TransCanada Scraps Energy East Pipeline

TransCanada, the “energy transfer company” responsible for getting the incredibly dirty diluted bitumen oil from the tar sands in western Canada, and also potentially Bakken crude, to refineries on the East Coast has notified the Canadian government that it is cancelling its proposed Energy East pipeline project, citing slowing growth in demand for the tar sands oil and increased environmental pressure from the government.

As reported in The Globe and Mail, the company said “changed circumstances” had caused it to reassess the need for the $15.7 billion pipeline, which would have carried over a million gallons of oil a day. TransCanada will also abort a planned natural gas pipeline intended to carry shale gas to ports on Canada’s East Coast.

Both pipelines were strongly supported by provincial governments in Alberta and New Brunswick as well as Conservative politicians at the national level. Proponents boasted of the income that could be derived from selling oil and gas abroad as well as the hundreds of short-term jobs for construction workers needed to build the pipelines.

But communities along the way fiercely opposed the plan, fearing leaks from the pipeline could endanger a number of lakes and rivers. Not only does diluted bitumen (“dilbit”) oil from tar sands and Bakken crude have an unusually large carbon footprint, it is extremely volatile, which has led to several cataclysmic explosions and fires. Jim Appleton, the fire chief in Mosier, Oregon, told the press that shipping Bakken crude by train was “insane” after an oil train derailed and exploded in his town. It was also Bakken crude that exploded in Lac-Mégantic, Quebec, killing 42 people.

After the National Energy Board announced earlier this year that it planned further study of the greenhouse gas emissions from the production and refining of tar sands oil, TransCanada took another look at the pipeline project and decided not to proceed. But Dirk Lever, an industry analyst for AltaCorp Capital, says he was not surprised by the decision to abandon the pipeline. After Donald Trump brought the Keystone XL pipeline back to life after it was blocked by President Obama, TransCanada didn’t need both. “I don’t think really anybody in Calgary thought Energy East was actually going to go ahead,” he said. “It was a Plan B.”

But Keystone XL is not a done deal either. In July, Paul Miller, president of TransCanada’s liquid pipelines business, told investors his company is feeling out potential customers to see how much demand exists for tar sands dilbit oil, which costs significantly more than other crude oils due to the extra energy it takes to separate it from the sand that surrounds it. “Our assessment of these factors will really drive our investment decisions when we get into that November–December time frame,” he said. He declined to say whether the project would go forward if the pipeline would not operate at full capacity.

This article has been updated for accuracy regarding the type of oil that’s being tapped in this region of Canada.