The oil-sands industry in Alberta has a problem: It's capable of producing more oil than it can get to market. It has tried building new pipelines south into the United States—the famous Keystone XL project—and west to British Columbia. But both projects are stalled and face stiff opposition. Now a battle is heating up over the latest proposal: a 2,858-mile-long pipeline to Canada's east coast.
TransCanada, the same company that wants to build Keystone XL, says it plans to seek Canadian government approval of the Energy East project in early November. "This is largest regulatory application in our company's history," said TransCanada spokesperson Shawn Howard. "It's tens of thousands of pages." The company announced last year that it had "confirmed strong market support."
Canada's oil sands are currently pumping out approximately two million barrels a day, an amount expected to nearly double within the next ten years. Oil trains are taking up some of the excess: In an annual forecast, the Canadian Association of Petroleum Producers (CAPP) predicted that oil transported by rail would increase from about 200,000 barrels a day in late 2013 to 700,000 a day by 2016.
But that forecast also called pipelines "essential" to moving new production.
"Our forecast is not dependent on any single pipeline of the many that are listed in the forecast," said Greg Stringham, vice president of oil sands and markets for CAPP. "We will need the capacity associated with them all by the time we get to 2030."
The Keystone XL pipeline, which would carry oil from Alberta south to refineries on the U.S. Gulf Coast, remains in limbo six years after TransCanada proposed it. The southern leg, from Cushing, Oklahoma, south, is already complete, but construction of the northern leg requires the approval of the U.S. State Department, because it crosses the U.S. border. The State Department announced in April that it was again postponing a decision. (See "Can Senate Force Approval of Keystone XL Pipeline?")
Energy East, with a length of 2,858 miles (4,600 kilometers) and a capacity of 1.1 million barrels a day, would be more than twice as long and carry a third more oil than Keystone XL. To build it, TransCanada plans to convert a 1,864-mile (3,000-kilometer) section of existing natural gas pipeline that runs from just east of Alberta to the western edge of Quebec. The company would add new sections at either end of the pipeline and build two marine terminals on the east coast.
From those terminals the oil could be shipped to refineries along the U.S. East and Gulf Coasts, and it would also find ready markets in Europe and Asia, according to CAPP. Some observers naturally see the Energy East project as a way around the Keystone XL impasse.
TransCanada, for its part, says the main impetus for Energy East is to reduce dependence in eastern Canada on foreign oil imports, and that Keystone XL will not be abandoned even if Energy East is built. "We believe that ultimately both of these projects will be approved. They have different markets," said Howard. "It's too simple for people to think that this is an either-or."
The First Nations Factor
Although Keystone requires U.S. government approval, Energy East has only the Canadian regulatory system to contend with. That's plenty, as executives at Enbridge and Kinder Morgan might attest.
Enbridge's 525,000-barrels-a-day Northern Gateway proposal, which would run west to the Pacific, has received approval from the Canadian government, but with a huge caveat: The Toronto-based company must meet more than 200 regulatory conditions before it can begin construction. That, along with strong opposition to the project at its terminus in British Columbia, has led to speculation that the pipeline will never be built. (See "Canada Approves Controversial Northern Gateway Pipeline: What Now?")
Houston-based Kinder Morgan has proposed expanding its existing Trans Mountain pipeline between Alberta and the British Columbia coast, which would boost capacity from 300,000 to 890,000 barrels a day—a project that's also under attack. Like Northern Gateway, it has faced formidable opposition from First Nations, and in British Columbia they have the right to reject any project running through their territory.
But it's not yet clear how strong First Nations opposition will be in the eastern part of Canada, or whether it would have the same power to thwart Energy East.
Ellen Gabriel, a human rights activist from the Kanehsatà:ke Nation in southwestern Quebec, opposes the project. "Energy East is a very divisive issue," she said. "There's people who are looking at jobs, which are badly needed in our community. [But] I would say the majority of people are against this, because of the toxicity, the danger, and the lack of assurances that there will not be a pipeline rupture."
Complex Web of Interests
Community activism on Energy East is to be expected, but TransCanada has also had to contend with other business interests. Natural gas distributors, for example, have complained that the project, by converting a natural gas pipeline to oil, will force them to bear the costs of replacing it.
"This is a fool's bargain," said Sophie Brochu, president and CEO of Montreal-based gas distributor Gaz Métro, in a speech this week. "They want to remove a vital pipeline that is already largely amortized and replace it with a smaller pipeline at a higher cost. No thanks."
"It is always our preference to have negotiated agreements," TransCanada's Howard responded. "But if we cannot come to terms, then we would look to the National Energy Board here in Canada to resolve this."
Assuming it can resolve the commercial sticking points, TransCanada will then need to secure federal approval for Energy East, a process that could take up to 15 months. And then it must meet any conditions set by the federal government and by provincial governments along the proposed route of the pipeline—the same step that has cast doubt on Northern Gateway's prospects.
A temporary court injunction has already delayed initial work on a marine terminal for Energy East at Cacouna, Quebec, because of fears that construction would disrupt a key calving area for beluga whales. Environmental groups have raised a host of other concerns—including the role the pipeline would play in expanding the use of emissions-intensive oil sands.
The Council of Canadians, an organization that advocates for clean water and energy, is one of several organizations fighting Energy East. "We are still in early days with this project, " said Andrea Harden-Donahue, a campaigner with the group. She said her group is building a "wall of opposition."
Energy East has support from the premiers of Alberta and New Brunswick, who jointly praised the project this week. But officials in Quebec have been more guarded, promising only a close review.
"It is unclear what the Quebec government will do, but it appears there's significant public opposition," said Danielle Droitsch, a senior attorney for the Natural Resources Defense Council, which opposes the pipeline. By setting tough conditions for Energy East, Quebec might have the power to delay it or, for example, to scuttle one of the planned marine terminals.
Once again, the familiar battle lines have been drawn. "I cannot tell you how often I read, when I started working on Keystone XL, 'This is a done deal. It's gonna happen,'" said Droitsch. "And of course that's not the case."