Although the pipeline made economic sense, said Tim Pickering, chief investment officer at Auspice Capital Advisors in Calgary, “it had regulatory layers put on it.”
The project, Energy East, would have converted and extended a natural gas pipeline, forming a link between Alberta’s oil sands and refineries in Ontario, Quebec and New Brunswick. The company had anticipated that some of the bitumen shipped from the oil sands would be loaded onto tankers at ports in eastern Canada for shipment to the United States.
The decision is yet another blow for companies operating in the oil sands. Like Keystone XL, Energy East had been seen as an opportunity to expand the market for the synthetic crude oil that is wrung out of the bitumen found in Northern Alberta.
While Canada is the largest source of foreign oil for the United States, the eastern part of the country, which is also its most populous, has relied mainly on imported oil for decades. The rise of hydraulic fracturing in the United States has meant that American oil fields now supply more than half of eastern Canada’s oil.
In its extensive lobbying for Energy East, TransCanada characterized the pipeline as an exercise in nation building that would end Canada’s dependence on oil imports.
That resonated in some places. TransCanada said that about 200 communities along the route supported the pipeline. But other places, particularly in Quebec, firmly opposed the project.
As with Keystone XL, some of that opposition was because petroleum removed from the oil sands is extracted through methods that emit significant amounts of greenhouse gases and produce large amounts of toxic water.
There were also concerns about the consequences of a potential pipeline leak.
In August, Canada’s National Energy Board said that in reviewing the application, it would look at the greenhouse gases created in the production and consumption of the oil carried in the pipeline. Before, it had looked only at greenhouse gases created by the construction and operation of pipelines.
Erin Flanagan, director of federal policy at the Pembina Institute, another environmental group, said it was far from clear that the new review would have led to a rejection of TransCanada’s application.
“A lot has changed and worsened from an economic perspective for the project,” she said. “It’s very opportunistic for politicians and others to say this project is not going forward because Prime Minister Trudeau brought in new regulations.”