TransCanada touts Energy East benefits for refiners, export markets

TransCanada Corp. is promising its proposed $12-billion Energy East pipeline will drive down the cost of crude for eastern Canadian refiners – and their consumers – while opening new export markets including on the U.S. Gulf Coast for western oil producers.

The company filed a 30,000-page application on Thursday with the National Energy Board, which is expected to take up to 18 months to review the project before making a recommendation to the federal cabinet for a final decision.

In a news conference in Toronto, TransCanada chief executive Russ Girling said the pipeline represents the safest and most economical way to transport crude from Western Canada to refiners that are increasingly relying on rail to access cheaper North American crude and replace higher-priced offshore imports. He noted the company has 20-year shipping contracts covering more than 900,000 barrels a day (b/d) of the project's proposed 1.1 million barrels-a-day capacity.

"These confirmed, long-term contracts demonstrate the strong desire for eastern Canadian refineries to access growing supplies of domestic crude oil and for Canadian producers to potentially reach both domestic markets and international markets in the safest and most efficient means possible and that is in a pipeline," Mr. Girling said.

With Energy East, TransCanada plans to convert portions of its mainline natural gas system to carry crude as far as Eastern Ontario, adding new pipe to get oil to refineries and tanker ports in Quebec and New Brunswick.

He said the pipeline could deliver light oil from western North America to refineries in Quebec and Saint John, N.B., for $10 (U.S.) a barrel less than it costs to ship it by rail. Deliveries to the U.S. Gulf Coast by Energy East and supertanker would be $6 a barrel less than the current costs of shipping Alberta by rail, and would be competitive with other pipelines, Mr. Girling said.

TransCanada expects roughly half of the volumes shipped along Energy East will be used at refineries in Quebec and New Brunswick, which currently import about 700,000 b/d of crude, though rising volumes come from the United States. The most attractive export markets will be the U.S. East Coast for light crude, and the U.S. Gulf Coast, Europe and even western India for diluted bitumen from the oil sands, the company said.

While the project has won support from premiers in Alberta and New Brunswick and from the Harper government in Ottawa, approval is no slam dunk.

Natural gas customers in Ontario and Quebec oppose the plan to convert for oil use a key section of natural gas mainline through eastern Ontario. TransCanada also filed on Thursday for NEB approval for its $1.5-billion (Canadian) plan to build a 250-kilometre gas pipeline from southern Ontario to Quebec, a project it says will ensure customers have all the gas they need and will save $900-million over 15 years.

But distributors such as Montreal's Gaz Métro and Ontario's Union Gas and Enbridge Gas Distribution insist the plan will hurt their customers, and they want the NEB to order TransCanada to build keep the Eastern Ontario gas line in service and build new pipe from North Bay to Cornwall to carry crude.

The company also faces opposition from environmentalists who warn about risk of spills and increased greenhouse gas emissions from growing oil sands production that new pipelines support. The National Energy Board has indicated it won't review the upstream impacts of GHG emissions, but environmental groups have launched court challenges in British Columbia to force the regulator to include such analysis in pipeline reviews.

TransCanada executive vice-president Alex Pourbaix said the company has consulted extensively with First Nations along the route and has benefits agreements with many, but regional chiefs in Ontario and Quebec say that effort has been insufficient. Failure to gain their support could result in lengthy lawsuits and delays.

"Over all, there has been very minimal contact so for them to say they have consulted First Nations, it falls well short of what's expected," said Lloyd Philips, a chief in the Mohawk community of Kahnawake and member of the chiefs' council for the Assembly of First Nations of Quebec and Labrador. "There has to be proper consultation and accommodation of the aboriginal rights of our people … We need to be full partners in any development on our lands."