Energy East at risk as Canada approves two others

Bloomberg

The Canadian government’s approval of two major oil export pipelines may mean the death knell for a third. For more than two years, TransCanada Corp.’s proposed 1.1 million barrel-a-day Energy East pipeline, designed to run from Alberta to New Brunswick, has been mired in regulatory hearings and opposition from environmentalists. Now, the hurdles it faces may be even higher after Kinder Morgan Inc.’s Trans Mountain expansion and Enbridge Inc.’s Line 3 replacement were both cleared for operation by the Canadian government on Tuesday.
When combined with US President-elect Donald Trump’s promise to quickly approve the Keystone XL pipeline, Trans Mountain and Line 3 will add enough capacity to handle Canada’s oil production for 20 years, according to National Energy Board projections. That makes Energy East redundant, according to Steve Belisle, a fund manager at Manulife Asset Management in Montreal.
“It’s becoming an even more remote possibility that Energy East goes ahead,” Belisle said in a telephone interview. “Why go through the political hassles at this stage. I don’t think that TransCanada has a lot of appetite for this.” Extending Trans Mountain to the British Columbia coastline and expanding Line 3, which carries crude to the US Midwest, will add 960,000 barrels in capacity a day. TransCanada’s Keystone XL pipeline to the Gulf Coast is designed to carry 830,000 barrels a day.

EXPAND ACCESS
TransCanada applied to build Energy East two years ago as Canadian oil producers looked to expand access to markets beyond the US, where nearly all Canada’s oil is sold and where a surge of shale oil production depressed prices. The aim was to open access for Western Canadian oil producers to the Atlantic Ocean, allowing Alberta’s crude to be sold in Europe. Slated to cost C$15.7 billion ($11.9 billion), the line would have been the largest in North America carrying oil. It faced an uncertain future after National Energy Board reviewers assessing the project stepped down in September amid allegations that the regulatory process was tarnished, and after violent protests forced a halt to hearings.
Still, TransCanada remains committed to the project, Tim Duboyce, a company spokesman, said in an e-mail Wednesday. “Energy East remains of critical strategic importance because it will end the need for refineries in Quebec and New Brunswick to import hundreds of thousands of barrels of foreign oil every day, while improving overseas market access for Canadian oil,” Duboyce wrote the day after Canadian Prime Minister Justin Trudeau announced the Trans Mountain and Line 3 approvals.

ADDED CAPACITY
Enbridge’s C$7.5 billion Line 3 replacement is scheduled to go into operation in 2019, allowing the company to restore the pipeline’s original 760,000 barrel-a-day capacity after it was cut by almost half in 2010. Kinder Morgan filed to expand Trans Mountain three years ago, seeking to almost triple its capacity to 890,000 barrels, and allowing increased exports to Asia. While Energy East could still be approved after Tuesday’s decision, it “may take a bit more time” and require the holding of provincial elections in Quebec, said Tim Pickering, a founder at Calgary-based Auspice Capital Advisors. Pickering said he believes the pipeline should be approved “in the interest of Canada’s energy security. We are selling oil at such a great discount because we have one buyer for our oil,” he said.
In December last year, TransCanada increased the projected cost after
addressing the concerns of communities and making almost 700 route changes. The company also eliminated a proposed marine export
terminal in Quebec amid concern
the facility would harm endangered beluga whales.
Opposition remains nonetheless. In September, Quebec’s Premier Philippe Couillard said in an interview that Energy East poses significant risk to the provinces freshwater resources.