Lessons from En­ergy East’s demise

The Prince George Citizen - - FRONT PAGE -

Not so long ago there was much to like about Tran­sCanada’s now-dead En­ergy East pipe­line project, which would have shipped 1.1 mil­lion bar­rels a day of western crude oil to eastern re­finer­ies and ports. As we ar­gued in 2014 amid mount­ing cen­tral-Cana­dian op­po­si­tion to the project, En­ergy East would have cre­ated thou­sands of jobs and boosted Canada’s eco­nomic out­put by an es­ti­mated $35 bil­lion. The pipe­line, which would have car­ried oil from Al­berta and Saskatchewan to re­finer­ies in Que­bec and New Brunswick, would have pro­vided a safer way to ship oil than by rail or other means. And the bulk of the pipe­line was al­ready in place.

Tran­sCanada’s pro­posal promised to im­prove the lives of a good num­ber of peo­ple, par­tic­u­larly those liv­ing in strug­gling parts of New Brunswick. Its demise should not be glibly cel­e­brated. But nor is it rea­son to de­clare, as some crit­ics have done, that Ot­tawa’s new en­ergy reg­u­la­tions are dis­as­trously over-strin­gent.

Rather, the ter­mi­na­tion of En­ergy East is an im­por­tant wake-up call that the eco­nom­ics of en­ergy are rapidly chang­ing and gov­ern­ment and in­dus­try must change along with them. The Trudeau Lib­er­als did not kill this project; an evolv­ing world did.

It doesn’t take an econ­o­mist to see that the busi­ness case for En­ergy East has badly de­te­ri­o­rated for rea­sons well be­yond the fed­eral gov­ern­ment’s con­trol. When the project was first pro­posed, for in­stance, oil was trad­ing at $120 per bar­rel and the Key­stone XL pipe­line, from the Al­berta oil­sands to Texas, seemed all but doomed. By the time we wrote about En­ergy East’s mer­its in 2014, the price of oil had dropped to $85 per bar­rel. Now it’s hov­er­ing be­low $50 – and Don­ald Trump has put Key­stone back on the ta­ble.

Nev­er­the­less, crit­ics, par­tic­u­larly in the prairies, are claim­ing that new reg­u­la­tions put in place by Ot­tawa are pri­mar­ily re­spon­si­ble for Tran­sCanada’s re­treat.

In par­tic­u­lar, these new rules re­quired that both up­stream and down­stream emis­sions be con­sid­ered as part of the ap­proval process. And, for the first time, they al­lowed dis­cus­sion at hear­ings of the im­pact of Ot­tawa’s cli­mate tar­gets on the fi­nan­cial vi­a­bil­ity of the project.

As Charles Hatt, a lawyer with Eco­jus­tice, told the Star in Au­gust, “Surely it is now self-ev­i­dent that a pipe­line re­view must con­sider all po­ten­tial green­house gas emis­sions and the risk that the pipe­line will be­come a stranded as­set in to­mor­row’s econ­omy.”

While some have char­ac­ter­ized these rules as an at­tack on Al­berta, it’s hard to see how Ot­tawa could re­spon­si­bly ap­prove an en­ergy project with­out un­der­stand­ing its full en­vi­ron­men­tal im­pact, never mind meet our na­tional cli­mate tar­gets or man­age the eco­nomic con­se­quences of do­ing so.

Canada has been slower than other coun­tries to see that cli­mate change is chang­ing the cal­cu­lus of na­tional in­ter­est.

China, choked by air pol­lu­tion, has ag­gres­sively in­vested in re­new­able en­ergy, driv­ing the price of wind and so­lar power pre­cip­i­tously down. Last year, re­new­ables matched fos­sil fu­els for the first time both in price and power ca­pac­ity.

As coun­tries seek to meet their cli­mate tar­gets, de­mand for the sort of en­ergy that de­pends on pipe­lines seems bound, even if slowly, to de­cline.

Justin Trudeau made few friends in Al­berta and Saskatchewan when he said ear­lier this year that the oil­sands would even­tu­ally – that is, prob­a­bly, over the very long term – have to be phased out. But his point was not just a moral one; it was also sim­ply de­scrip­tive. “We need to man­age the tran­si­tion off of our de­pen­dence on fos­sil fu­els,” he said. Clearly oil con­tin­ues to be a large part of Canada’s econ­omy and will be for a sig­nif­i­cant pe­riod of time. And we need to con­tinue to be wor­ried about the safest and most ef­fi­cient ways of get­ting that oil to mar­ket. But our long-term com­pet­i­tive­ness, in­clud­ing but not only in the $5-tril­lion global en­ergy busi­ness, de­pends on our abil­ity to look be­yond fos­sil fu­els and fos­ter clean-tech and al­ter­na­tive-en­ergy in­no­va­tions and in­dus­try.

Many of the pro­po­nents of En­ergy East are ready to blame re­gional con­flicts, over­reg­u­la­tion and en­vi­ron­men­tal ex­trem­ism for its col­lapse. But more than any­thing the project was killed by mar­kets ad­just­ing to a chang­ing world. Look­ing back­wards can’t be the ba­sis for Canada’s en­ergy fu­ture.

— Toronto Star

It doesn’t take an econ­o­mist to see that the busi­ness case for En­ergy East has badly de­te­ri­o­rated for rea­sons well be­yond the fed­eral gov­ern­ment’s con­trol.

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