TransCanada is shrugging off the latest challenge to its plans for a mega-scale pipeline to move oil sands crude out of Alberta, certain it will proceed with a regulatory application to build its C$12 billion Energy East system to deliver 1.1 million barrels a day to Eastern and Atlantic Canada and possibly Europe.
But the usual array of First Nations, environmentalists and activist organizations may be on the verge of finding allies from an unlikely source - oil producers in the United States.
The latest U.S. government data shows that ballooning production from the Bakken, Eagle Ford and Permian Basin plays underpinned 387,000 barrels per day of U.S. crude exports to Canada in June, raising the count on a sustained basis to 250,000 bpd.
The delivery points are in Ontario, Quebec and Atlantic Canada, all markets that are vital to the success of Energy East.
Line 9B challenge
A further challenge to TransCanada comes from rival Enbridge, which hopes to complete the reversal of its Line 9B in September, opening the way for shipments of 300,000 bpd of crude from the oil sands and the Bakken to the Quebec refineries of Suncor Energy and Valero.
Amrita Sen, chief oil analyst at the London-based consulting firm of Energy Aspects, said Line 9B and the U.S. sales come close to meeting the needs of Eastern Canadian refineries, including Irving Oil’s 300,000 bpd facility at Saint John, New Brunswick.
He suggested that means Eastern Canada will not require additional supplies from Western Canada, although Energy East backers argue that over the long term the project will be a more secure source of crude than what can be produced in the U.S., as well as the current imports to Quebec from volatile global supply regions.
Davis Sheremata, a spokesman for TransCanada refused to back down from his company’s insistence that the planned role for Energy East is holding firm.
He told the Globe and Mail the objective is to offer domestically priced crude from Western Canada to meet Eastern Canada’s refinery feedstock consumption of 640,000 bpd, of which 86 percent comes from Saudi Arabia, Nigeria, Venezuela and Algeria.
Sheremata also emphasized that Western Canadian shippers have committed to enter long-term contracts for 90 percent of Energy East’s capacity, while also displacing about 100,000 bpd that is shipped by rail - mostly from the Bakken - to Quebec and New Brunswick.
Jackie Forrest, an energy economist with ARC Financial, said that if Energy East meets its goal of shipping crude to Eastern and Atlantic Canada in 2017 or 2018, its customers will be able to enjoy the benefits of accessing crude that will be cheaper than the volumes delivered by rail or tanker from the Gulf Coast.
Organized opposition
The project is also under fire from the Council of Canadians, a social action organization, which has published a report claiming the 2,700-mile pipeline poses a threat to 90 watersheds and 951 waterways.
Contributing author Andrea Harden-Donahue said the council believes the proposal “should be rejected.”
“From what we’ve been hearing, water ranks very high, if not at the top of the list of concerns regarding the risks of this pipeline,” she said.
The council opposes Energy East and all other pipelines that would deliver crude bitumen to export markets, including Enbridge’s Northern Gateway project and Line 9 reversal, Kinder Morgan’s Trans Mountain expansion and TransCanada’s Keystone XL.
Shawn Howard, another TransCanada spokesman, said Energy East is being designed to meet the highest operational standards, dismissing the council report as a repackaging of the “same claims that this group has been making” since Energy East was announced in August 2013.
Energy East’s project director Bob Eadie said TransCanada is “definitely on track” to submit its application to the National Energy Board, NEB, this quarter.
He said the company has learned a “lot about local concerns and we have taken steps already to revise the pipeline routing with respect to those concerns. We are revisiting a lot of the locations.”
But environmental groups estimate more than a dozen resolutions opposing Energy East have been filed with the NEB by Quebec communities, which could result in a wave of legal challenges.
Harden-Donahue said the “legal battles are going to play out in the next six months to a year.”
