VANCOUVER (miningweekly.com) – TransCanada has pulled the plug on the Energy East and Eastern Mainline pipeline projects, the oil and gas infrastructure major revealed on Thursday.
The TSX- and NYSE-listed company said it would inform the National Energy Board (NEB) that it would no longer be proceeding with its proposed Energy East Pipeline and Eastern Mainline projects.
TransCanada last month sent a request to the NEB to suspend its processing of the two project permit applications, citing a review of the projects on the back of the NEB earlier in August announcing a broader scope under which it would deal with the environmental assessments (EAs) for the two projects.
President and CEO Ross Girling said the company would withdraw the two applications and that it expects to book a C$1-billion after-tax non-cash charge in the company's fourth quarter results.
“We appreciate and are thankful for the support of labour, business and manufacturing organisations, industry, our customers, Irving Oil, various governments, and the approximately 200 municipalities who passed resolutions in favour of the projects. Most of all, we thank Canadians across the country who contributed towards the development of these initiatives,” Girling stated.
The NEB Energy East panel identified additional issues such as consideration of greenhouse gas (GHG) emissions for both projects; the impact of GHG laws and policies on both projects; the potential effects of power lines, in the case of the Energy East project; and the potential effects of project-related marine shipping, also related to the Energy East project. The federal government agreed to pay additional costs caused by the analysis of the upstream and downstream GHG emissions associated with the Energy East pipeline.
Energy East was a 4 500 km pipeline proposed to carry 1.1-million barrels of crude oil a day from Alberta and Saskatchewan, to refineries in Eastern Canada and a marine terminal in New Brunswick. The company first proposed the project in 2013, when oil prices neared $100/bl.
However, with increased regulatory scrutiny and an oil price that has crawled sideways along the $50/bl mark for an extended period, TransCanada revealed last month that the project's future had come into doubt.
The Eastern Mainline pipeline was a proposal to build about 279 km of new gas pipeline and related components, beginning near Markham, Ontario, and finishing near Brouseville, Ontario.
Natural Resources Minister Jim Carr said TransCanada Pipelines’ decision to cancel the Energy East Pipeline project was a business decision. “Our government would have used the same process to evaluate the Energy East Pipeline project that saw the Trans Mountain expansion and Line 3 projects approved. Nothing has changed in the Government’s decision-making process,” he said in a statement.
He pointed out that the federal government had approved two major export pipelines that are now under construction, and that a third is expected to start soon. The Trans Mountain expansion and Line 3 projects alone represent more than C$11.6-billion in investment and will support thousands of jobs.
The Canadian Energy Pipeline Association (Cepa) lamented the decision, expressing its extreme disappointment. “This is evidence of how a lack of clarity and an unclear decision-making process regarding pipeline projects in Canada are challenging the energy sector’s ability to be competitive in the world market,” president and CEO Chris Bloomer 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.
Bloomer stressed that pipelines are the only viable way to move large quantities of oil and natural gas to markets, safely and responsibly. “With global demand for energy expected to rise and extensive supply potential in Western Canada, Canada will be missing out on a significant economic opportunity if governments do not see value in pipeline projects such as Energy East,” he said.
Energy East would have delivered Canadian oil to Eastern Canadian markets, displacing about 400 000 bbl/d of foreign imports and opening up access to new markets for Canadian oil in world markets.
Alberta Premier Rachel Notley said in a release that the province is “deeply disappointed” by the decision. “The NEB needs to send a clear message on what the future of project reviews look like in Canada. Investors need confidence and we look forward to seeing that certainty in place soon.
“Our government has supported Energy East since the project was proposed. We believe this nation-building project would have benefited all of Canada through new jobs, investment, energy security and the ability to displace oil being imported into Canada from overseas and the US.”
“This decision highlights the importance of diversifying market access and the subsequent national priority that must be placed on the Trans Mountain expansion project,” Notley stated.
TransCanada’s decision has wide-ranging impacts on provinces. In New Brunswick, Premier Brian Gallant decried the loss of the projects, saying: “TransCanada deciding not to proceed with its application is not good news for those who wanted to see the Energy East pipeline built – and your provincial government falls firmly in that camp.
“Like many New Brunswickers, we are disappointed. The project would have created jobs in New Brunswick and helped the Canadian economy,” he said.
Nongovernmental organisation Environmental Defence saluted the project cancellations.
“The message from the cancellation of TransCanada’s proposed Energy East pipeline is loud and clear: new tar sands pipelines don’t make sense – economically or environmentally – in a world that is addressing climate change and moving away from fossil fuels.
“The reason for Energy East’s cancellation is simple: New pipelines can’t be justified during a time of declining investment in the tar sands, North American pipeline overcapacity, and an unstoppable transition to renewable energy,” the organisation’s Patrick Derichie said in a statement.
According to him, the proposed pipeline was at odds with Canada’s commitment to tackle climate change and the global effort to prevent dangerous global warming. Energy East would have locked Canada into a high-carbon future, because once fossil fuel infrastructure is built, there is a powerful rationale to use it, he argued.
“Today brings good news for communities, First Nations, and Canadians along the pipeline route who took a stand against Energy East. The pipeline failed to respect Indigenous rights and title and would have put the drinking water of millions of Canadians at risk of an oil spill.”
TransCanada's Girling noted that the company will continue to focus on its C$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% range through to 2020.