TransCanada’s decision to forge ahead with its Energy East pipeline does not signal the company is losing faith that its Keystone XL line to the United States will be approved, says a Calgary analyst.
In recent days, U.S. President Barack Obama has repeated his concerns that the environmental impact of Keystone would outweigh its job-creation benefits, interpreted by some as a sign he may not approve it.
But University of Calgary business professor Bob Schultz said the west-to-east pipeline project is not a backup plan for TransCanada in the event the Keystone XL project is rejected.
Schultz said there is enough demand in Alberta for oil transportation to justify several projects.
"If Keystone, Gateway, this line, and all the rail went, then in five years we'd need all of them anyway," Schultz said.
"What this does is it enables the oil that's in the ground to be distributed to refineries with some confidence in advance."
The $12-billion pipeline would send 1.1 million barrels of crude oil per day from Alberta and Saskatchewan through 4,400-kilometres of converted and new pipe to refineries and ports in Eastern Canada.
Hurdles to clear
There are a number of hurdles that must be jumped before TransCanada’s proposal can go ahead, said Robert Page, a professor at the U of C's Institute of Sustainability, Energy, Environment and Economy.
One of them will be Quebec politics, he said.
"Given the controversy in Quebec with regard to oilsands product, you're never quite sure what is going to happen there," he said.
Quebec Premier Pauline Marois said last week her province would have to study the proposal once TransCanada releases its detailed plans.
Energy prices will also be a key factor, Page said.
"You really are dependent on the world price for oil remaining high the way it is right now."
Plenty of support
Premier Alison Redford said in a statement that she is pleased with today's announcement.
"My government made a commitment to the project as part of our efforts to build new markets and get a fairer price for the oil resources Albertans own," she said in a release. "This is truly a nation-building project that will diversify our economy and create new jobs here in Alberta and across the country."
Alberta's Opposition leader also welcomed the news about the proposed pipeline, saying it will create jobs in the province.
Wildrose Party Leader Danielle Smith gave credit to Redford for fighting for the pipeline.
"Premier Alward, Premier Marois, the company, Premier Redford — there has been a great championing of this project for probably the past year once it became clear that TransCanda thought it was economically viable," she said.
Bill Gwozd of Ziff Energy says the pipeline could increase capacity of oil shipments by up to three million barrels per day.
"So this represents a huge added value to the province," he said. "This is big news. This is not small news. This is as big as any issue we've had in Western Canada."
Robert Page is not the director of the Haskayne School of Business, as originally reported in this article.Aug 01, 2013 9:55 AM MT