Canadian Prime Minister Justin Trudeau is starting to get down to the nitty gritty of his office and carried out a 45-minute meeting with Montreal Mayor Denis Coderre yesterday with one of the main topics being the Energy East Pipeline. The Energy East Pipeline, a proposed pipeline project slated to ship 1.1 million barrels of crude oil a day from the Alberta oilsands to refineries in Quebec and New Brunswick, has been the centre of controversy for some time.
The project that would result in a 4,600 kilometre pipeline has had more than its share of setbacks with TransCanada (TSX: TRP, Forum) announcing last year that the completion would be delayed two years to 2020 due to the company having to secure a new marine terminal location over concerns about nearby whales in the St. Lawrence Seaway.
There has also been no shortage of detractors as more than 60 organizations petitioned the National Energy Board to suspend TransCanada’s application for the East Energy Pipeline in May of last year stating that the federal regulator should shelve the application until its review process had been overhauled, allowing for a sufficient amount of public consultation. Then last August, Bloc Quebecois leader Gilles Duceppe stated categorically that, “We cannot let Quebec be transformed into a highway for Alberta Oil.”
The Ontario Energy Board (“OEB”) also had reservations regarding the pipeline after a 15-month public consultation, stating that the environmental and economic risks far outweighed the benefits the project would bring. It was concerned about pipeline safety in an industry that reports more than 300 significant pipeline spill events per year since 1986 in the U.S. alone. To be ‘significant’ the event would have to have resulted in death, damages over $50,000, more than five barrels of highly volatile substances or 50 barrels of other liquid released, or where the liquid exploded or burned. As such, the OEB requested TransCanada reroute the planned pipeline from environmentally sensitive areas and recommended the company continue to engage residents throughout construction and operation of the project.
The Conservation Council of New Brunswick voiced concerns about the amount of noise generated by increased tanker traffic in the Bay of Fundy and how the cacophony would place undue stress on the North Atlantic right whale, the most endangered large whale on the planet. As well, the natural makeup of the bay with its renowned tides and thick fog would make it extremely difficult to clean up any spills that might result from the increased traffic.
Then last week the Mayor of Montreal stepped up to condemn the project; not for environmental concerns, but because he felt the province and Montreal wasn’t getting enough cash out of the deal to make the whole project worth it. Needless to say that resulted in an uproar from premiers of other provinces including Alberta Premier, Rachel Notley, and resulted in a war of words where Coderre said that Alberta Wildrose leader, Brian Jean, believed ‘the Flintstones was a documentary’. Finally, Coderre received a televised chiding from political pundit, Rick Mercer, where the comedian told the Montreal mayor in no uncertain terms to stop being so selfish and cooperate.
Trudeau followed up that sentiment yesterday when he met with Coderre, stating that it was his job as the Prime Minister to bring the people of Canada together to give companies like TransCanada the opportunity to present the benefits of their projects without undue opposition. Coderre exited the meeting, stating he was now open to changing his mind regarding the Energy Easy Pipeline and that Trudeau had extolled the ‘notion of being responsible’ and finding a ‘balance’ between economic development and sustainable development.
Trudeau expertly sidestepped the question as to whether he would approve the project without Coderre’s approval, but reiterated that he would find options to export Canadian resources in a responsible manner and affirmed that his party would launch a review process that would examine the total greenhouse gas emission issue of proposed energy projects and ensure proper public consultation on said projects, stating, “For the past 10 years, we had a government that was, rather, a cheerleader for these projects rather than being a responsible arbiter to establish a clear, open, rigorous and transparent process, and that is what we are going to do.”
MARKET REACTION:
TransCanada shares edged up 2.92% to $47.25 per share in morning trading.
OUR TAKE:
Since the 1980s, pipelines have come under scrutiny for safety issues as most of the current network, now over 60 years old, begins to fail, resulting in spills ranging from significant to catastrophic. Transporting oil by rail cars has its own issues and rail networks travel through or by many of the environmentally sensitive areas conservation groups are trying to protect. Again, we are stuck with a dilemma. Sure, wouldn’t it be great to live in a world without the need for oil, but at present and even the foreseeable future, we are undoubtedly dependent on fossil fuels and need to transport it. Which method is best? Pipeline technology has evolved and with the advent of automated big data analysis, the ability to actively monitor new pipelines has improved dramatically.
Let’s face it, Alberta has been a cash cow for the country for quite some time and only recently has been vilified for its oil industry, more specifically the oil sands. With environmental activists and celebrities like Leonardo DiCaprio visibly coming out against Alberta and its dirty oil, the general public doesn’t get the full picture which includes the unavoidable economics and human impact of shutting down the province’s oil industry. The province is hurting and hurting bad. If it is allowed to funnel its product to the world market, the province as a whole will benefit and through its contribution to the transfer fund, the rest of the country will feel the positive impact.
As much as I would like to see the success and mass adoption of alternative energy, there are some hard realities we cannot avoid and blindly idealizing the issue will not help. This doesn’t mean we should give a free pass to pipeline companies to cover the country, but through a legitimately concerned approach, by weighing all appropriate factors, we may come to an acceptable solution that serves the present without destroying the future.
For the record, I own no shares, nor have any involvement with either TransCanada or any other pipeline company.
--Gaalen Engen
https://twitter.com/gaalenengen