Higgs's bid to revive Energy East 'virtually impossible,' says ex-pipeline exec
Premier sees new Ontario, Quebec governments making revival possible
A former pipeline executive who worked on the proposed Energy East project says Premier Blaine Higgs's plan to revive the project is "virtually impossible."
Higgs has floated the idea of several provincial governments banding together to create a holding company that would re-submit the Energy East application to the National Energy Board, then hand it back to a private company once it's approved.
But Dennis McConachy, who worked on the Energy East and Keystone XL projects for Calgary-based TransCanada Corp., said that's unlikely to work.
"I would think it would be virtually impossible to be taken seriously by the NEB," he said.
Many oil producers that planned to ship their product on Energy East transferred those commitments to TransCanada's Keystone XL after the Alberta-New Brunswick proposal was withdrawn.
Provincial governments wanting to revive Energy East would have to find a way to re-assemble those bookings, McConachy said, to give the plan "commercial credibility."
"I would not think that's very feasible," he said.
Proof of economic feasibility required
The NEB requires companies applying to build a pipeline to provide "evidence to support economic feasibility" in order for it to assess the proposal, board spokesperson Chantal Macleod said in an email.
A provincial holding company couldn't demonstrate that unless it had producers willing to commit to using the pipeline, McConachy said. "This goes to the heart of the matter."
Energy East would have been a 4,600-kilometre pipeline to carry Alberta oil across the country to Saint John. Most of the oil would have been exported to foreign markets, though some would have been processed at the Irving Oil refinery.
The route to the east was conceived when Alberta oil producers were facing opposition to two other pipelines: the Keystone XL line to the United States and the Northern Gateway line to the British Columbia coast.
TransCanada withdrew its application for Energy East in October 2017, blaming the NEB's decision to apply stricter greenhouse gas emission criteria to its review.
Some economists say the more likely reason TransCanada gave up on Energy East was a deteriorating business case for the pipeline. With Keystone XL and the Trans Mountain pipeline moving forward, oil production in Alberta didn't warrant a third export pipeline.
Higgs said his plan would relieve TransCanada from the burden of going through a long regulatory process. It also "doesn't really incur expenses as such for the government, not any significant amount."
But McConachy said that seriously underestimates the cost of filing a major regulatory application and guiding it through 21 months of hearings and consultations.
"Those are numbers in the hundreds of millions of dollars," he said.
We wouldn't stand in the way of that pipeline moving forward. We believe it's in the interest of all Canadians.- Todd Smith, Ontario's economic development minister
Another obstacle is that "you can't actually do Energy East unless you have TransCanada's concurrence to do it" because two-thirds of the pipeline would have been a conversion of the company's existing gas line, McConachy said.
TransCanada said in a statement last week it had "no plans" to revisit the proposal.
Higgs spoke about reviving the project leading up to the election campaign and now says he wants to work with other pipeline-friendly provinces to bring it back to life.
"It's trying to find a way around the roadblocks," he said. "I spent a career trying to find ways to get things done, not find a reason not to do them."
He said he'll talk to Ontario and Saskatchewan about creating a holding company "that would put the application forward, the same application TransCanada put forward."
Once the NEB approved it, "then you go to the companies — could be TransCanada again, or others — and you say, 'OK, this barrier has been removed.'"
Higgs said the election of a PC government in Ontario and a business-friendly Coalition Avenir Québec government in that province makes a revival possible.
Ontario Economic Development Minister Todd Smith said during a visit to Fredericton last week that "we wouldn't stand in the way of that pipeline moving forward. We believe it's in the interest of all Canadians."
But he was non-committal on the idea of Ontario helping incorporate a company to push the project.
"I'm not going to tip our hand on that one just yet, but we are going to enter into some talks on all kinds of important issues," he said.
New Quebec premier Francois Legault said in 2016 he would only support the project if the province received billions of dollars in oil royalties.
Higgs's position understandable
McConachy, who retired from TransCanada in 2014 as executive vice-president of pipeline strategy and development, said he understands why Higgs is pushing Energy East.
Besides the economic benefit to New Brunswick, both Keystone XL and Trans Mountain have suffered new delays in recent months, making it difficult for Alberta to benefit from world oil prices far higher than the U.S. price.
"It's entirely understandable why a New Brunswick premier would be highly motivated to continue to explore any set of ideas that might revive the project," he said.
If Keystone XL were cancelled over legal delays in the U.S., Energy East might start to look possible again, he added, but it will still have to overcome political opposition in Quebec, Indigenous opposition and other obstacles.