Energy East faces new barriers

Ontario, Quebec forge united stand on TransCanada pipeline project, setting criteria on GHG emissions, emergency response plans

Gary Park

For Petroleum News

Ontario and Quebec, the two provinces that make up more than half of Canada’s population, have made common cause by setting conditions they say TransCanada must meet if it hopes to get their support for the C$12 billion Energy East pipeline to the Atlantic coast.

Once seen as the most palatable of the pipeline mega-projects on the table and once viewed as the easy answer to Keystone XL, Energy East is suddenly confronted with the same array of opposition as XL, Northern Gateway and the Trans Mountain expansion.

Topping the list agreed to by Ontario Premier Kathleen Wynne and Quebec Premier Philippe Couillard are four agreements covering carbon pricing and solutions to reduce greenhouse gas emissions, although Ontario has not reached a decision on carbon pricing.

Wynne said the two provinces are talking about “compliance with the highest available technical standards,” having contingency plans and emergency response programs in place to handle pipeline ruptures or spills, and making sure that proponents and governments fulfill their duty to consult with First Nations and aboriginal people.

The provinces also insist that TransCanada must consult with local communities to “ensure the project’s social acceptability.”

Similar to BC demands

Wynne said she is confident that the conditions are reasonable and that Alberta Premier Jim Prentice will see them as “logical.”

She and Couillard agreed that Alberta is under pressure to find ways to move its resources to market, but that has to be weighed against their obligation to “protect people in Ontario and Quebec.”

Prentice, who has solid backing from New Brunswick Premier Brian Gallant for Energy East, said he plans visits to Ontario and Quebec in December to make his case for the economic benefits of a west-to-east pipeline.

There was no mention of TransCanada’s goal of using Energy East’s 1.1 million barrels per day of capacity to wean Ontario and Quebec off using 700,000 bpd of imports to operate their refineries.

As part of their pact, the two provinces are pushing for national targets on GHG emissions to curb the rate of climate change, but those demands are at odds with the mandate of the National Energy Board, which is about to start public hearings on Energy East and pay little regard to the fact that pipelines generate few emissions compared with the use of rail to move crude.

Not responsible for referendum

Canada’s Natural Resources Minister Greg Rickford said after the same luncheon that Ontario and Quebec can raise their issues with TransCanada or during the NEB hearings.

TransCanada said it will study the principles raised by the two provinces and is ready to work with both governments “in the appropriate manner to make the project successful.”

Quebec Environment Minister David Heurtel indicated his province is ready to test that mandate which gives the overriding authority to approve interprovincial pipelines with the Canadian government.

Even Ontario’s Energy Minister Bob Chiarelli said his province does not intend to follow Quebec’s plan to conduct its own environmental assessment of Energy East, noting that would take three to four years to complete, long after the NEB will have made its recommendation to the Canadian government.

He conceded that provinces can participate in NEB hearings only as interveners and may not be able to force an issue of the pipeline is approved by the NEB.

Chiarelli said the best provinces can hope for is that the NEB will endorse their call for conditions as it did in attaching 209 conditions to Northern Gateway.

Injecting a note of reality to the discussion, he said: “When you consider the needs of Ontario and Quebec, we need natural gas, we need oil and it is either going to move by train or by pipe.”

However, the fight in Quebec is decidedly uphill, with the latest poll showing support in that province for Energy East is at only 33 percent, despite TransCanada’s estimate that Ontario and Quebec will collect billions of dollars in tax revenues over the lifetime of the pipe and gain thousands of construction and manufacturing jobs.

Legal fights carry a cost

Suddenly there is reason to question that claim as First Nations, environmental groups and other non-government organizations — many of them financed from United States trusts and other sources — drag proposals for pipelines, mines, hydroelectric dams and tanker terminals before the courts.

The feeling among independent observers is that one or both of the pipeline proposals to get oil sands crude through British Columbia to offshore markets is destined to fail, bogged down in protracted and costly legal fights.

And leading the litigation is British Columbia, whose proved petroleum resources alone are estimated at 6.6 billion barrels of oil equivalent, but it estimated by the Globe and Mail to be entangled in 11 projects valued at C$25 billion which have spawned 38 court cases.

Jock Finlayson, executive vice president of the Business Council of British Columbia, said the province’s reputation as a haven for investment is in danger of crumbling.

Although protests against resource development are not new, they are “getting more complex and costly over time ... so it does hurt us,” he told the newspaper.

The danger is that investors, institutional money managers or corporations may view British Columbia as a place that is “too difficult to do business.”

The Fraser Institute thinks the flashpoint has already been reached as investors show special concern about the impact of unresolved aboriginal land claims.

The conservative-leaning think tank has already pointed to British Columbia’s dubious standing in its latest annual ranking of petroleum jurisdictions.

It lists the province as 19th among 44 jurisdictions of the 156 it measured against a long list of criteria from fiscal terms, to taxation, environmental regulations and disputed land claims.

One of the tipping points for British Columbia rests on a showdown between protesters and Kinder Morgan, the proponent of plans to triple capacity to 890,000 barrels per day of its Trans Mountain pipeline from the oil sands to refineries and tanker ports in Metropolitan Vancouver and Washington state.

Since the Royal Canadian Mounted Police started acting on a British Columbia Supreme Court injunction more than 50 people who have tried to blockade work by Kinder Morgan to drill two 250-meter deep test holes to determine if a pipeline could be run through Burnaby Mountain have been arrested.

Many of those arrested agreed not to return to the site, but the others are facing charges.

A Simon Fraser University professor, Lynne Quarmby, who was among those arrested, has become the face and voice of the protesters in challenging the Canadian government’s 2012 legislation that she insists stripped environmental oversight from the National Energy Board.

She said the NEB regulatory process has been reduced to a “sham. ... There’s no meaningful environmental regulation and there’s no respect for First nations’ peoples. We have a process that does not allow consideration of climate change in the evaluation of a major fossil fuel project at a time when climate change is the biggest problem facing humanity.”

What separates the Trans Mountain project from earlier protest movements is the financial muscle being applied in regulatory and court actions by the cities of Vancouver and Burnaby in their fight against pipelines and increase crude tanker traffic in Port Metro Vancouver.

Gregor Robertson (Vancouver) and Derek Corrigan (Burnaby) were re-elected as mayors of the two cities in mid-November by wide margins, which many credit to their efforts to thwart Kinder Morgan.

On the flip side, others are quietly mounting an argument in favor of the natural resource industry, which accounts for 13 percent of British Columbia’s gross domestic product and contributes billions to the provincial treasury to pay for education, health care and transportation systems.

There is a deep-seated mood of concern over the extraction, processing and export of oil sands bitumen from Alberta. If that takes hold in the LNG sector, which will be heavily dependent on the fracking of shale gas in British Columbia, the province could quickly find itself in a financial bind, having staked a lot of the province’s future on its natural gas industry.

—Gary Park