Canada is now dependent on the U.S. energy market after TransCanada scrapped two major energy pipelines Thursday following the government’s decision to beef up regulations on oil projects.
The pipeline developer scuttled the Energy East and Eastern Mainline pipelines after Canada adopted a slew of strict pipeline regulations to address concerns about climate change. TransCanada also cited the slowdown in the oil sector as one of the reasons for the move.
The company promised a review of Energy East’s viability in September after the country’s energy regulator included in its review of pipeline approvals the potential for increased carbon emissions once the oil enters its destination.
Energy East pipeline was expected to deliver crude from the oil-rich area in Alberta and Saskatchewan to a marine terminal in New Brunswick, carrying more than 1 million barrels of oil a day. The Eastern Mainline project, meanwhile, included new natural gas pipeline facilities along TransCanada’s already existing facilities in southern Ontario.
Energy East 2,800-mile-long project could have allowed producers to transport oil to Europe, a continent that is largely dependent on Russia’s natural gas market for energy. The pipeline would have broadened the market for Canada’s oil exports, according to Jackie Forrest, director of research for Calgary-based ARC Energy Research Institute.
“We don’t have diversity of markets,” Forrest told reporters about Canada’s energy production problems. Canada exported 3 million barrels of crude a day in 2016, with 99 percent of that going to the U.S.
Oil industry groups blamed Canada’s Prime Minister Justin Trudeau and for the problem. Trudeau nixed Enbridge’s proposed Northern Gateway pipeline across the western province of British Columbia, which would have shuttled half a million barrels of oil a day to Chinese markets.
“We’re beholden to the U.S.,” Tim McMillan, president of the Canadian Association of Petroleum Producers, told reporters. The U.S. is already exporting oil and natural gas to Europe and India, meaning Canadian industry is supplying a country with gas it doesn’t need.
Activists in Canada argue TransCanada’s decision is a net-benefit for the environment. They believe the nixed pipelines would have allowed oil companies to increase greenhouse gas emissions through dramatically ramped up production
“This is an important day in the fight against climate change in Canada,” Adam Scott, senior adviser for Oil Change International, said in a press statement. “Realizing that Energy East would never would never be allowed if its full climate impact was accounted for, TransCanada has walked away from the project.”
Environmentalists have also managed to cajole pipeline regulators to consider similar regulations for American pipeline companies.
Members of the Federal Energy Regulatory Commission (FERC) conducted a greenhouse gas assessment earlier this month on power plants in Florida that accept fuel from the Southeast Market Pipelines Project. The analysis satisfies a court requirement that an assessment be conducted before the project is approved.
FERC can decide to appeal the D.C. Circuit court of appeals’ Aug. 22 ruling, but the fact that the agency already ran an assessment indicates an appeal before October is unlikely. The project would theoretically increase Florida’s greenhouse gas emissions between 3.7 percent and 9.7 percent compared to earlier years, the analysis found.
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