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Canada Buys Trans Mountain Pipeline, Is Energy East Next?

Energy East pipeline

The mayor of Canadian town Saint John has asked the federal government to dust off the Energy East pipeline project, which TransCanada quit last year. Don Darling made his call after yesterday Ottawa announced it would buy the Trans Mountain expansion project from Kinder Morgan and look for new investors.

The decision caused outrage in parliament because if the government cannot find new investors, it would be down to taxpayers to take on the cost of the project, which Kinder Morgan considered abandoning if the federal government could not guarantee it would go ahead despite opposition from British Columbia.

But besides the parliamentary outrage, the decision to pay Kinder Morgan US$3.46 billion (C$4.5 billion) has now caused Saint John’s leaders to question this special treatment of Trans Mountain.

"It does not seem fair that we couldn't get the level of support. I mean, it seems like this is a project that the federal government is going to push through at all costs," Darling said as quoted by CBC. "In the case of the Energy East project, I mean, I think the project had a lot of merit. The oil continues to be shipped here by rail bed. We just couldn't seem to get the level of commitment that is being demonstrated … on the West Coast."

Energy East was supposed to carry crude from Alberta’s oil sands to an export terminal in Saint John, in New Brunswick. TransCanada announced it would quit the project last year after it became clear that cheaper oil would make the cost burden too heavy to bear, at about US$12.3 billion (C$16 billion). It would have transported more than a million barrels of crude daily to Canada’s east coast.

Related: Canada To Buy Kinder Morgan’s Trans Mountain Expansion Project

Environmental concern has been running high in Canada and the Untied States, with opposition focusing particularly on new pipeline projects. Besides the general worry for the environment based on the fact that oil is transported in liquid form and there is always a chance for it to spill, the main rational argument of pipeline opponents is that peak oil demand is near and any new pipelines will become stranded assets before long.

The counter argument, of course, is that they are needed urgently now, so Canadian producers won’t have to sell to U.S. refineries at a major discount to WTI because of pipeline bottlenecks, and instead could tap more international markets.

By Irina Slav for Oilprice.com

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  • Peter on May 31 2018 said:
    Peak oil demand is a myth. A few years ago these same people were warning of peak oil production. The world's middle class is growing and most of them will want cheap to buy and easy to fix cars (not EVs). The adoption of EVs in developed countries with good nation wide electric grids will be much less than the adoption of gasoline cars and motor bikes in the developed world. Hence oil demand will keep growing

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