With Energy East scrapped, Western Canada’s producers are now counting on Kinder Morgan’s project to carry crude to the Pacific Coast, and TransCanada’s Keystone XL to connect with US Gulf Coast refineries.
TransCanada’s cancellation of the Energy East pipeline leaves domestic producers more dependent than ever on the Keystone XL and Trans Mountain proposals, two projects facing ardent opposition in their own right.
Energy East would have given oil producers in Alberta and Saskatchewan, heavily dependent on buyers in the US, another market for their crude by carrying about 1.1 million barrels a day to refineries and a marine-shipping terminal in eastern Canada. TransCanada cancelled that project a week ago amid regulatory hurdles and weaker oil prices.
Western Canada’s producers are now counting on Kinder Morgan’s project to carry crude to the Pacific Coast, and TransCanada’s Keystone XL to connect with US Gulf Coast refineries. Both face significant hurdles: Keystone XL needs approval in Nebraska, and Trans Mountain is hampered by a legal challenge in British Columbia.
The pipeline pinch already had producers shipping more of their crude by rail, which can cost as much as three times more to get oil from Alberta to the US Gulf Coast.
Should Keystone XL and Trans Mountain fail to be built, oil producers could end up shipping more than 300,000 barrels a day via rail for at least five years, and some producers could shut in operations.
Energy East would have provided Canadian oil producers with access to buyers in India, because shipping there is faster from Canada’s Atlantic Coast than from its Pacific Coast. Instead, the cancellation makes the domestic industry more reliant on the US to act as its broker in getting crude to world markets.
Alberta Premier Rachel Notley decried Energy East’s demise, calling it “an unfortunate outcome for Canadians” and saying that it would have reduced the nation’s imports of foreign oil, according to Bloomberg. The National Energy Board must let the industry know how future project reviews will be conducted so investors can have confidence in the industry, she said.
“This decision highlights the importance of diversifying market access and the subsequent national priority that must be placed on the Trans Mountain expansion project,” Notley said in a statement.