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Energy East pipeline faces $1 billion obstacle

Calgary-based TransCanada is facing a demand by gas companies to build hundreds of kilometres of new pipeline and another $1 billion in costs for their proposed $12 billion Energy East pipeline project. If TransCanada wins out, 3.6 million people in Ontario and Quebec will be paying higher rates to heat their homes. If consumers win, it would be a serious blow to the pipeline proposal.

Bloomberg reports, “TransCanada Corp. will have to spend $1 billion more than planned on an oil pipeline to Canada’s Atlantic Coast if natural gas customers get their way, a move it says would threaten the viability of the project. TransCanada has delayed seeking regulatory approval of the $12 billion Energy East line as it negotiates with Quebec’s Gaz Metro Inc. and Ontario units of Spectra Energy Corp. and Enbridge Inc., said two people familiar with the talks who asked not to be identified discussing a private matter.”

“Gas distributors claim that converting the mainline in eastern Ontario would lead to fuel shortages and higher prices. While TransCanada intends to build a new 250-kilometer gas line to meet demand, the distributors say it won’t be big enough. They want the company to build a standalone oil conduit or a gas line the same size as the existing one at no cost to customers. Building [a 350-kilometre] oil line from North Bay, Ontario, to Ottawa instead of altering the existing one would cost at least $1 billion more and put Energy East in jeopardy, the company says.”

On this issue, Gaz Metro CEO Sophie Brochu says, “I don’t accept that we ask domestic consumers of natural gas to interfinance the exportations of petroleum.” She also commented, “I refuse [to accept] that the Children’s Hospital of Montreal pays a higher price for its gas because Western Canada needs to export its oil to the international markets.”

On October 15, the Globe and Mail reported, “The consultancy firm Wood Mackenzie told the [Quebec regulatory body] Regie [de l’energie at hearings] last week that TransCanada’s plan [to convert their natural gas pipeline to oil] would create a 20-per-cent shortfall in gas pipeline capacity in eastern Ontario and Quebec markets. …Both Quebec and Ontario governments plan to intervene in the National Energy Board review… [They] are being urged to defend their natural gas customers who say their interests are being sacrificed to western oil producers.”

Today’s news report highlights, “A compromise is unlikely before TransCanada submits its application to the National Energy Board in a few weeks, [TransCanada’s president of natural gas pipelines Karl] Johannson said. …TransCanada planned a mid-year application for Energy East as of May and has revised its schedule multiple times since then.”

The Energy East pipeline project involves a 4,600 kilometre 1.1 million barrels per day pipeline from Hardisty, Alberta to Saint John, New Brunswick, as well as a marine terminal in the St. Lawrence River to service export supertankers. It would convert 3,300 kilometres of natural gas pipeline from Alberta to Quebec for oil, with new pipeline constructed from Quebec to New Brunswick. The project would mean a 39 per cent increase in tar sands production from 2012 levels and would generate at least 32 million tonnes of greenhouse gas emissions from the crude oil production required to fill it.

In just four days time, the Council of Canadians and local partners will launch a tour against the Energy East pipeline in Nova Scotia and New Brunswick. This follows our tour against the project in Ontario this past April 7-28. The Atlantic tour will include public forums in Halifax (October 26), Cornwallis (October 27), Saint John (October 29), Fredericton (November 4) and Edmundston (November 6).

Further reading
Gaz Metro, Enbridge, Union Gas, even provinces may oppose Energy East pipeline (October 14 blog)