TransCanada proposal to ship Alberta oil to East Coast takes step forward

SAINT JOHN, N.B. – A proposal to transport Alberta oil as far east as New Brunswick took a step forward Tuesday as TransCanada Corp. (TSX:TRP) announced it was seeking binding commitments from shippers before determining whether there is a business case to proceed.

The Calgary-based energy company said it is trying to determine whether there is enough interest in the idea, which would involve converting an existing 3,000-kilometre natural gas pipeline so that it could carry crude into Quebec.

The Energy East Pipeline project could also see a 1,400-kilometre extension that would ship oil into the port city of Saint John, N.B., home to the Irving Oil refinery, Canada’s largest.

Proponents of the development say it would bring jobs and reduce Eastern Canada’s dependence on foreign oil, thereby increasing the country’s energy security. But critics say they are worried about potential environmental damage, pointing to the rupture Friday of an ExxonMobil pipeline in Arkansas.

“This would be a very old pipeline built to carry natural gas, not diluted bitumen, and you could have major spills,” said Keith Stewart, the climate and energy campaign co-ordinator for Greenpeace Canada.

“This goes through some very remote areas, but it also goes through populated areas.”

Federal Natural Resources Minister Joe Oliver, who has backed the project, said such concerns are unfounded and don’t take into account the need to increase Canada’s access to lucrative markets abroad.

“If you follow their logic to its conclusion … what they’re saying, I guess, is that they don’t want to see any pipelines built,” Oliver said in Ottawa.

“If we do not build pipelines, the oil will be stranded and all the potential economic benefits that would flow from that would be lost.”

Oliver welcomed TransCanada’s announcement, as did New Brunswick Premier David Alward, who held a news conference at the Irving Oil refinery to express his support.

“A west-east pipeline will strengthen Canada’s economy and stimulate new growth in jobs in every region and every community of our province,” Alward said. “But we must not forget that this is a critically important project that will benefit all Canadians.”

The idea of shipping oil eastward has also enjoyed the support of Alberta Premier Alison Redford, who met with Alward in February to discuss it.

TransCanada has yet to file the necessary regulatory applications. The company said it is seeking binding commitments from April 15 until June 17 for delivery points in Montreal, Quebec City and Saint John before deciding whether to proceed.

It is aiming for the Energy East Pipeline project to begin shipping as much as 850,000 barrels of oil per day in late 2017.

Warren Mabee, a professor at Queen’s University, said it would be an economic boon to ship western oil to the East Coast and onward to global markets.

But Mabee added that pipeline proposals that once generated little controversy are now at the forefront of public concern.

“People have images in their head like the Arkansas image of oil gushing down driveways, and that means that they are worried,” said Mabee, the director of the university’s Institute for Energy and Environmental Policy.

He said TransCanada will need to stress the proposal’s benefits and engage the public in its decision-making in order to gain support.

The development is one of two proposals for moving oil from the western provinces to the East Coast. The other would see Enbridge Inc. (TSX:ENB) expand capacity on some pipes in the Great Lakes region and reverse the flow of another line between Montreal and southern Ontario — the so-called Line 9 pipeline.

Last year, Canada imported more than 600,000 barrels per day to supply its Eastern refineries. The Irving Oil refinery handles about 300,000 barrels a day.

TransCanada is the same firm proposing to build the contentious Keystone XL pipeline through the heartland of the United States. It is hoping to win U.S. State Department approval for that project, which has provoked outrage from environmental groups concerned about its potential impact on water sources and climate change.