TransCanada Corp. is seeking to halt a federal review of its $15.7-billion Energy East pipeline, raising the possibility the project could get scrapped in a move that would spare Prime Minister Justin Trudeau from having to make a politically charged decision on the project’s fate.
TransCanada late on Thursday asked the National Energy Board for a 30-day suspension to study possible impacts of the regulator’s move to examine whether the project and a related pipeline fit with Canada’s commitments to reduce greenhouse gas emissions (GHGs).
Under a toughened review unveiled last month, the NEB said it would assess how construction of the contentious pipeline would affect GHGs from the production of the crude flowing through it.
Environmental groups had long pushed for such a test, arguing that major pipelines such as Energy East would lead to increased investment in Alberta’s carbon-intensive oil sands and make it harder for Canada to meet its climate-change goals.
The broadened scope proposed by the regulator would also look at how government climate-change policies impacted the commercial viability of the megaproject.
In a statement, TransCanada said it needs time to conduct a “careful review” of how those changes will affect the cost, schedule and viability of Energy East and a related natural gas pipeline in Southern Ontario. It is unclear how much the company had spent on the project to date.
“Should TransCanada decide not to proceed with the projects after a thorough review of the impact of the NEB’s amendments, the carrying value of its investment in the projects as well as its ability to recover development costs incurred to date would be negatively impacted,” the company said.
The move to suspend the regulatory review could signal the death knell for a project that has drawn sharp criticism from environmentalists and stoked regional tensions along the cross-Canada route. The review has already been suspended once before over charges of political interference.
Energy East, as proposed, would ship up to 1.1 million barrels of oil a day from Alberta to the Atlantic Coast, with much of the crude bound for export markets. The project was initially billed as key for the oil-rich province and its downtrodden energy industry, which is struggling amid a bruising slump that is approaching its fourth year.
However, the pipeline is seen as less critical after U.S. President Donald Trump revived hopes for the company’s much-delayed Keystone XL project, a competing proposal that had been rejected by his predecessor on climate grounds. That project would deliver up to 830,000 barrels a day of Alberta crude to refineries on the U.S. Gulf Coast.
This week, TransCanada extended a deadline to sign up new customers for the $8-billion (U.S.) project, citing the impacts of Hurricane Harvey on Texas refineries.
But oil’s collapse from more than $100 a barrel in mid-2014 to about half that level has also raised questions about its viability, and how much new pipeline capacity the energy industry needs.
TransCanada and the energy industry as a whole had staunchly opposed broadening the scope of federal reviews for such infrastructure, arguing the NEB was not the appropriate forum to address broad questions about GHG emissions and climate-change policy. On Thursday, the Alberta government echoed that view and reiterated support for the project.
“In its decision to pause on the regulatory process, TransCanada echoed concerns we’ve raised previously about the NEB’s recent change to the scope of assessment for Energy East,” the province’s Energy Minister, Margaret McCuaig-Boyd, said in a statement. “We believe it would be a historic overreach and has potential to impact the future of energy development across Canada.”
In Ottawa, the Liberal government will face heated attacks over the potential cancellation from Conservative Party MPs when Parliament resumes later this month. The Conservatives complain the Liberals have not done enough to get pipelines built, despite the approval of two major projects late last year: Line 3 and Trans Mountain. Natural Resources Minister Jim Carr defended both at a caucus meeting in Kelowna, B.C., this week.
Whether TransCanada proceeds with the Energy East review is “ultimately a private-sector decision,” a spokesman for Mr. Carr said on Thursday night.
“Our government recognizes the importance of the competitiveness of the natural resources sector,” Mr. Carr’s press secretary, Alexandre Deslongchamps, said in an e-mailed statement. “A fundamental responsibility of our government is to get our natural resources to market sustainably because Canada’s energy is, and must remain, a good source of strong, middle-class jobs for Canadians.”
Environmentalists on Thursday claimed victory and said TransCanada’s request to shows clearly that the project is incompatible with Canada’s emissions-reduction goals, as well as the Paris climate accord.
But market forces are also weighing on Energy East, said Adam Scott, senior campaign adviser with anti-oil sands group . Already, investment in new projects in northern Alberta has slowed considerably as multinational companies look for less capital-intensive and less carbon-intensive development elsewhere.
New growth in the oil sands has “hit a brick wall, with no major projects expected online after 2020,” he said.
With a report from Carrie Tait in Calgary