Why Brian Gallant wants the feds to pay for added costs of Energy East review

As Calgary-based TransCanada Corp. takes a 30-day pause to reconsider the future of the $15.7 billion Energy East pipeline, New Brunswick Premier Brian Gallant is looking for ways to save the troubled project.

Yesterday (Sept. 19) Gallant wrote an open letter to Prime Minister Justin Trudeau.

Gallant’s message to Trudeau was as follows – since you’ve changed the way pipelines are reviewed by the National Energy Board, the federal government should pay for the additional costs incurred by TransCanada for changing the rules so late in the game.

Gallant is worried TransCanada is fed up with how long the review is taking and is ready to cancel a project that would send 1.1 million barrels of oil per day from Western Canada to refineries in Eastern Canada, including Saint John’s Irving Oil refinery.

The project represents 3,771 full time direct and indirect spin-off jobs per year during the nine-year construction phase and 261 direct and indirect jobs during the 20-year operations phase to the province.

The province could also reap $853 million in tax revenue during the life of the project. Gallant doesn’t want to see that potential economic opportunity disappear.

However, it’s unlikely the federal government will be willing to foot the bill for the added costs of this review.

For one, the feds can simply say industry has to adapt to the new reality of having to account for an assessment of all greenhouse gas emissions related to the production and consumption of crude oil being shipped on the pipeline and an assessment of how Canada’s carbon taxes and other climate change regulations would impact the need for the pipeline.

Secondly, paying for the additional costs would set a precedent that would have proponents of other pipelines subject to the same rules demanding the feds pay for similar costs in the future on any other reviews the NEB undertakes.

The other thing that’s important to note here – as was mentioned in last week’s blog – is that it’s not just these new rules that are impacting the viability of Energy East.

Market conditions are a big factor, and they have changed drastically since the pipeline was unveiled in 2013.

Kinder Morgan’s Trans Mountain pipeline expansion in B.C. and Enbridge Inc.’s Line 3 into the U.S. have been approved by the Canadian government. And U.S. President Donald Trump has revived the controversial Keystone XL pipeline.

Those three pipelines would add 1.8 million barrels of pipeline capacity Western Canada’s producers could access. TransCanada and producers may not think there is a need for Energy East anymore because the other three pipelines could give them all the capacity they need to access new markets.

If that’s the case, even if the federal government were to pay for the additional costs created by the new rules, that won’t be enough to convince TransCanada to keep Energy East alive.

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