$50 billion lost; 50,000 jobs gone;
1 million barrels of oil gone; 1500 new pipelines gone
TransCanada Corp. has scrapped its Energy East Pipeline and Eastern Mainline projects, oil and natural gas conduits killing a controversial $15.7 billion Energy East Pipeline proposal amid slow oil sands growth, heightened environmental scrutiny and regulatory hurdles in Canada raised doubt about the project.
TransCanada announced Thursday it reviewed the “changed circumstances” and would be informing the National Energy Board that it would no longer proceed with the project. It said that included the Eastern Mainline natural gas pipeline that would have complemented the crude-carrying Energy East. TransCanada provided no further details for its decision.
TransCanada said in a statement Thursday it expects an estimated $1 billion after-tax, non-cash charge to be recorded in the fourth quarter. Because regulators failed to reach a decision on the projects, TransCanada expects “no recoveries of costs from third parties.” The Energy East link to Canada’s Atlantic Coast carried a $15.7 billion price tag.
Prime Minister Justin Trudeau said Thursday “TransCanada made a business decision.”
Kanesatake Mohawk Council Chief Serge Otis Simone says he was “jubuliant” about the pipeline being shut down. “That’s one down, three to go.”
He said it’s only one pipeline there are others First Nations are opposing that he will be supporting. He said there have been warnings from chiefs across Canada, especially the north, about climate change. “The consequences are going to be worse it won’t be good for the economy. The northwest passage has no ice, migration patterns of caribou and salmon, and moose in some areas, have changed. The latest report on wildlife in Canada says 50% of the wildlife population is on a decline.”
He said he is not against progress. “The treaty alliance has options for generating energy that could be looked at that could even pale the fossil fuel energy. Short sightedness is no excuse.”
The west-to-east pipeline was to deliver 1.1-million barrels per day of western Canadian crude to refineries in Quebec and Saint John, N.B. and an export terminal in New Brunswick. the export terminal would have been built by Irving Oil Ltd.
The project had been 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.
The line faced opposition from municipalities, Indigenous leaders and environmentalists, who worried it would lead to increased production of carbon-intensive bitumen and could spill crude into critical waterways.
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.
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.
“I don’t think really anybody in Calgary thought Energy East was actually going to go ahead,” he said. “It was a Plan B.”
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. . “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.
The company’s plans include spending billions of dollars expanding its natural gas pipeline system in British Columbia, and boosting it investments in Mexico.
After TransCanada asked the NEB to put the review on hold, New Brunswick Premier Brian Gallant urged the company to proceed with the project, and sought assurances from the federal government that the process would be a fair one.
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.
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.
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.
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.
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.”
“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.
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.
In a statement, the Canadian Energy Pipeline Association blamed TransCanada’s reversal on Ottawa’s “unclear decision-making process” regarding pipeline projects in Canada.
“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.”
However, Mr. Gallant said Thursday he had received assurances from Ottawa that the GHG assessment did not represent an insurmountable hurdle for TransCanada.
“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.
“We believed if TransCanada continued with the process, the project would be approved. We still believe that.”
Natural Resources Minister Jim Carr said TransCanada made a “business decision” that was driven by changes in the market.
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.
And he insisted that “Canada is open for business.”
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.
She said the Liberals are sending negative signals to investors and creating a “double standard” to the detriment of Canadian companies and workers.
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.
Energy producers in Alberta had hoped the projects would help them diversify their markets, with most of the existing pipeline network linking the energy-rich province to the U.S. Midwest and Gulf Coast. Last month, TransCanada sought a 30-day suspension of the project applications for more time to review environmental assessment factors.
“We are not at all surprised by the decision,” given that TransCanada had sought to delay the project applications, said Robert Kwan, an analyst at RBC Dominion Securities Inc., in a research note. The decision won’t affect the company’s dividend because its growth forecast didn’t include those projects, he said.
QuickQuotes: what’s being said about the end of TransCanada’s Energy East
TransCanada announced Thursday that it wasn’t going ahead with the Energy East pipeline, bringing on a wave of comments either condemning or celebrating the outcome. Here is what some are saying:
“Today is not a good day for Canada. It is not a good day for the federation. It is a very bad day for the west. TransCanada made the decision to cancel Energy East -but make no mistake, the reasons for it fall at the feet of Prime Minister Justin Trudeau and the federal government. They have been, at best, ambivalent about the project and then moved the goalposts at the last moment by asking the regulator to consider the impact of upstream greenhouse gas emissions.” _ Saskatchewan Premier Brad Wall
“I am satisfied that TransCanada is abandoning this project.
Given the low level of social acceptability of such a project, it was the only option.” Montreal Mayor Denis Coderre
“We are deeply disappointed by the recent decision from TransCanada. We understand that it is driven by a broad range of factors that any responsible business must consider. Nonetheless, this is an unfortunate outcome for Canadians.” Alberta Premier Rachel Notley
“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.” Minister of Natural Resources Jim Carr
“This is a sad day for Canada. The construction of the Energy East pipeline was a once-in-a-lifetime opportunity. This was a $15-billion private-sector investment that would have enabled further investment and development in our country, creating thousands of skilled jobs and generous tax revenues and royalties for all levels of government along with creating energy security for our country.” Ian Whitcomb, President of Irving Oil
“The message from today’s 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.” _ Environmental Defence campaigner Patrick DeRochie
“We’re disappointed. 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.” _ Sneh Seetal, spokeswoman for Suncor Energy
“Both the Northern Gateway fight and this Energy East one show that when First Nations stand together, supported by non-Indigenous allies, we win…So that’s two tar sands expanding mega-pipelines stopped in their tracks but it will be a hollow victory if either Kinder Morgan, Line 3 or Keystone XL are allowed to steamroll over Indigenous opposition and serve as an outlet for even more climate-killing tar sands production.” Grand Chief Serge Simon of the Mohawk Council of Kanesatake on behalf of the Treaty Alliance Against Tar Sands Expansion
“Energy East really would have allowed us to become more energy independent as a nation to provide Canadian consumers with Canadian energy plus giving us more access to tidewater, so today is a very disappointing day.” _ Calgary Mayor Naheed Nenshi
“The Building Trades regrets the opportunities that have been lost in Atlantic Canada, Quebec, Ontario and on the Prairies. What have been lost are high quality, high paying jobs in all of those regions on the construction of this world-class, nation building project.” Robert Blakely, operating officer of Canada’s Building Trades Unions