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Analyzing TransCanada's move to abandon Energy East

(Courtesy www.energyeastpipeline.com)
Summary

Industry groups suggest Canada's regulatory environment is a big part of why the Energy East project was scrapped

Some experts suggest the low price of oil was the biggest factor for TransCanada's decision to pull the plug

Experts believe TransCanada will now turn its focus to pushing ahead on its Keystone XL pipeline

VANCOUVER (NEWS 1130) –┬áTransCanada is opting not to go ahead with the Energy East pipeline, and already the blame game is on in Ottawa.

But what are the real reasons for the company’s move? Industry groups are suggesting our country’s regulatory environment is a big part of why the company made this decision.

“If you look at the regulatory environment and the outcome of this particular project, I think what’s happening is that there’s this drip, drip, drip of regulatory uncertainty that is creating an environment where obviously projects aren’t the approvals to go ahead, and companies are backing away from them,” says Chris Bloomer, the president of the Canadian Energy Pipeline Association. “It is a very uncertain environment on the regulatory side, and it’s a concern.”

But Ben Dachis, an associate director with the C.D. Howe Institute, says it was the low price of oil that was the biggest factor.

“If you look in the political arena, everyone is looking for someone, some person to blame, but at the end of the day, this is about the market,” says Dachis, although he does acknowledge the regulatory situation likely factored in as well. “Regulation sure didn’t help this project a lot. There’s no way you can say it was a good thing. But at the end of the day, if the economics were there, TransCanada would have gone ahead with it.”

Economist Werner Antweiler with the UBC’s Sauder School of Business believes TransCanada will now turn its focus to pushing ahead on its Keystone XL pipeline.

“This is a project that will get oil to the U.S. market where it has traditionally gone,” says Antweiler. “This is one that has low shipping cost, low risk. It has a lot of things going for it.”

That’s a view backed up by Michal Moore with the University of Calgary’s School of Public Policy.

“Keystone XL looks a whole lot more attractive than it did a year ago,” says Moore. “Simply because the [U.S. President Donald] Trump administration is trying to make sure that from their side, especially that track that goes through Nebraska, that they make it as easy as possible for the company to remain interested and follow through on construction. That in turn would open up opportunities for the SunCor expansion up in Alberta to find an easier transit path to get down the mid continent where it can be refined. The likelihood is that this increases the attraction of the previously planned and now on hold Keystone project.”