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Vol 21, No. 19 Week of May 08, 2016
Providing coverage of Alaska and northern Canada's oil and gas industry

Giving ground on pipelines

Signals point to tilting of balance; Trudeau reported to support bitumen export

GARY PARK

For Petroleum News

The GPDC - for those not in touch with such flashy terms, that’s the Great Pipeline Debate of Canada - has experienced a sudden gusher of developments that raise hopes for at least one of the pipelines aimed at shipping oil sands bitumen to offshore markets.

Emerging from the swirl of events, the most startling has been an indication from the Canadian government that the approval process for proposed pipelines could be shortened.

That shift has been tied to reports that Prime Minister Justin Trudeau has instructed senior cabinet ministers to figure out ways to make TransCanada’s Energy East pipeline from Alberta to Quebec and the Atlantic Coast and Kinder Morgan’s Trans Mountain expansion from Alberta to the Pacific Coast a reality while reviving consideration of Enbridge’s stonewalled Northern Gateway pipeline to a northern British Columbia tanker terminal.

Trudeau is said to have convinced Finance Minister Bill Morneau and other influential voices around the cabinet table that pipelines are essential if the government is to achieve its ambitious economic growth targets.

However, during a fleeting visit to Saskatchewan, Trudeau also reiterated his mantra that cooperation with First Nations and demonstrating environmental responsibility are still essential to getting pipelines built.

Faced with renewed pressure to get Canada’s crude and LNG to new markets, Natural Resources Minister Jim Carr said hearings and decision-making by the National Energy Board and cabinet could take less time than previously billed.

Juggling act

But the juggling act for Trudeau is to develop a strategy that achieves his combined goal of a full environmental assessment and a lift for the national economy, especially as those objectives relate to the exploitation of 170 billion barrels of resources in the oil sands.

If there has been a shift in Trudeau thinking, the credit is being given to Alberta Premier Rachel Notley who received a standing ovation are making her case to the federal cabinet during a three-day meeting at a resort in the Canadian Rockies.

Carr described Notley as “very effective” at making her case. “She has an argument and a story to tell and ministers were very keen to hear it,” he said.

Carr said that apart from its understanding of the economic growth and environmental issues, his government is coming to understand that a shift to green infrastructure and technology “will not happen overnight.”

That thinking was bolstered during a meeting by Carr and Environment Minister Catherine McKenna with the Petroleum Services Association of Canada.

Campaign for approval

As part of the campaign to prod Trudeau and his cabinet to approve two pipelines before the end of 2016, former Prime Minister Brian Mulroney warned in mid-April that some pipeline projects might fall apart because of regulatory delays.

He urged Trudeau to act as persuader-in-chief for megaproject development and ease pipeline concerns raised by aboriginal groups, environmentalists and provincial leaders.

Following her cabinet presentation, Notley told the Globe and Mail that Canada is drawing closer to a pipeline approval because of Alberta’s new carbon tax.

She said Alberta’s plan to phase in a tax of C$30 per metric ton puts the province “at the forefront in the fight against climate change” and provides leverage for the Trudeau government to defend approvals.

Edmonton Mayor Don Iveson said the national debate has swung in favor of building new pipelines and he is looking for a clear answer this year on which projects will go ahead.

“The federal government has created enough due process around additional environmental review and consultation that they will be well situated to give cabinet approval for these projects,” he said.

Meeting with environmentalists

The lobbying has also involved meeting with environmentalists with Suncor Energy, Cenovus Energy, Canadian Natural Resources and Shell - the four companies that publicly endorsed Notley’s climate change strategy.

Pembina Institute, a Calgary-based think-tank, is now more focused on working with governments to fulfill the promises of climate action by Trudeau and Notley than in campaigning against projects, said Executive Director Ed Whittingham.

But he voiced concern that Alberta’s plan still allows growth in greenhouse gas emissions for the next 15 years at the same time Canada has pledged to cut GHGs by 30 percent from 2005 levels.

Not all environmentalists are falling into line, with Toronto-based Environmental Defense arguing the industry cannot continue to increase its emissions if Canada is to meet its international obligations.



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Energy East in tit-for-tat trade

In a surprise capitulation, TransCanada will submit its C$15.7 billion Energy East pipeline to an environmental assessment in Quebec, in return for which the provincial government suspended its court application for an injunction against the project.

The company said it will submit a detailed environmental impact study in addition to a comprehensive one that has already been filed with Canada’s National Energy Board.

A TransCanada spokesman noted that the company had initially been “quite perplexed” by Quebec’s request in March to submit to provincial environmental law because Energy East is subject only to federal regulations under the NEB.

But he said the latest development “is a good news story, which is that (TransCanada and Quebec) came to an agreement.”

Quebec Energy Minister Pierre Arcand said his government wanted to make sure that “this project will be submitted to what we call public hearings on the environment and natural resources.”

He said “cool heads have to prevail” before Quebec takes a stand on Energy East. “We’ll have to look at facts,” he said.

Greenpeace campaigner Keith Stewart said the pipeline, designed to carry 1.1 million barrels per day of Western Canadian crude to refineries in Eastern Canada and a tanker export terminal, will now undergo a much more detailed review process.

“The odds of this project getting built went down a couple of notches and the scrutiny that it’s going to be subject to went up several notches,” he said.

Meanwhile, Kinder Morgan has encountered an obstacle in British Columbia that scuttles hopes of a National Energy Board recommendation by early June on its application to triple capacity on the Trans Mountain pipeline to 890,000 bpd.

B.C’s Environmental Assessment Office told Ian Anderson, president of Kinder Morgan Canada, that the project will have to pass provincial scrutiny because of a B.C. Supreme Court ruling that the province cannot assign environmental decisions solely to the NEB.

A Kinder Morgan spokeswoman said the decision “was expected,” adding the company is now waiting for further direction from the EAO.

It is not clear whether the EAO intervention will affect Kinder Morgan’s hopes of an in-service date of late 2019.

—GARY PARK