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Alberta oil faces political hurdles in East

Ontario Premier Kathleen Wynne looks over at Energy Minister Bob Chiarelli during a press conference Oct 8, 2013.

Moe Doiron/The Globe and Mail

Governments in Ontario and Quebec have thrown political hurdles in front of Alberta's efforts to expand markets for its crude, launching public hearings into controversial pipeline proposals the industry regards as necessary to enable its fast-growing oil production.

The Ontario Liberal government ordered its provincial energy board to hold public consultations on TransCanada Corp.'s proposed $12-billion Energy East project, focusing on public safety, greenhouse gas emissions and the reliability of the province's natural gas supply. TransCanada plans to convert sections of its main natural gas line to carry crude in Ontario, then build a pipeline though Quebec and New Brunswick to move 1.1 million barrels a day of crude to refineries and export terminals.

Separately, Quebec's Parti Québécois government said it will conduct two weeks of hearings into Enbridge Inc.'s plan to reverse its existing Line 9B pipeline in order to ship western crude into Montreal. Environment Minister Yves-François Blanchet said the government will then determine a list of conditions that it would expect Ottawa to impose on Enbridge in order to approve the pipeline.

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The provinces' moves serve as new risks to promising plans to ship Alberta oil eastward, at a time when the energy industry is facing major resistance to pipeline proposals to bring crude to the West Coast and the U.S. South. Alberta is eager to access new markets, as a chronic backup of the province's oil due to transportation constraints weighs on prices.

Ontario and Quebec acknowledge that Ottawa has the formal responsibility for approving interprovincial pipelines, but they appear to be taking their lead from British Columbia. The province has set five conditions that must be met before it would support Enbridge's Northern Gateway project that would transport 500,000 barrels a day of oil sands bitumen to a West Coast export terminal.

Alberta Premier Alison Redford and her British Columbia counterpart Christy Clark recently agreed on a "framework" under which B.C. would ensure environmental, First Nations and financial concerns were addressed, but would not look to Alberta for compensation.

That deal could serve as a template for other provinces, said Peter Tertzakian, an energy economist with Calgary-based ARC Financial Corp. "We were always going to have to face some Canadian provincial geopolitics … but we need to be very careful as a country that we don't head down a path where you play too hard and nothing gets done."

Ontario Energy Minister Bob Chiarelli said the province would focus on the environment – including pipeline safety and climate-related issues – as well as First Nations issues and the economic costs and benefits that the project would bring.

Ontario is also concerned that TransCanada's Energy East project will remove a source of gas supply for utilities and industrial users in the province. TransCanada has said it will ensure its gas customers receive service and that they will pay no more for that service than they would if Energy East had not been built, although they will need to enter long-term contracts.

Lisa MacLeod, an Ottawa MPP who serves as energy critic for Ontario's Opposition Progressive Conservatives, suggested the province should let the federal approval process run its course and not add "another layer of bureaucracy."

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Ms. MacLeod also questioned why Ms. Wynne appeared to be supportive of oil-sands development when recently visiting Ms. Redford in Alberta, but might now be looking to throw up roadblocks.

For his part, Mr. Blanchet said Quebec remained "open" to the Enbridge proposal and wants to weigh the economic benefits and job creation potential of the project. However, he insisted that all security measures must be in place to protect the environment.

While the province may not have formal jurisdiction, "it isn't true that the federal government can disregard what may be a consensual or even a unanimous position by the National Assembly," Mr. Blanchet said Wednesday.

TransCanada, the federal government and Alberta all said they had no concerns with the two provinces holding hearings to assess the projects' impacts, though federal natural Resources Minister Joe Oliver said they should not overlap or delay the federal approvals process.

"We welcome the opportunity to get the facts out about the benefits of this project. The process Minister Chiarelli outlined this morning will give us another opportunity to do that," said Alex Pourbaix, TransCanada's president of energy and oil pipeline, said in a statement.

Alberta Energy Minister Ken Hughes acknowledged the right of other provinces to ensure their interests are addressed. But he warned against singling out Alberta's emission record, and against other governments imposing additional levies on the interprovincial transport of goods, including oil and gas.

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Additional transportation charges that would reduce the competitiveness of the oil sands would hurt all regions of the country, including manufacturers in Ontario and Quebec that supply the oil industry, Mr. Hughes said. "We are all connected and we are all beneficiaries of the wealth that is created in Canada as a result of energy development."

With report from Adam Radwanski and Rhéal Séguin

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About the Author
Global Energy Reporter

Shawn McCarthy is an Ottawa-based, national business correspondent for The Globe and Mail, covering a global energy beat. He writes on various aspects of the international energy industry, from oil and gas production and refining, to the development of new technologies, to the business implications of climate-change regulations. More

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