April 7, 2015 / 7:18 PM / in 2 years

TransCanada applies Keystone's lessons to Energy East pipeline

CALGARY, Alberta (Reuters) - After six years battling bitter opposition to its Keystone XL pipeline project in the United States, TransCanada Corp has learned where and when to pick its fights, to consult early and often - and to retreat when prudent.

Canada’s No. 2 pipeline company scrapped plans last week to build a crude oil export terminal in Quebec because it would endanger beluga whales in the St. Lawrence River.

The proposed Cacouna terminal was part of TransCanada’s 1.1 million barrel-per-day Energy East plan for a pipeline to take Alberta oil sands crude to Canada’s east coast.

The pipeline project will now be delayed roughly two years as TransCanada rejigs regulatory filings.

Despite the drop in global crude prices, demand for Energy East remains strong with Canadian crude production seen hitting 6.4 million barrels per day by 2030, up from 3.5 million bpd in 2014.

With Cacouna’s cancellation, environmentalists claimed a huge victory, but industry players say TransCanada is shrewdly taking a short-term hit in hope of a smoother road ahead.

Besides beluga whales, Energy East was facing other hurdles in Quebec. The province has imposed seven conditions on the pipeline and aboriginal groups are resisting it.

“This avoids having it slowed down a lot more. They really would have had an enormous problem trying to get permission to build in Quebec,” said environmental law specialist Dianne Saxe. “My guess is they decided it would be a better economic decision not to stand and fall on this particular hill.”

Alan Ross, partner at law firm Borden Ladner Gervais, said scrapping Cacouna will likely speed up the National Energy Board regulatory process.

Under NEB rules, directly affected parties such as local environmental groups campaigning to protect the whales would have been able to intervene against the pipeline.

Pipeline companies are a lot “sharper and savvier” than in the past, Ross said, having learned from fierce opposition to Keystone XL, which would take Alberta crude to the U.S. Gulf Coast, and to Enbridge Inc’s Northern Gateway pipeline, which would take it to Canada’s Pacific Coast.

“Keystone XL, the opposition to Northern Gateway, the extended nature of NEB hearings, were all a bit of a wake-up call to the pipeline industry that consultation needs to be done early and often,” Ross said.

TransCanada spokesman Davis Sheremata said a major lesson learned from the long-delayed Keystone XL project was the need to engage communities, landowners and stakeholders as early as possible.

Enbridge, Canada’s largest pipeline company, has taken steps to woo opponents to Northern Gateway, offering aboriginal communities along the route C$1 billion ($800 million) in long-term benefits, including a 10 percent equity stake, jobs and contract opportunities.

Nearly half of the 45 affected communities have rejected the offer, however.

Editing by Peter Galloway

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