In a Calgary ballroom, a panel hashes out grim wake for the Energy East pipeline

by Jen Gerson (feat. Dennis McConaghy)

National Post
November 8, 2017

CALGARY — In an ornate ballroom in one of downtown Calgary’s few Edwardian hotels, hundreds of dark-suited men and women gathered over lunch Tuesday to hash out one of the questions festering at the heart of Alberta’s politics: What really happened to Energy East?

The TransCanada pipeline was intended to be a win-win project: Alberta would gain access to tidewater for its beleaguered bitumen; oil would travel to a refinery on Canada’s east coast; resources would stay in the country. But in October the company killed it, inspiring interprovincial rancour and darkening the province’s increasingly sour mood.

In a letter to the National Energy Board explaining its decision, the company cited “delays resulting from the regulatory process,” among other obstacles. Andrew Leach, a professor of energy policy at the University of Alberta and one of the architects of Alberta’s climate change policy, was among the loudest voices crying foul over TransCanada’s implication. Canning Energy East was a reasonable business decision inspired by low oil prices, reduced oilsands production forecasts and the imminent approval of Keystone XL, Leach had argued publicly in the wake of the announcement.

On Tuesday, Leach gathered with Dennis McConaghy, TransCanada’s former executive vice-president of corporate development, and Martha Hall Findlay, president of the Canada West Foundation and once a Liberal MP for a Toronto riding, to hash the matter out.

Leach contended that Energy East’s fate was clear once Trump was elected. Oil prices are low, production predictions have been slashed, and once Keystone XL was back on the table, the less-efficient Energy East was doomed. “It was the most expensive of the pipeline projects, so the one you naturally take off the deck,” he said.

McConaghy took issue with that position. Energy East already had shipping contracts lined up, he said, and while Alberta might indeed maintain adequate pipeline supply if both Keystone XL and the TransMountain pipeline are approved, the fate of those two projects is still uncertain. (Keystone XL is still awaiting sign-off from Nebraska’s state government, while TransMountain must face an interprovincial intransigence so entrenched that Alberta premier Rachel Notley plans to go on a cross-country road trip to support the project.) Energy East would have been a viable third option, and oil companies were willing to pay the price of potentially having too much capacity.

“The real tragedy of losing Energy East was that a set of circumstances evolved to reach a point where TransCanada couldn’t just suspend the project, but went on to terminate it, and that was fundamentally driven by a conviction they could never get the permit,” he said.

The regulatory process has simply become so unpredictable that no sane company will throw billions of dollars behind a project that can be cancelled on a political whim, just as Northern Gateway was, he said.

“There is total uncertainty in this country about whether we can get anything built,” Hall Findlay said, adding that among resource companies Canada was beginning to acquire the reputation for political uncertainty of a banana republic.

There is no political clarity around what this country wants or what it will approve, she added. The approvals process is now taking decades, in hopes of creating a social license that will never be granted by staunch anti-oilsands activists. The cost of that delay for business can reach hundreds of millions of dollars per month.

McConaghy said that if the government wants to impose an even-handed carbon strategy, well, fine. Just make that clear upfront and apply it to all industries equally.

“It’s not like these points haven’t been made to the Trudeau government,” he said. The government heard all these gripes and then “dismissed all the actual problems and instead advocated for more open-ended engagement, as if the regulatory process were a focus group as opposed to a technocratic exercise.”  

In the eyes of both Hall Findlay and McConaghy, nothing exemplified this more than Energy East. After the regulatory process had begun, the NEB said that it would take into consideration greenhouse gas emissions from the oilsands and the oil burned after it left the line rather than just the emissions of the actual pipeline. This was untenable, they argued, the sort of standard that would never be applied to central Canadian industries. It would be like judging the approval of an auto plant based on the lifetime emissions of all the cars it produced. 

“The final straw was moving the goalposts,” Hall Findlay said.

“Establish what the strategy is and then let our regulatory bodies implement those directions. But let them do their jobs. If every decision then comes back to what is a political win, we will not get anything done.”

And there was no doubt in Hall Findlay’s mind that the cancellation of Energy East was celebrated in the Prime Minister’s office.

“When that announcement was made, there were champagne bottles popping in Ottawa,” she said. As the Liberals face more competition from the NDP, the pipeline “would have been a major, major headache for the federal Liberals.”

Despite this, both Hall Findlay and Leach warned about the increasingly vicious rhetoric currently being bandied about across provincial lines: UCP leader Jason Kenney has said he would scrap Alberta’s carbon tax and cut permits to oil pipelines feeding B.C. if it continues to stall the TransMountain expansion. Those threats only add to the culture of political uncertainty.

But McConaghy nonetheless echoed the darker sentiment now rippling through much of the province.

“I think it’s naive to think that in a scenario where Keystone XL doesn’t happen because of Nebraska and TransMountain (falters) because the federal government didn’t enforce (its regulatory approval, the idea that Alberta is going to be saying ‘We stepped up. We applied the most stringent carbon tax in the country and you stiffed us on market access,’” he said.

“No one should think the political reaction to that isn’t going to be extreme.”