Photographer: Andrew Burton/Getty Images

Regulator Voids TransCanada Energy East Project Decisions

  • Decision comes as three competing pipelines are moving forward
  • Company must start regulatory hearings from the beginning

Canada’s lead pipeline regulator has voided past decisions on TransCanada Corp.’s application for its proposed Energy East pipeline, forcing the company to start the hearing process from the beginning shortly after competing pipeline projects have been approved.

The National Energy Board’s decision was made by a new hearing panel that was appointed earlier this month. That panel replaced an earlier panel that stepped down in September amid accusations of bias. Past decisions regarding the proposed Eastern Mainline gas pipeline project were also voided. While TransCanada won’t have to submit new applications, once the panel determines that the existing applications are complete, a 21-month time limit for hearings will reset.

The decision is a setback for the $15.7 billion ($11.2 billion) Energy East project, which involves building a 4,500 kilometer crude pipeline from the oil fields of Alberta to refineries in Eastern Canada and a marine terminal in New Brunswick. It comes as viability of the line has been thrown into doubt after U.S. President Donald Trump signed orders to revive the company’s proposed Keystone XL pipeline and after Canada’s government approved two other major export pipelines late last year.

“I don’t think TransCanada is really hopeful that the project will be approved down the road,”  Steve Belisle, a fund manager at Manulife Asset Management in Montreal, said in a phone interview. “I don’t think this is key to them going forward.”

TransCanada applied to build Energy East three years ago as Canadian oil producers looked to expand access to markets beyond the U.S., where nearly all of Canada’s oil is sold and where a surge of shale oil production depressed prices. The aim was to open access for Western Canadian oil producers to the Atlantic Ocean to allow for the export Alberta’s crude to Europe. The project was initiated at a time when the Keystone XL project was stalled by former U.S. President Barack Obama, who later rejected the proposal.

The proposed line faced opposition, especially in Quebec. The province’s premier, Philippe Couillard, said in a September interview that Energy East poses significant risk to its freshwater resources. It also faced resistance from gas distributors because the project would covert part of TransCanada’s mainline to handle oil. The $1.5 billion Eastern Mainline would replace a portion of the line turned into Energy East by bringing 600 million cubic feet of gas a day to major consuming regions from Toronto to Montreal.

The company said it will review the National Energy Board’s decision to “understand its impact on TransCanada and the project,” Spokesman Tim Duboyce said in an e-mailed statement. “Energy East remains of critical strategic importance because it will end the need for refineries in Quebec and New Brunswick to import hundreds of thousands of barrels of foreign oil every day, while improving overseas market access for Canadian oil.”

TransCanada submitted a new application on Thursday for Keystone XL pipeline at the invitation of President Trump. Last November, Canada’s government approved Kinder Morgan Inc.’s Trans Mountain pipeline expansion to the Pacific coast and the replacement of Enbridge Inc.’s Line 3 to the U.S. Midwest. The three lines would will add about 1.8 million barrels a day of oil export capacity, enough to handle Canada’s oil production for 20 years, according to National Energy Board projections.

The pipelines may be more than the industry needs, according to Wood Mackenzie.

“At best we would expect TransCanada to build Keystone XL or Energy East but not both,” analyst Afolabi Ogunnaike wrote in a note Tuesday.

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