Screws tighten on Energy East project
TransCanada seems to lose more ground than it gains in efforts to gain Quebec government support for the Energy East pipeline that would carry crude oil from Western Canada as well as the Bakken to refining and export markets in Eastern Canada.
Just after the company abandoned plans for a marine oil terminal in the Quebec town of Cacouna on the St. Lawrence River and explore an alternative site as Petroleum News Bakken reported April 19, Quebec Environment Minister Pierre Arcand was demanding proof of greater economic benefits from the C$12 billion project for his province.
Arcand has told reporters in New York and Quebec that TransCanada has yet to answer questions on whether it will open an office in Montreal or provide greater detail on the economic spinoffs from the proposed 1.1 million barrel per day crude oil pipeline.
“The problem with Energy East as we speak is that we don’t have a final project,” Arcand told Bloomberg. “We’re not sure if there’s going to be a port or not.”
At the same time, he conceded that fossil fuels will be needed for the next 30 to 40 years, “if not more,” and the prospect of more crude being moved by rail if pipeline applications are turned down will force Quebecers to debate “which one is the lesser evil.”
A TransCanada spokesman said the company was committed to ensuring Energy East would yield “significant economic benefits” for Quebec industry, labor and governments at all levels.
That includes C$5 billion of capital spending in Quebec and C$2 billion in property taxes to Quebec municipalities over 20 years.
A Conference Board of Canada report commissioned by TransCanada estimated the construction and operation of Energy East would add C$5.83 billion to the province’s gross domestic product over 25 years.
Currently, Quebec imports all of the oil it needs for the province’s Suncor Energy and Valero refineries, with those imports from the Middle East and Africa costing C$15 billion a year.
TransCanada Chief Executive Officer Russ Girling said in early April that the “pipeline itself” was a far more important piece for Energy East than the loss of the Cacouna site.
He said the company was engaged in a series of tradeoffs covering economic benefits and environmental protection.
Arcand said the decision to scuttle the Cacouna terminal will probably delay the start of regulatory hearings until the second half of 2016, making a recommendation from the National Energy Board unlikely before 2017.
If final approvals are granted, most observers believe a startup for Energy East is not possible before 2020.
The Quebec and Ontario governments are developing a joint position on the pipeline to strengthen their case to the NEB, Arcand said, adding that the two provinces share common concerns and if they can arrive at the same conclusion, that will represent a “powerful” intervention at the hearings.
The climate change factor Ontario has opened the door to such a pact by announcing April 16 it will team up with Quebec (and California) in a cap-and-trade emissions reduction program, which environmental and energy lobbyists are eager to turn into a new energy strategy for Canada.
“It makes sense (for Canada’s 10 provinces) to move together on this issue for a whole slew of reasons, including competition and the economic health of Canada,” said Sidney Ribaux, executive director of Equiterre, an environmental group that wields growing influence in Quebec.
Because there has been little progress in trying to move the Canadian government of Prime Minister Stephen Harper on climate change action, a number of the most powerful industry associations — including the Canadian Association of Petroleum Producers, the Canadian Energy Pipeline Association, the Canadian Electricity Association and Canadian Manufacturers & Exporters — have decided they must play a role or risk arbitrary measures.
Energy East has quickly become a major sticking point in the debate over a Canadian energy strategy, with most environmental groups opposing the pipeline, saying it will encourage growth of the Alberta oil sands at a time when they are calling for a halt to development of the resource.
The buildup to the United Nations climate change summit in Paris this December is increasingly focused on across-the-board reduction targets for greenhouse gas emissions rather than intensity targets, which are tied to energy outputs or inputs, undercutting a position the oil sands sector has long advocated.
CAPP, which emphasizes the use of technology to reduce emissions, has urged the Alberta government to continue supporting intensity targets, whereas absolute reductions would pose the greatest threat of all to pipelines such as Energy East, Keystone XL, the Northern Gateway from Bruderheim near Edmonton to coastal access at Kitimat in western British Columbia and the Trans Mountain expansion from Edmonton to Vancouver.
What the energy lobbyists are seeking is a strategy that includes broad statements or principles and actions that Canada’s 10 provinces could support voluntarily.
A spokesman for CAPP said the provinces, as owners of natural resources, have a vital role to play in how goals and objectives are “manifest in their particular resource development scenarios.”
Canada’s Finance Minister Joe Oliver said his government does not endorse the cap-and-trade system being touted by Ontario, Quebec or California, viewing that as “negative for consumers and taxpayers.”
Harper has promised his government will release its GHG emission targets in advance of Group of 7 meetings in June.
—Gary Park
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