TransCanada Corp said today it would abandon its Energy East and Eastern Mainline pipeline projects, following tough review by Canada’s energy regulator
Vancouver Sun, October 5, 2017
TransCanada Corp. has scrapped its Energy East Pipeline and Eastern Mainline projects, oil and natural gas conduits that have faced regulatory hurdles in Canada and stiff opposition from environmental groups.
As a result of the decision, TransCanada expects an estimated $1 billion after-tax, non-cash charge to be recorded in the fourth quarter, the company said in a statement Thursday. Because regulators failed to reach a decision on the projects, TransCanada expects “no recoveries of costs from third parties.” The Energy East link to Canada’s Atlantic Coast carried a $15.7 billion price tag.
Energy producers in Alberta had hoped the projects would help them diversify their markets, with most of the existing pipeline network linking the energy-rich province to the U.S. Midwest and Gulf Coast. Last month, TransCanada sought a 30-day suspension of the project applications for more time to review environmental assessment factors.
“TransCanada was forced to make the difficult decision to abandon its project, following years of hard work and millions of dollars in investment,” the Canadian Energy Pipeline Association, an industry group, said in a statement. “The loss of this major project means the loss of thousands of jobs and billions of dollars for Canada, and will significantly impact our country’s ability to access markets for our oil and gas.”
The decision comes as TransCanada seeks again to complete its controversial Keystone XL pipeline, which the Obama administration rejected in 2015. The US$8 billion project, which would carry heavy crude from Alberta to Nebraska, is awaiting state approval in Nebraska after a hearing in August. A final decision on whether to build the line is pending.
In January, the National Energy Board voided previous decisions on the Energy East application, forcing the company to start the hearing process anew shortly after competing pipeline projects have been approved. The change came after the regulator’s previous hearing panel stepped down amid accusations of bias.
TransCanada applied to build Energy East three years ago, seeking to open access for Western Canadian oil producers to the Atlantic Ocean for exports to Europe. It faced intense opposition in Quebec, where the province’s premier said the line posed a significant risk to its freshwater resources.
Energy East would carry about 1.1 million barrels of oil a day from Alberta and Saskatchewan to eastern Canadian refineries and a marine terminal in New Brunswick. The Eastern Mainline project would add new gas pipeline and compression facilities to an existing system in Southern Ontario, where most of the country’s home and industrial gas consumers are located.
“We are not at all surprised by the decision,” given that TransCanada had sought to delay the project applications, said Robert Kwan, an analyst at RBC Dominion Securities Inc., in a research note. The decision won’t affect the company’s dividend because its growth forecast didn’t include those projects, he said.