What the Death of Keystone XL Means for Canada’s Energy East Pipeline

The death of one controversial Canadian-proposed pipeline could breathe new life into another.

When the news of Keystone XL's rejection reached climate protesters outside the Canadian prime minister's residence last week, it drew loud cheers. But Friday's apparent death blow to Keystone XL by US president Barack Obama prompted disappointed press releases from both the company that proposed it, TransCanada, and Canada's newly-sworn in prime minister, Justin Trudeau, who favored it.

Now both TransCanada and the Liberal government are looking hopefully toward another project: the proposed Energy East pipeline.

Traversing Canada, North America's longest proposed pipeline would repurpose an existing natural gas pipeline to carry 1.1 million barrels of crude oil per day from Alberta and Saskatchewan to refineries in Quebec and New Brunswick. Locals along the route are both eager for construction jobs, and wary of potential environmental effects. However, the project has not yet drawn the intense legal and political opposition that other pipeline proposals to the west have provoked, making it a cautious favorite for government and industry alike.

In response to the Keystone XL decision, foreign affairs minister Stephane Dion said Fridayit was time to "move on" and "make a fresh start." Trudeau had expressed uncertainty over Energy East during the election, but Dion said the Liberals now support the project: "We support this … but we want that to be done properly and it will be difficult to do if we don't strengthen the process itself, the process of consultation with communities and the process of scientific environmental assessment," he said.

Energy East pipeline spokesperson Tim Duboyce would not say what Liberal comments about bolstering environmental assessment and consultation could mean for the project since there are no specifics yet, but he did say the company has its chin up about the proposal.

Related: What Trudeau's Liberal Victory Means for Canada's Oil Sands

"Yes, we're optimistic that we're going to be able to move forward with this project because we believe we have put together something that is in the public interest on a number of fronts, whether it's economic, whether it's safety, whether it's the environment," Duboyce said Tuesday.

Energy East would deliver oil to a different market than Keystone XL, so the apparent death of the latter project does not automatically mean the success or failure of the other, Duboyce said.

The Canadian Association of Petroleum Producers (CAPP) thinks Energy East is the favorite to be built at this point. "If I had to nail down one, I think the general consensus might be, the leading one is probably Energy East," CAPP's VP of policy and performance Alex Ferguson told VICE News on Monday. "TransMountain (through British Columbia) is probably just behind it."

He believes the Keystone XL decision had more to do with politics than it did with Obama's direction on climate change.

"We need access for our products to international markets," Fergusonsaid."What we heard from the US on Friday certainly wasn't a real big grounding in science. We knew this for a long time, there was a lot of politics at play, so at the end of the day it really comes down to: what will Canada do with its resources?"

"I think it should add impetus for our governments — plural — to get on with our reputational piece," he said, referring to Canada's ability to market its oil internationally. "Our view is that regardless of what Alberta or Canada may do on climate policy, this was so political it had nothing to do with that."

Ultimately, the Canadian oil industry is trying to market its product internationally as a more responsible option compared to oil in less stable regions. That explains, in part, why Obama's Keystone XL call prompted former and current oil industry executives to come out in favor of a Canadian carbon tax on Sunday. Former TransCanada CEO Hal Kvisle told the Globe and Mail "a very hefty carbon tax could have the outcome of significantly reducing carbon emissions."

"I think business is quite happy to see a carbon tax because it will help everybody in society understand that we all have a role to play in this," Kvisle said.

There is some degree of support for a price on carbon within the industry because it would target consumers rather than companies, and would encourage companies to continue innovation within the sector, which looks good to international buyers, Ferguson said.

Back in February, Trudeau said he would put in place a national "carbon pricing plan," arguing that the oil sector is in favour of such a thing since many companies already have a price on carbon.

Related: Breaking: President Obama Rejects Keystone XL Pipeline

However, following Obama's decision last week, Trudeau left his party's positioning on Energy East to Dion and provincial premiers, who also recently reiterated their support for the proposal.

Last week, in advance of Obama's Keystone rejection, TransCanada asked the state department to pause its decision on the project, prompting Saskatchewan premier Brad Wall, to note "the importance of getting approvals for Energy East."

Alberta premier Rachel Notley has said she sees potential in the cross-country line. "We need to focus our efforts on the other pipelines over which we have greater domain," she said, reacting to the US decision. Like Dion, Notley emphasized that Obama's public rejection of Keystone XL on climate grounds "underlines the need to improve our environmental record."

Last week, TransCanada also announced it would amend its Energy East application to remove a port in Quebec, signaling the company had heard local opposition loud and clear. The company hopes to complete the project by 2020.

Follow Hilary Beaumont on Twitter: @hilarybeaumont

Image by Flickr user kris krüg