Demise of Energy East exposes deep political divide between energy, environment

OTTAWA — TransCanada’s decision to cancel the Energy East pipeline project exposed deep divisions across the political landscape Thursday, highlighting the ever-present clash between energy development and environmental protection.

The premiers of Alberta and New Brunswick and Calgary Mayor Naheed Nenshi all expressed disappointment over the decision, while the Opposition Conservatives blasted Prime Minister Justin Trudeau’s Liberal government for “disastrous” energy policies that they blame for lost jobs and investment.

Quebec politicians, along with Indigenous and environmental groups, welcomed the project’s demise, branding it as a harbinger of the inevitable death of fossil fuels and a reminder of the need for further green energy development.

The political implications for the federal Liberals, who are trying to strike a difficult balance between energy and the environment, were mixed. Where charges of environmental negligence followed the approvals of the Trans Mountain and Line 3 projects, this time the government was savaged for being soft on jobs and economic growth.

The main political fight is over whether the pipeline was cancelled mainly because of changes that meant emissions caused from extracting oil before it goes into the pipeline (upstream) as well as burning it for fuel after it exits the pipeline (downstream), will now be considered as part of the decision about whether a project is in the national interest.

Previously the NEB process only included looking at emissions caused from actually building and operating a pipeline, but has added upstream and downstream emissions at the behest of the government, which promised to make the NEB review process more vigorous and transparent.

Natural Resources Minister Jim Carr contended today that both the TransMountain pipeline expansion between Alberta and B.C. and the overhaul of Enbridge’s Line 3 between Alberta and Wisconsin, were approved with upstream emissions as part of the package.

“Our government would have used the same process to evaluate the Energy East pipeline project,” he said. “Nothing has changed in the government’s decision-making process.”

Energy East had already been delayed a year after the first review process was dumped in September 2016 following allegations the original review panel had a conflict of interest with TransCanada. The second review, announced by the NEB in August, was to include both upstream and downstream emissions.

Shortly after that, TransCanada announced it was putting the application on hold pending further analysis of the NEB’s new review requirements. On Thursday, it said it would shelve the project.

Deputy Tory leader Lisa Raitt blamed the decision on “the disastrous energy policies promoted by Justin Trudeau and his failure to champion the Canadian energy sector.”

New Liberal regulations on Canadian energy projects have forced companies to adhere to standards not enforced in other countries, giving exporters in Venezuela, Saudi Arabia and Algeria a competitive advantage, she said.

“Justin Trudeau claims to support the middle class, but the truth is that the very people that the prime minister is claiming to help are the people most hurt by his misguided policies.”

Trudeau however said in question period Thursday this was a business decision because “the market conditions have changed fundamentally” since the pipeline was proposed, including a steep drop in oil prices.

Jeff Rubin, former chief economist at CIBC World Markets and a senior fellow at the Centre for International Governance Innovation, agreed, saying the economics are just not there for this pipeline with oil at less than half the price it was three years ago.

“There is neither the supply nor the demand for the product it would deliver,” he said.

He said many of the new pipelines being proposed were to respond to an expected doubling of production in the oilsands, which is not happening because of the lower price of oil and is not expected to happen as the world begins to shift away from oil towards renewable resources.

Benjamin Dachis, associate director of research at the C.D. Howe Institute, said the government’s policies didn’t help but were far from the only or even main reason for Energy East’s demise.

“TransCanada clearly made a decision on the market fundamentals,” said Dachis.

Dachis also pointed to a significant decision by the energy board in September that drastically reduces the cost of shipping natural gas through that pipeline.

TransCanada’s proposal was to convert the existing Energy East pipeline to oil from natural gas because the higher cost of shipping the gas through the pipeline meant it was under capacity. But the NEB’s decision to cut that cost changes that entirely, which means keeping the pipeline as a natural gas pipeline is now far more lucrative, said Dachis.

Trans Mountain and Line 3 together represent more than $11.6 billion in investment that will support “thousands” of jobs, Carr said. And he rejected the argument that the Liberals’ changes to the regulatory framework played a role.

Carr shrugged off Raitt’s criticism, saying there are signs of growth in the energy sector despite “market challenges” posed by sagging oil prices.

“Canada is open for business. We offer a stable and predictable investment climate, world-class energy reserves, proximity to global markets, a skilled workforce and enabling services and technology.”

Mike Blanchfield and Mia Rabson, The Canadian Press