Energy East still of ‘strategic importance’

Continued from FP1

Carr also said the government recognized the need for Canadian companies to export products to a “diversity of markets,” rather than just the United States, and those diverse markets include both Asia and — importantly for Energy East — Europe.

Financial analysts in Calgary said Carr’s and Prime Minister Justin Trudeau’s comments about diversifying export markets for commodities is a signal that Ottawa is open to other export pipelines following this week’s approval of Kinder Morgan’s Trans Mountain pipeline expansion.

But Brian Lee Crowley, MacDonald Laurier Institute managing director, said any signals Ottawa is trying to send on future pipeline projects are impossible to decipher given that approvals, in Trans Mountain’s case, and denials, in Northern Gateway’s case, seem like political rather than regulatory decisions.

“This throws the entire process into great confusion,” Crowley said, adding the process should be de-politicized.

Referring to this week’s decision to reject Enbridge Inc.’s Northern Gateway pipeline, he added, “I think (it) creates a huge disincentive for people to want to risk their money on pipelines in Canada because we’ve gone from a predictable, rulesbased system to one where the outcome depends on whether the Prime Minister of Canada thinks your pipeline runs through a forest that he likes.”

One industry veteran, who asked not to be named, Financial analysts say the prime minister’s comments about diversifying markets marks a signal that Ottawa is open to other export pipelines. said the approvals of Trans Mountain and Enbridge’s Line 3 could signal a willingness to approve expansions or retrofits of existing pipelines, but not necessarily new pipelines.

Given that Energy East is a brownfield project through Western Canada and a greenfield project when the line reaches New Brunswick, from where the crude from Western Canada will be exported, it is difficult to predict how the government will treat the plan.

Economists say Energy East is still needed, despite the approvals this week.

“We just went through a long period where it didn’t look like Canada could get pipelines built, because the politics were just too difficult,” said Craig Alexander, Conference Board of Canada senior vice-president and chief economist.

In the past month, however, the surprising election victory of Donald Trump in the U.S. and his willingness to approve TransCanada’s Keystone XL to the U.S. Gulf Coast, plus the Canadian approvals, would result in 1.8 million barrels of incremental oil export capacity from Canada in the near term. The $15 billion Energy East project would add another 1.1 million bpd of pipeline capacity, raising potential new capacity to just under three million bpd.

“In the long run, Canada will ultimately need expanded capacity into the U.S., but also be able to tap overseas markets both through the West Coast and hopefully through the East Coast,” Alexander said.

TransCanada says it’s looking forward to resuming the Energy East regulatory process and believes the project is still needed.

“Energy East remains of critical strategic importance because it will end the need for refineries in Quebec and New Brunswick to import hundreds of thousands of barrels of foreign oil every day, while improving overseas market access for Canadian oil,” TransCanada spokesperson Tim Duboyce said in an email. “TransCanada and oil shippers remain committed to the project.”