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Ontario says risks outweigh benefits At issue is Energy East pipeline, which would move 1.1 million bpd of crude from Western Canada to Ontario, Quebec, New Brunswick GARY PARK For Petroleum News
The prospect of pumping C$15 billion to C$19 billion into the Ontario economy over the first 20 years of TransCanada’s Energy East project has failed to sway the Ontario Energy Board.
The provincial government’s energy regulator argued the environmental risks of the C$12 billion pipeline, designed to deliver 1.1 million barrels per day of crude from Western Canada to refineries in Ontario, Quebec and New Brunswick and ship some beyond North America, would outweigh the potential benefits and could drive up natural gas prices.
“What we have found is there is an imbalance between the economic and environmental risks of the project and the expected benefits for Ontarians,” said OEB Vice President Peter Fraser.
The OEB estimated a major spill could easily cost C$1 billion to clean up, but not before it had contaminated drinking water.
Economic benefits ‘modest’ It also concluded the economic benefits, including as many as 114,000 direct and indirect jobs, were only “modest” in comparison with the downside.
“These kinds of analyses tend to focus on just the benefits of all the spending and not on the other kinds of costs associated with the project in Ontario ... for example costs related to additional emergency preparedness and other infrastructure upgrades that might be needed,” Fraser said.
The report will form the basis of Ontario’s position when the National Energy Board holds hearings next year on Energy East.
Ontario Energy Minister Bob Chiarelli gave an assurance that his government plans to be an “active intervener” in the approval process and “our participation will reflect the concerns of the Ontario public to the federal regulator.”
In hardening its line against Energy East, Ontario joins the Quebec government - which is estimated to collect C$5.8 billion from development, construction and operation of the pipeline over the initial 20 years - in posing formidable opposition to the 2,800 mile line.
Fraser said the main concern expressed during 15 months of consultations with communities along the pipeline route was “the risk of an oil spill as the pipeline runs across many waterways.”
“Our advice is that the existing (TransCanada natural gas pipeline in Ontario) should be rerouted” along a Canadian Pacific Railway line to avoid environmentally sensitive areas.
Natural gas prices a concern The OEB report, despite emphatic promises by TransCanada, said Energy East could also drive up natural gas prices once an existing, underutilized line in the network is converted to carry crude.
Fraser said the OEB report, which was prepared by a University of Toronto think tank at a cost C$2.4 million, estimated that natural gas prices in Eastern Ontario would climb 11.9 percent higher than if Energy East did not proceed.
It is demanding that TransCanada update its demand, supply and price forecasts to reflect current and projected gas market conditions to ensure that “Ontario natural gas consumers do not subsidize Energy East.”
Steve Baker, president of Union Gas, one of Ontario’s largest utilities, said his company wanted assurances from TransCanada that the province’s natural gas customers “would not bear the costs and risks related to Energy East.”
Right of way A TransCanada spokesman said the proposed right of way minimizes new land disturbance by taking advantage of the established gas line right of way.
To bolster its argument, the OEB also said First Nations and Metis people do not feel they have been adequately consulted by TransCanada.
Trevor McLeod, director of natural resources policy at the government and industry financed Canada West Foundation said Ontario’s decision to use its energy regulator “to weigh in on a project squarely under federal jurisdiction changes the game for companies looking to build pipelines.”
“It is unorthodox and a little bit bizarre frankly,” he said. “This is a big play for the Ontario government and it’s significant from a political context as the province has no jurisdiction (over a pipeline that crosses provincial borders).”
Bob Schulz, a business professor at the University of Calgary, said TransCanada has made its case that every part of Canada would receive some benefits from Energy East, “but the people in Ontario are only apparently worried about themselves.”
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