By October 3, 2017 Read More →

ENGO argument against Energy East pipeline ‘egregious’ and without merit – op-ed

Energy East

The Canadian ENGO movement argues that the Energy East pipeline will ship crude that is not needed, based on their belief that a “low carbon future” is now at hand. TransCanada photo.

ENGOs should demand that Trudeau government clarify if carbon pricing is Canada’s primary carbon policy mechanism

By Dennis McConaghy, former TransCanada VP

The Trudeau government’s support for the NEB’s re-scoping the Energy East crude oil pipeline project hearing justifiably generated wide spread condemnation and dismay across the Canadian political spectrum, from the Notley government to the editorial page of the Financial Post.

The project proponent, TransCanada Pipelines, has spent hundreds of millions of dollars to date in pursuit of regulatory approval relying on the expectation that “upstream and downstream” carbon emissions, (those not directly attributable to the physical operation of the pipeline), would not form part of the project’s environmental assessment.  And more fundamentally that issue of whether the project can be rationalized to Canadian carbon policy is the responsibility of the federal cabinet to clarify not a regulatory entity, whose basic mandate is to impose appropriate conditions on the construction and operation of major energy infrastructure not create policy.

But predictably the Canadian ENGO movement disagrees. This recent op-ed in the Globe and Mail is indicative. 

Its contentions are so egregious that a vigorous rebuttal is required.

Ignoring entirely the serious impact on future capital investment for essential major infrastructure investment in Canada by capriciously “changing the rules” midstream in a regulatory process, their basic argument is that incremental pipeline infrastructure for Canadian oil sands production is unneeded based on the contention that a “low carbon future” is now at hand.

Moreover, if built and actually operational, the project would generate incremental carbon emissions that would be at odds with Canada’s commitments under the Paris Climate Accord.

Of course, no credible forecast out to at least 2050 exists that contains any material reduction in crude oil demand globally. A date that is within the likely economic life of most of Canada’s soon to be constructed incremental crude oil pipeline capacity. Implicit in such forecasts is the continued demand for gasoline, diesel, and jet fuel, even accounting for some market penetration of all electric vehicles in the transportation sector.

Also ignored are that the corresponding supply forecasts include that substantial heavy oil production including Canada’s oil sands as a major component, recognizing its competitive position to supply much of US Gulf Coast refining infrastructure, optimized to run on a substantially heavy oil feedstock. 

Specifically, CAPP, Canadian Association of Petroleum Producers, has forecasted supply growth in Canadian oil sands production out to 2030, reaching close to 4.0   million barrels per year, fully internalizing current outlook for commodity prices and their evolving competitive position. 

energy East

Dennis McConaghy, author of “Dysfunction — Canada after Keystone XL”

Of course a credible global hydrocarbon supply/demand forecast is not the same as a scenario that would have the global energy supply and demand actually meet by 2050 the aspirational target of Paris of 2 C temperature containment. That distinction is not acknowledged by Canadian ENGOs.

It is still an entirely open question whether world’s developed economies will ever be prepared to impose costs on themselves sufficient to meet that Paris target.

If Energy East achieves regulatory approval, subject to appropriate conditions on construction and operations, the ultimate “go-no-go” decision on Energy East should rest with TransCanada and its shippers. They are the parties who bear the actual financial cost of holding the option on that decision and face the economic consequences if the facility is under-utilized at some point in time.  They are best positioned  to make the assessment of the project’s fundamental economic viability,

A more constructive contribution from the ENGO community would have been to call on the Trudeau government to clarify if Canada’s carbon policy is to be fundamentally defined by carbon pricing or not. Whether paying an appropriate carbon tax is an entirely sufficient compliance mechanism or not.

To date, the Canadian ENGO community has never been clear on how much cost Canada should bear to meet its Paris target, or how that cost would compare what Canada’s trading partners, especially the United States, are prepared to impose on themselves.

It has yet to accept carbon pricing as the pre-eminent carbon policy instrument for Canadian, instead insisting that Canada achieve implausible carbon emission targets regardless of the cost.

Lastly, suggesting that the Energy East project represents unjustifiable risks in terms of its physical construction and operation of the pipeline and will not offer insufficient accommodation of directly impacted stakeholders as other prima facie showstoppers is ridiculous.

The reality is that the NEB has historically appropriately conditioned pipelines to meet global standards on safety and remediation, and ensure accommodation proposals consistent with Canadian law. 

There is nothing fundamentally unique about the route or engineering design of Energy East that would justify disqualifying this project out of hand. 

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