Energy East Pipeline

The Energy East pipeline is proposed as a 4,500 kilometre pipeline to carry over one million barrels of crude oil per day from Alberta to the refineries of Eastern Canada and New Brunswick. TransCanada would repurpose an existing 3,000 km natural gas line and build 1,500 kilometres of new pipeline. The project will cost about $15.7 billion. The nine-year construction phase will create 14,000 direct and indirect jobs and about 3,300 permanent direct and indirect jobs.

The project is mostly aimed at replacing offshore oil with domestic product. Canada imports about 750,000 barrels per day. Canada’s primary sources for overseas imports in 2016 were Saudi Arabia (11%), Algeria (11%), Nigeria (10%). In the past couple of years the US has been the big winner, shipping shale oil north.

A brief history:

  • The project was announced in August 2013 and TransCanada began a consultation process.

  • TransCanada made its formal application to the National Energy Board in October 2014.

  • It filed a full application in May of 2016 and the NEB began its public hearings and analysis processes. The timeline would have put the project forward for a Cabinet decision by March, 2018.

  • In August 2016, the hearing in Montreal turned into violent confrontations. Accusations of bias resulted in the resignation of all the three NEB panelists and the process ran off the rails.

The federal government has a massive political problem trying to square its election promises with the competing interests around the pipelines. It had campaigned on:

  • listening and consulting the provinces more extensively

  • establishing stronger relationships with First Nations

  • better environmental safeguards

So politely put, the government found itself with a helluva mess:

  • Ontario and Quebec governments opposed the project, as did a consortium of Mayors around Montreal

  • The usual environmental and indigenous lobbyists vigorously opposed the project

  • Alberta, Saskatchewan and New Brunswick supported the project

  • Oilsands producers and the energy industry strongly supported the project

So setting aside the NEB process – the government worked on its political problems:

  • The NEB invalidated nearly two years of decisions made by the previous panel.

  • In January 2017, Natural Resources Minister Carr announced government would appoint new panelists and expressed concern about the NEB process – too narrow and disliked by many he said.

  • Three new panel members were selected,

    • The panel chair is an ex-deputy minister with a background in health and social services from New Brunswick

    • an environmental lawyer,

    • a consultant who previously worked for Hydro Quebec and SNC Lavalin in construction

    • Separately four NEB members will engage with indigenous people “to understand their concerns and interests”.

    • The NEB recently announced that emissions from production and consumption resulting from oil in the pipeline project would be assessed. Project advocates see this as a form of “shooting the messenger” since production projects already undergo separate environmental reviews. Nor do pipelines themselves control production or consumption.

  • On a broader level, the federal government started to overhaul its environmental regulatory framework – which drew sharp criticism from business as convoluted and unworkable.

  • It also started a sweeping makeover of the NEB’s goals and structure. And the NEB will now consider broader range of factors (including “do people like pipelines?”).

So the politics of Energy East are much messier than Line 3 or even the Trans Mountain Pipeline. The CIBC economics analysts give the project only a 25% change of being built. It pits regions against regions. It is a contest between the ideas of forcing a low carbon future and supporting energy resource development.

The environmental and indigenous lobbyists see their arguments gaining momentum. The wider terms of reference of the review greatly benefit their case against the pipeline. Their arguments will be:

  • The pipeline carbon footprint will facilitate global warming and expansion of the energy intensive “tar-sands”

  • A pipeline spill will be disastrous because of the nature of bitumen and the risk to aquifers and rivers

  • Construction will have a negative impact on the wildlife and natural landscape

  • Indian treaty rights to hunt, fish and trap will be impaired

  • The Federal government’s duty to consult First Nations on the project has not been met

  • First Nations as self-styled ‘guardians of the land’ should have a ‘veto’ according to their interpretation of the UN Declaration on the Rights of Indigenous Peoples

  • The line will not be financially viable given the future decline of oil consumption

  • Quebec has jurisdiction over environmental matters independent of the NEB (and TransCanada recently agreed to submit the project to Quebec’s regulators.)

The proponents of the pipeline are quick to point out the wishful thinking and irony that can be found in anti-oil logic. There is a disconnect between Canadian values and the importing oil from countries like Saudi Arabia, Nigeria and Algeria. There is the irony that environmental activists lobby against tankers on the West Coast – yet tankers are preferred on the East Coast and the St Lawrence Seaway. Pipeline proponents case revolves around:

  • Using domestic oil creates jobs and wealth for Canadians
  • Jobs and economic benefits occur all along the line and indigenous companies will benefit
  • Federal and provincial taxes will be paid
  • Pipelines themselves don’t create much in the way of GHGs
  • Pipelines are the safest and most efficient ways to transport oil,
  • Environmental impacts related to construction will be mitigated
  • Oil producers have signed commitments to use the line
  • 70% of the line already exists and is safely operated.

This donnybrook is threatening to spill out into the parking lot.

  • Saskatchewan Premier Brad Wall suggested that if Quebec was not prepared to develop its own resources and support the line then maybe equalization payments to Quebec (roughly $5 billion annually) from the resource rich west should stop. A Quebec cabinet Minister invited Wall to “mind his own business”.
  • The Provincial Premiers “Canadian Energy Strategy” initiative has failed to find a consensus on pipelines – now it focuses on minor energy issues that seem less divisive.
  • First Nations are eager to take pipelines to court. It seems inevitable they will sue the federal government if the pipeline is approved.

Looking ahead, Severely Normal Albertans should watch for the answers to three important questions:

  • Is TransCanada up for the costly uphill battle with moving goal posts that it faces?
  • Can the “new” NEB manage its expanded review process in a way that seems fair to all parties? There is nothing convincing in the resumes of the panel members that suggests they can manage the regulatory and political challenges ahead.
  • Is government orchestrating a “grand bargain” that kills Energy East?

      • Environmentalists – you get: No Gateway pipeline, No Energy East and a signal that this ‘phases out’ oilsands development
      • First Nations – you get: a greater say in resource development in your ‘territories’ and more clout to extract benefits from energy companies
      • Energy sector – you get: Keystone, Line 3 and (maybe) Trans Mountain – enough to sustain the oilsands
      • Pipelines – you get: to continue make money in the long run within a new tougher regulatory regime
      • Alberta and Saskatchewan – you get: benefits from moving some more bitumen to market
      • Quebec and Ontario – you get: to avoid the unpopular oil source from oilsands and the risks of spills
      • New Brunswick – you get: well…. nothing really.

This debate about forcing a low-carbon future or developing natural resources will exacerbate division and regionalism in Canada beyond the pipeline battles.