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The promise and the perils of a pipe to Saint John

From left: Paul Browning and Arthur Irving, CEO and chairman, respectively, of Irving Oil; and Stefan Pohlod, president for the eastern energy pipeline; gather at the refinery in Saint John after the announcement of a proposed pipeline and marine terminal.

For the Globe and Mail/David Smith

TransCanada Corp. and Irving Oil Ltd. are joining forces to market Canada's crude oil to the world, officially launching the proposed $12-billion Energy East pipeline and a $300-million deep-water marine terminal to be built off Saint John, N.B.

The Energy East pipeline, subject to regulatory approval, promises to unlock new markets for landlocked Western Canadian suppliers by giving them access to eastern refineries and global export markets through ports at Quebec City and Saint John.

TransCanada chief executive Russ Girling said the company expanded its original plan to 1.1-million barrels per day of capacity – about a third of current Canadian oil production – after Irving Oil successfully promoted the ambitious export option to energy producers.

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Echoing politicians backing the plan, Mr. Girling described Energy East – the largest project ever undertaken by TransCanada – in nation-building terms, comparing it to the construction of the Canadian Pacific Railway or the Trans-Canada Highway.

"Each of these enterprises required innovative thinking and a strong belief that building critical infrastructure ties our country together, making it stronger and more in control of our own destiny, and this is true of Energy East," he said.

For the family-owned Irving company, the pipeline represents a critical new source of oil for its refinery.

"Canada has the world's third-largest basin of oil reserves, and it's the only major basin of oil reserves in the world that's not connected to a major deep-water port," Irving Oil president Paul Browning said in a telephone interview from Saint John. "And so we do feel that when this pipeline and marine terminal is put in place and Western Canadian crude has access to a deep-water port, there is going to be a substantial opportunity for us and our partner."

The oil terminal will be built at the Irving-owned Canaport facility, which now imports liquefied natural gas but is to be converted to handle LNG storage and exports. Mr. Browning said TransCanada and Irving have been talking to potential buyers of Canadian crude as far away as Asia and are confident there will be demand for the exports.

But first, TransCanada has to get regulatory approval, consult with scores of First Nations communities along the route and win over a public whose fears will be stoked by environmental groups eager to choke off oil sands expansion by blocking pipelines and producers' access to markets.

The company hopes to complete construction to Quebec City by late 2017 and to Saint John in 2018.

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In a news conference Thursday, Mr. Girling said the company faces a long road in winning the necessary approvals and acknowledged that people in Quebec will be particularly sensitive to the risks involved in transporting crude after the calamitous derailment in Lac-Mégantic in which 47 people were killed.

"The impact on this review obviously is that public awareness has increased," Mr. Girling said. "These kinds of events should not occur, and as transporters, we have to do everything we possibly can to ensure they don't happen in the future."

Quebec Premier Pauline Marois has been non-committal on the contentious project, saying last week during a premiers' conference that her government was working with Alberta to identify benefits and risks. Her office refused to comment on Thursday's announcement.

But environmentalists are clearly gearing up for a battle, just as they have fought TransCanada's Keystone XL pipeline in the United States and Enbridge Inc.'s Northern Gateway project to bring oil-sands bitumen through British Columbia to an export terminal in Kitimat.

"You can't build a nation around a project that will poison water, violate treaty rights and further accelerate a global climate crisis that is already resulting in weather disasters around the world," said Greenpeace Canada campaigner Mike Hudema.

Western oil producers are welcoming the TransCanada plan, which would convert some 1,400-kilometres of under-utilized natural gas pipeline for oil use and build new pipe through Quebec, New Brunswick and parts of Alberta.

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Cenovus Energy Inc. aims to boost production to half a million barrels per day by the end of 2021 and is looking at all options for marketing its crude. It has committed to send 200,000 barrels per day down the eastern line.

The project provides "access to a market that we're only currently reaching in small amounts by rail. … It's a very promising project for us," spokeswoman Rhona DelFrari said.

With files from Sophie Cousineau in Montreal and Carrie Tait in Calgary.

Editor's Note: An earlier online version of this article incorrectly referred to the president of Irving Oil as Paul Brown. This has been corrected.

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About the Authors
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

Mergers and Acquisitions Reporter

Jeffrey Jones is a veteran journalist specializing in energy, finance and environment for The Globe and Mail’s Report on Business, based in Calgary. Before joining The Globe and Mail in 2013, he was a senior reporter for Reuters, writing news, features and analysis on energy deals, pipelines, politics and general  topics. More

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