Canada’s Pipeline Industry Takes Another Hit
Another oil pipeline in Canada bites the dust. TransCanada announced last week that it would scrap its plans to build a 2,800-mile major pipeline that would traverse nearly the entire country, closing off a crucial potential export route for Canada’s oil sands.
The $15 billion Energy East pipeline would have carried 1.1 million barrels of oil per day from Alberta to Canada’s eastern coast for refining and export. It faced significant opposition from communities affected along the pipeline’s route, but TransCanada had been confident that it could overcome those hurdles.
More recently, however, top Canadian regulators decided that the pipeline would need to face an assessment of the project’s impact on greenhouse gas emissions, a review that TransCanada fiercely opposed. Ultimately, it appears that the Canadian pipeline company shelved the project in light of the heightened environmental scrutiny.
Canada’s pipeline industry cried foul, blaming the government for regulatory uncertainty. “The common thread here is that Canada generally has displayed an unwelcoming policy environment and an uncertain approval process,” Explorers and Producers Association of Canada president Gary Leach, told the Financial Post, citing other billion-dollar projects that have been cancelled in the past year. “For Canada, I think this is a blow. We are deluding ourselves if we think Canada is a place with a stable, predictable investment climate.”
The lack of pipeline capacity is why so much onus has been put on Keystone XL, a pipeline that has been in limbo for the better part of a decade.
But the problem for TransCanada is that Energy East was always going to be a heavier lift than other projects. While some blame regulators for the death of Energy East, others see changing market conditions behind TransCanada’s decision to pull the plug. The project ran into trouble when oil prices cratered in 2014. Also, even with Keystone XL blocked, there are other projects that are more attractive than Energy East.
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