO of the Canadian Energy Pipeline Association, adding the decision means about 400,000 barrels per day of foreign oil will continue to be imported into Eastern Canada.
“It really is a result of this constant, and I’ll say this, drip, drip, drip of regulatory uncertainty that are impacting these kinds of infrastructure decisions.”
But Adam Scott, a senior adviser at the environmental group Oil Change International, had a different interpretation.
“Realizing that Energy East would never be allowed if its full climate impact was accounted for, TransCanada has walked away from the project,” he said in a statement. “Energy East was a disaster waiting to happen.”
The proposed project is a 4,500-kilometre pipeline designed to carry 1.1 million barrels of oil a day from Alberta and Saskatchewan to refineries in Montreal and Saint John, N.B. The project includes converting an existing natural gas pipeline to carry crude and building new segments of pipeline to complete the route.
A year ago, its first round of NEB hearings collapsed after protesters shut down hearings in Montreal and accused the panellists of bias, prompting the board to start the review process from scratch with a new, three-member panel early this year.
Some industry analysts have questioned the need for the Energy East project after TransCanada’s 830,000-bpd Keystone XL project received U.S. approval to transport oil from Alberta to the U.S. Gulf Coast and Kinder Morgan won federal approval of its Trans Mountain pipeline project to nearly triple the capacity of the 1,150-kilometre line running from Edmonton to Burnaby, B.C. to 890,000 bpd.
Enbridge Inc.’s rebuild of its Line 3 export pipeline to the U.S. is expected to add another 375,000 bpd by restoring its full capacity.
But the Canadian Association of Petroleum Producers says all the pipelines are needed, predicting in June that national oil production will climb by 33 per cent by 2030 to reach 5.12 million bpd — CEO Tim McMillan said Thursday pipeline capacity will be exceeded under that forecast if Energy East is not in place.
Suncor Energy Inc. (TSX:SU), Canada’s largest oil, gas and refining company by market capitalization, had hoped Energy East would allow it to replace U.S. and offshore oil at its 137,000-barrel-per-day Montreal refinery, said spokeswoman Sneh Seetal.
“We’re disappointed,” she said. “We supported the Energy East pipeline because it would have provided supply options and access to western Canadian crudes for our Montreal refinery and also would have provided access to new markets which is critical for Canadian producers.”
The line would have brought western oil as far east as Irving Oil’s New Brunswick works — Irving president Ian Whitcomb said in a statement, “This is a sad day for Canada.”
The project has opened deep rifts in political circles, with New Brunswick and Alberta premiers expressing disappointment Thursday and Quebec politicians like Montreal Mayor Denis Coderre celebrating its demise.
In its news release, TransCanada said it will record a non-cash charge of about $1 billion in its fourth-quarter results to account for funds invested in the failed venture.
Natural Resources Minister Jim Carr delivers a statement on TransCanada Pipelines’ decision to cancel the Energy East Pipeline project on Parliament Hill in Ottawa on Thursday.