TransCanada pulls plug on Energy East pipeline

After pulling the plug on funding for construction, it's the end of the line for a controversial oil pipeline planned for eastern Canadian markets.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |  Oct. 5, 2017 at 8:58 AM
share with facebook
share with twitter

Oct. 5 (UPI) -- Canadian pipeline company TransCanada said Thursday it was canceling plans for its Energy East pipeline overhaul after careful review.

TransCanada submitted an application for its Energy East project three years ago, proposing the construction of a new 930-mile segment and converting 1,800 miles of gas line for oil service. It would've carried 1.1 million barrels of oil per day from Alberta and Saskatchewan to eastern Canadian refineries if built.

The company said in a statement that "after a careful review of change circumstances," it would tell Canadian energy regulators and those in Quebec it was no longer pursuing the project.

"We appreciate and are thankful for the support of labor, business and manufacturing organizations, industry, our customers, Irving Oil, various governments and the approximately 200 municipalities who passed resolutions in favor of the projects," it stated. "Most of all, we thank Canadians across the country who contributed toward the development of these initiatives."

TransCanada in mid-September called on the National Energy Board to suspend its review of the project after the regulator published a lengthy list of issues ranging from greenhouse gas emissions to the risk of an oil spill that could determine whether the project was in the public interest. When the NEB published its findings in late August, the Canadian Energy Pipeline Association said the federal regulator was not the appropriate venue for policy issues like the climate.

Chris Bloomber, the CEO of the pipeline association, said the NEB review targeted the best way to get liquid fuels to the market.

"This is evidence of how a lack of clarity and an unclear decision-making process regarding pipeline projects in Canada are challenging the energy sector's ability to be competitive in the world market," he said in a statement to UPI.

The fate of the project was in doubt when the company said it halted some of the funding allocations for construction in early September.

"We will continue to focus on our $24 billion [$19.2 billion USD] near-term capital program which is expected to generate growth in earnings and cash flow to support an expected annual dividend growth rate at the upper end of an eight to 10 percent range through 2020," the company said.

It's the latest setback for the company behind the Keystone XL pipeline through the United States. Malaysia energy company Petronas in July said that, as the head of a partnership, it was no longer pursuing a liquefied natural gas project at Port Edward in British Columbia because of an "extremely challenging environment" brought on by a weak market. TransCanada was a project partner.

TransCanada said the Energy East would've made eastern Canadian refineries more competitive because they'd be sourced by domestic crude and bring in more than $7 billion in tax revenues during its first 20 years of operation. The pipeline could offset regional imports of 700,000 barrels of oil per day, though critics countered it would serve primarily as an export project.

The company's request in September to delay the environment review of Energy East came one day after it extended a solicitation period to secure interest for crude oil deliveries through its Keystone and Keystone XL oil pipeline systems to the U.S. Gulf Coast in order to compensate for the impacts from Hurricane Harvey, which sidelined refinery activity in the region when it made landfall in late August.

Sandy Fielden, the director of research, commodities and energy at Morningstar, told UPI it may be a better strategic move for TransCanada to focus on U.S. efforts given President Donald Trump's support for the oil industry.

"In the circumstance, it makes more sense for them to concentrate on Keystone XL as the next big pipeline expansion into the U.S. because they have a better reception from the Trump administration and the investment to complete is much lower," he said. "So I see this as a rational decision to trim their bets from two horses to one."

Nearly all of Canadian oil exports go to the United States, though the government aims to tap into foreign markets with exports from western Canadian ports. The NEB in November approved Kinder Morgan's plans to triple the capacity of its westbound Trans Mountain network to around 890,000 barrels of oil per day.

Related UPI Stories
Trending Stories