Business Leaders, Mayor Blame Regulatory Delays, Changes for Killing Energy East
SAINT JOHN– TransCanada’s decision to pull the plug on the Energy East Pipeline project is disappointing, but not surprising to the mayor of Saint John and the leaders of local and regional business organizations.
On Thursday morning TransCanada announced that it was cancelling plans for the Energy East pipeline and EasternMainline projects. The Calgary-based company said previously that it was suspending its efforts to get regulatory approvals for the mega projects.
Energy East was conceived as a way to ship Alberta oilsands crude oil as far east as Saint John.
Saint John Mayor Don Darling was disappointed and frustrated. He understood that market conditions may have played a role in cancelling the project, but says the shifting regulatory environment was inexcusable.
“How is it possible that a project of this scale and magnitude and significance is in a position where regulatory uncertainty is there three years after [the process was launched],” said Darling, who expressed his frustrations about the process in a phone call Thursday with Natural Resources Minister Jim Carr.
RELATED: TransCanada cancels the Energy East Pipeline Project
David Duplisea, CEO of the Saint John Region Chamber of Commerce, shared Darling’s disappointment and sympathized with TransCanada’s decision to back out of the project.
“It’s extremely disappointing for our region and for the country to lose a project of this significance and of this magnitude. But it’s completely understandable too that TransCanada has made this decision,” said Duplisea.
“If you look at the scenario, it’s been four years and TransCanada has spent over a billion dollars, $30-million of that in Saint John alone, and there’s still no line of sight on any kind of regulatory framework what so ever. So it’s certainly understandable that they’ve decided that some of the uncertainty around the regulations and how it’s going to play out has affected their decision.”
Last month, TransCanada filed a letter with the National Energy Board (NEB) asking for a 30-day suspension for the proposed project. The company said it wanted to study how the NEB’s decision last month to consider the Energy East’s contribution to upstream and downstream greenhouse gas emissions will affect “costs, schedules and viability.”
Colleen Mitchell, president of the Atlantica Centre for Energy, said when the application is suspended for a project of this size it typically doesn’t go ahead at all. She said TransCanada made the right business decision given the ongoing uncertainties over the regulatory process.
“It was pretty clear that there wasn’t any way for TransCanada to continue,” said Mitchell. “There was no way for the National Energy Board to really indicate how long the regulatory review process was going to take, and certainly not provide any assurances that it wouldn’t continue changing.
I think it was the constant changing of the rules while the project was active and had been filed. It just created this huge level of uncertainty about how much the project will cost in order to get it approved and how long will that take.”
Duplisea agreed that the level of uncertainty made it impossible for the company to proceed with the application.
“The federal government and the NEB keep moving the goal post, with the latest in terms of adding in the upstream and downstream emissions to the project itself with no clarity around that,” he said. “There’s not even a light at the end of the tunnel that there’s going to be clarity around or a timing on what some of these regulations could look like, so we certainly understand their decision to not move forward with this.”
Duplisea says the Chamber had warned that confusion and lack of clarity would lead to the project falling through.
We cautioned this project would die a natural death simply because of inactivity and because of ambiguity and confusion that the NEB and government allowed to happen. It’s not a surprise.”
Mitchell dismisses the idea that market conditions played a role in TransCanada’s decision. She said the company has committed itself to $24-billion worth of investments in North America, and those investments will now be made by a Canadian company in the U.S. and Mexico.
She pointed out that they could build the KeystoneXL pipeline to delivery Canadian oil to the U.S. gulf coast but the company ultimately decided the regulatory hurdles were too significant for a pipeline to service Canadian refineries.
It is a little bit ironic that in the United States/Canadian crude will be able to serve American refineries but here on the east coast of Canada, the three refineries are completely on imported crude from foreign markets,” said Mitchell. “We can get a pipeline approved to service U.S. refineries, not Canadian refineries, with our own resource.”
Darling said this certainly a lost opportunity for the country. “This was a real test of our of the federation to come together and we failed,” he said.
He also emphasized the lost opportunity for the city, and he’s doesn’t know if people grasp magnitude of the loss.
“I’m not sure folks truly understand that, even at the local level, [it would have been] $2.2-billion in local capital investment, 3,700 person-years of employment during the construction phase, 97 person-years of permanent employment,” he said. “Probably the piece that hurts the most is the $5-million in incremental direct annual property tax revenue for the city. That’s that’s difficult to swallow when we have the extent of the challenges that we have here.”
The cancellation of this $15-billion project is a great disappointment for Saint John, but Duplisea says Saint John’s economy will be fine.
“Saint John is not a one-project town. We’ll get through this. We got a lot of other things on the go. We have close to a billion dollars in actual and planned projects coming here,” said Duplisea. “We remain a vibrant and diverse economy and getting even more diverse. The vibrancy of our city is going to continue and it will be reflected in our dynamic arts and culture and the growing list of projects that want to come here.”
With files from Mark Leger and The Canadian Press.