Analysis

2 inconvenient facts make Energy East pipeline revival unlikely

Ottawa's bailout of the Trans Mountain pipeline has prompted a new outbreak of pipeline fever in New Brunswick, but the chances of the Energy East pipeline project rising zombie-like from the grave are remote at best.

New hopes for TransCanada pipeline flow from faulty comparison with Trans Mountain project

The Energy East pipeline would have transported more than a million barrels of oil every day. (Reuters)

Ottawa's bailout of the Trans Mountain pipeline has prompted a new outbreak of pipeline fever in New Brunswick.

Here's the cure: take two facts and call us in the morning.

Politicians, business leaders and newspaper editorials are calling for the federal government to somehow revive the Energy East proposal, a 4,600-kilometre pipeline that would carry Alberta bitumen to Saint John for refining and export.

The project died last October, but this week's decision by the Trudeau government to spend at least $4.5 billion nationalizing another pipeline project to British Columbia has officials here pining for similar treatment.

The Trans Mountain proposal is to twin its existing line carrying bitumen from Edmonton to the port of Burnaby.

"The very same arguments that are being made in B.C. today — national interest, jobs, keeping the economy moving ahead — were the same exact points that we were making here on the east coast," Saint John Mayor Don Darling said at a business lunch Tuesday.

"I'd call on the federal government to immediately re-engage in conversations with TransCanada to see — with this new attitude, with this new, 'We're going to get this done' approach to a pipeline — if we can't resurrect the Energy East pipeline on the East Coast," Darling said.

Jim Irving, the co-CEO of J.D. Irving Ltd. who spoke at the same event, echoed that.

"You should never give up," he said. "It's going to the West Coast? Come to the East Coast. We should have it here. It would be the right thing to have. So we'd encourage everybody in Ottawa to not let go. Stick with it."

No credible case

Economist Trevor Tombe says current conditions suggest no need for a fourth pipeline until at least 2030. (Submitted by Trevor Tombe)

But the chances of Energy East rising zombie-like from the grave are remote at best.

"In the short term, there's not a credible case to get aggressively behind Energy East," said Trevor Tombe, an economist at the University of Calgary who studies oil markets and pipelines.

Some of the recent arguments for a project reboot have been downright contradictory.

When it looked last month like Trans Mountain was doomed, some Energy East supporters said the project was needed once again, as a back-up plan to get Alberta's oil onto ocean-going ships for export.

They're much more interested in making money on one pipeline than losing money on two.- Trevor Tombe , economist

Now that Trans Mountain has been rescued, there are calls for Ottawa to give Energy East the same treatment — even though the rescue means a back-up is less necessary.

There are two inconvenient facts that make a revival unlikely.

The first is that no private sector company is proposing to build Energy East right now.

TransCanada Corp. has been silent on exactly why it cancelled the project last October. Its official notice implied that new environmental criteria adopted by the National Energy Board didn't provide it with a clear path to approval.

Supporters of the project are convinced Trudeau nudged the NEB to apply the new standards because the proposal was deeply unpopular in Quebec, where his party holds 40 of 78 seats.

Low oil prices slow demand

This chart illustrates the projected oil production growth under the current scenario (blue line) and under stricter environmental regulations (red line), showing that Energy East would not be needed for some time. (Trevor Tombe )

But oil prices, lower now than when Energy East was proposed in 2013, were also a factor, Tombe says.

Those low prices have slowed production in Alberta's oil sands, meaning less demand for another pipeline on top of the Keystone XL project to the U.S., the Enbridge Line 3 upgrade and the Trans Mountain expansion.

That was true when Energy East was cancelled and it's still the case now, Tombe says.

"At the moment, it doesn't look like oil production growth in Western Canada is going to be enough to justify a fourth pipeline anytime at least before 2030, and potentially not even after that, depending on how environmental policy evolves globally."

In that scenario, TransCanada would be cannibalizing itself if it revived Energy East while building Keystone XL, he added.

"They're much more interested in making money on one pipeline than losing money on two."

Speculating on emotion only

Saint John MP Wayne Long thinks Ottawa should at least explore whether there's any glimmer of hope for Energy East. (Brian Chisholm, CBC)

The second inconvenient fact is that Trans Mountain was approved by the National Energy Board in May 2016 and by Trudeau's cabinet six months later. The federal government had little choice but to defend its regulatory process and its outcome.

"That wasn't the same for Energy East," said Saint John Liberal MP Wayne Long.

Hearings for Energy East were cancelled in 2016 after two NEB members recused themselves because they met in secret with a TransCanada lobbyist.

A replacement panel put new environmental criteria in place but new hearings had not started when TransCanada pulled out. If Ottawa tried to build Energy East itself, it would still need to go through that lengthy process.

"It's disingenuous for anybody to just say, 'We're going to do Energy East,'" Long said. "Those who are currently speculating in our city on emotion only, they don't have all the facts."

Even so, Long said, it would be "the right thing to do" for the Trudeau government to at least approach TransCanada to see if there's a glimmer of hope.

But like Tombe, he recognizes it's unlikely.

"TransCanada's focus and energy is on Keystone."

About the Author

Jacques Poitras

Provincial Affairs reporter

Jacques Poitras has been CBC's provincial affairs reporter in New Brunswick since 2000. Raised in Moncton, he also produces the CBC political podcast Spin Reduxit.