IN THE NEWS ~ Stephen Harper endorses Energy East pipeline proposal

TransCanada going ahead with west-east oil pipeline

John Spears, Toronto Star News; Hamilton Spectator, Business, Page A12.

TransCanada Corp. will go ahead with a $12-billion project to carry western Canadian oil to Canada's east coast, and beyond, the company says.

That means converting 3,000 kilometres of the company's main natural gas pipeline to carry oil, and constructing another 1,400 kilometres of new pipeline, mostly in Quebec and New Brunswick.

Comparing the project with the nation-building construction of the Canadian Pacific Railway, chief executive Russ Girling said the line should be ready to deliver oil to Quebec refineries in 2017, and New Brunswick in 2018.

Following TransCanada's announcement, Irving Oil said it plans to build a $300-million marine oil terminal in Saint John, N.B.

Another marine terminal is planned for an as-yet undetermined location in Quebec. In the west, a big new oil hub will have to be built somewhere in southeastern Saskatchewan - a hub that could also handle oil flowing from the Bakken region straddling the Canada-U.S. border.

Canadian Natural Resources Minister Joe Oliver said the line must undergo regulatory review.

But Oliver welcomed TransCanada's announcement Thursday that it will proceed with the project. He said in an emailed statement the pipeline would enhance the country's energy security and reduce its reliance on foreign crude.

The pipeline will help carry a swelling supply of crude oil from western Canada.

Oil production in the west - currently in excess of 3 million barrels a day - is projected to more than 6 million barrels a day by 2030 as oilsands production continues to grow.

TransCanada's new project, dubbed Energy East, will be able to carry 1.1 million barrels of crude eastward. The company has contracts with shippers for 900,000 barrels a day.

TransCanada is also hoping to ship Canadian oil south to the Gulf of Mexico on its Keystone XL pipeline, a project that has yet to receive approval from President Barack Obama.

Girling said the Energy East project is independent of Keystone XL.

Girling said the market will decide where the oil ends up, acknowledging that there are opportunities for the oil to be shipped to the U.S. eastern seaboard, which imports 800,000 barrels a day from offshore.

But he said the market forces favour much of the oil remaining in Canada.

East coast refineries currently use 700,000 barrels of oil a day - all of it imported - and western Canadian oil should be able to displace that because of the lower shipping cost, he said.

"The primary driver of this project has been to supply Canadian refineries," he said.

Canadian refiners have already contracted for delivery of much of the oil, Girling said: "I do strongly believe that Canada will be served first."

Girling said he doesn't think the conversion of a portion of the gas pipeline to carry oil will starve eastern Canada of natural gas, and TransCanada has already talked to its gas customers.

"What we've said to them is we will ensure we have the capacity available to meet their needs," he said.

TransCanada officials said the pipe in the ground is capable of carrying either gas or oil; it won't have to be dug up and replaced.

But a natural gas pipeline is powered by compressors to keep the gas moving to market. Oil needs to be pumped, not compressed, so TransCanada will have to build about 70 pumping stations along the pipeline to move the oil.

The New Democratic Party endorsed the project conditionally,

"There's no doubt that moving oil west to east can be a win-win," energy critic Peter Julian said.

But he said that assumes environmental and safety concerns are met, and that the Conservatives cease their "reckless stripping of environmental protection."

Others condemned the project outright. The Council of Canadians said it will launch a national campaign to stop the pipeline.

"While there has been a lot of talk about Atlantic energy security, this crude will actually go to the highest bidder. India, China, Europe and the U.S. are in line," said Maude Barlow the council's national chairperson.

Greenpeace also denounced it. ILLUS: CEO Russ Girling says TransCanada will proceed with its $12-billion pipeline. Jeff McIntosh, The Canadian Press

© 2013 Torstar Corporation