En­ergy East axed

Tran­sCanada can­cels plans for En­ergy East pipe­line and East­ern Main­line.

Fort McMurray Today - - FORT MCMURRAY - DAN HEAL­ING

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.

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