05 October 2017
TransCanada Corp. has pulled the plug on its controversial $15.7-billion Energy East Pipeline proposal, after slowing oil sands growth and heightened environmental scrutiny raised doubts about the viability of the project.
TransCanada kills controversial Energy East Pipeline project
<p></p><p>Open this photo in gallery:REUTERS</p><p>TransCanada President and CEO Russ Girling announces the new Energy East Pipeline during a news conference in Calgary, in this August 1, 2013 file photo.</p><p></p><p>TODD KOROL/REUTERS</p><p>SHAWN MCCARTHY AND JEFF LEWIS</p><p>OTTAWA/CALGARY</p><p>45 MINUTES AGO</p><p>OCTOBER 5, 2017</p><p>TransCanada Corp. has pulled the plug on its controversial $15.7-billion Energy East Pipeline proposal, after slowing oil sands growth and heightened environmental scrutiny raised doubts about the viability of the project.</p><p></p><p>In a terse statement Thursday morning, TransCanada said it has reviewed the "changed circumstances" and would be informing the National Energy Board that it would no longer proceed with the project, including the related Eastern Mainline, a natural gas pipeline that complemented the crude-carrying Energy East.</p><p></p><p>The west-to-east pipeline was planned to deliver 1.1-million barrels per day of western Canadian crude to refineries in Quebec and Saint John, N.B. as well as an export terminal in New Brunswick which was to be built by Irving Oil Ltd.</p><p></p><p>Read also: Energy East is a pipe dream in a carbon-constrained world</p><p></p><p>The project was strongly supported by governments in Alberta and New Brunswick – as well as federal Conservative politicians – who touted it as a means for increasing crude exports, replacing imported oil in Eastern Canada and created thousands of short-term construction jobs. However, it drew fierce opposition from municipalities and Indigenous leaders in Quebec, and from environmentalists, who worried it would lead to increased production of carbon-intensive bitumen and could spill crude into critical waterways.</p><p></p><p>Last month, TransCanada asked the National Energy Board to put its regulatory review hearings on hold while it reviewed the board's decision to include an assessment of the proposed pipeline's impact on greenhouse gas emissions, both in the production side of the business and in the refining and use of the oil.</p><p></p><p>The company did not specify the reasons for its decision in Thursday's announcement.</p><p></p><p>But AltaCorp Capital Inc. analyst Dirk Lever said he was not surprised by the move. There is more optimism around TransCanada's once-moribund Keystone XL pipeline, which would deliver Alberta crude to big refineries on the U.S. Gulf Coast. Producers would be reluctant to commit to both projects, especially given shrinking growth prospects in the oil sands, he said.</p><p></p><p>"I don't think really anybody in Calgary thought Energy East was actually going to go ahead," he said. "It was a Plan B."</p><p></p><p>In a statement, TransCanada chief executive officer Russ Girling thanked the supporters of the project, and said the company will now turn its attention elsewhere. The company expects to take an estimated $1-billion charge on its pre-tax fourth-quarter earnings. "We will continue to focus on our $24-billion, near-term capital program, which is expected to generate growth in earnings and cash flow to support an expected annual dividend growth rate at the upper end of an 8– to 10-per-cent range through 2020," he said.</p><p></p><p>STORY CONTINUES BELOW ADVERTISEMENT</p><p></p><p></p><p></p><p>After it announced the review, New Brunswick Premier Brian Gallant urged TransCanada to proceed with the project, and sought assurances from the federal government that the process would be a fair one.</p><p></p><p>Federal Natural Resources Minister Jim Carr insisted at the time that the proposal would get a fair hearing from the board and the government. He noted that the Liberal government had approved other oil and gas projects, including Kinder Morgan Inc.'s Trans Mountain pipeline expansion, after conducting similar climate-change-related assessments.</p><p></p><p>Some industry analysts questioned how much support existed among producers for the Energy East project, particularly after U.S. President Donald Trump revived and approved TransCanada's Keystone XL project that would carry 830,000 barrels per day from Western Canada to the massive refining hub and export terminals on the U.S. Gulf Coast.</p><p></p><p>The company is now seeking to firm up commitments from shippers on the Keystone XL line, while seeking final approval for its route through Nebraska from the state's public utilities commission.</p><p></p><p>Growth in oil sands production is expected to slow considerably as international oil companies retreat from Alberta and major projects that had been planned are either cancelled outright or deferred.</p><p></p><p>The industry is also supporting expansions of two other pipelines, the Trans Mountain line to Vancouver harbour, and Enbridge Inc.'s rebuild of its Line3 export line to the U.S.</p><p></p><p>Alberta Premier Rachel Notley said she was disappointed over TransCanada's decision to kill the project, which her government had actively supported as a "nation-building project."</p><p></p><p>"We understand that [the decision] is driven by a broad range of factors that any responsible business must consider. Nonetheless, this is an unfortunate outcome for Canadians," Ms. Notley said.</p><p></p><p>The premier said the government needs to provide greater certainty regarding the regulatory review process, which the Liberal government is currently working to update. With the west-to-east proposal now dead, Ms. Notley said there is an even greater urgency in completing the Trans Mountain project in order to diversify the industry's export markets beyond the United States.</p><p></p><p>In a statement, the Canadian Energy Pipeline Association blamed TransCanada's reversal on Ottawa's "unclear decision-making process" regarding pipeline projects in Canada.</p><p></p><p>"TransCanada was forced to make the difficult decision to abandon its project, following years of hard work and millions of dollars in investment," the association said in a statement. "The loss of this major project means the loss of thousands of jobs and billions of dollars for Canada, and will significantly impact our country's ability to access markets for our oil and gas."</p><p></p><p>However, Mr. Gallant said Thursday he had received assurances from Ottawa that the GHG assessment did not represent an insurmountable hurdle for TransCanada.</p><p></p><p>"Given the positive signals the federal government has sent to TransCanada over the last weeks . . . we believe it is clear that TransCanada is not proceeding with its application for the Energy East pipeline because recent changes to world market conditions and the price of oil have negatively impacted the viability of the project," Mr. Gallant said.</p><p></p><p>"We believed if TransCanada continued with the process, the project would be approved. We still believe that."</p><p></p><p>Natural Resources Minister Jim Carr said TransCanada made a "business decision" that was driven by changes in the market.</p><p></p><p>He said Ottawa had long signalled it would require climate change-related assessments of pipeline projects, and noted previous federal approvals after such reviews in other projects.</p><p></p><p>And he insisted that "Canada is open for business."</p><p></p><p>However, Conservative Party deputy leader Lisa Raitt slammed the Liberal government for imposing a climate test on Canadian producers that foreign competitors do not face.</p><p></p><p>She said the Liberals are sending negative signals to investors and creating a "double standard" to the detriment of Canadian companies and workers.</p><p></p><p>Mr. Carr said Ottawa's job is to regulate in Canada. He added the Liberals are not prepared to engage in a "race to the bottom" to match environmental regulations in Venezuela or Saudi Arabia.</p><p></p><p>FOLLOW SHAWN MCCARTHY AND JEFF LEWIS ON TWITTER @SMCCARTHY55 @JEFFALEWIS</p><p> REPORT AN ERROR LICENSING OPTIONS</p>
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