The basic reality faced by projects like Energy East is that, like it or not, the fossil fuel era is rapidly drawing to a close.
TransCanada Corporation dodged a bullet last Thursday with its decision to cancel its controversial and redundant Energy East pipeline — not that the now-jubilant opponents that lined up against the $15.7-billion project should hold their breath for the thank you notes they deserve.
The hours and days after the TransCanada announcement were filled with predictable, overheated rhetoric from former and current politicians. But none of the spot commentary came close to answering the questions TransCanada should have asked before it proposed another big oil and gas megaproject, questions it should still consider before it tries to complete the increasingly precarious Keystone XL pipeline. Questions such as, is there any realistic scenario in which a 30 – to 60-year piece of fossil fuel infrastructure is not going to be a recipe for controversy, litigation and eventual bankruptcy? And, despite the storm of political positioning that followed the announcement, was the decision driven by regulators, or does it signal the beginnings of a drastic, permanent shift in the way the world buys, sells and uses energy?
No future for new pipelines
There’s a basic reality that seems to have eluded the number-crunchers behind projects like Energy East: One way or another, like it or not, the fossil fuel era is rapidly drawing to a close.
No one is suggesting that oil and gas consumption will fall to zero tomorrow, next week or even next year. But a new, multi-billion-dollar pipeline isn’t about today’s markets.
Such pipelines only have a purpose or a business case if its proponents can confidently anticipate steady demand through the middle of this century and beyond.
And while the last chapters of the fight against global climate change have yet to be written, there is no realistic outcome in which fossil fuels and pipelines have a future.
If the fossil fuel lobby and a climate-denying White House prevail, the broader industry will have to cope with an unmitigated increase in severe weather that will make the Fort McMurray wildfires and hurricanes Harvey, Irma, and Maria look like opening acts. The fossil fuel shutdowns during Harvey and the plausible talk of abandoning Gulf Coast refineries and other infrastructure are preludes for an increasingly unstable operating environment for pipelines.
The more hopeful and more likely scenario is that the momentum for deep, rapid decarbonization will continue to build, driven by the mounting urgency of the climate crisis and the relentless affordability and job-creating power of energy efficiency, renewable energy, electric vehicles and, increasingly, energy storage.
Either way, a fossil pipeline built today will be sold for scrap before the end of its operating life, quite likely before its backers have recovered their initial investment. Canada’s oil patch may be making a genuine effort to decarbonize the production process that would have put diluted bitumen into TransCanada’s pipeline. But the fate of Energy East — tripped up by the 235 million tons of life cycle emissions it would have enabled each year — shows the hollowness of that effort, given a full accounting of the industry’s climate impact.
A rocky road for fossil infrastructure
Climate change and a transforming energy sector are not the only business challenges facing pipeline developers. No survey of the business landscape for fossil fuels is complete unless it accounts for:
- A sustained oil price crash that is now entering its fourth year, with no realistic or guaranteed end in sight
- Uncertain demand for natural gas, with the resulting bargain basement prices in Asia
- Plans from more and more major jurisdictions — soon to include China — to eliminate internal combustion engine vehicles, further undercutting any future need for new pipelines or oil sands projects
- The growing ability of First Nations in Canada and tribal governments in the United States to delay or defeat proposed pipelines that would cross their territory
- Little or no social licence for new fossil projects that fail to meet the (legitimately) stronger regulatory requirements that were the death knell for Energy East
- Growing skepticism on the part of investors about fossil megaprojects, and enthusiasm about clean energy, based on both market realities and the need to align their supply chains and portfolios with their corporate responsibility goals
The National Energy Board eventually earned its keep on the Energy East file, with a decision to include real consideration of greenhouse gases in its review of the TransCanada application. Now it’s time for a wider dose of truth. And it’s up to political leaders at all levels to deliver it.
Canada will do much better with the coming energy transition when more of us understand that the fossil industry is entering a period of managed decline. That the transition to clean energy can create work for every unemployed Canadian twice over. That a deliberate drawdown of the country’s fossil economy could open a period of massive opportunity across the country, but not if we leave it to chance. And that Canada can’t be a global leader in climate solutions if it does not meet, and exceed, its inadequate Harper-era carbon reduction target.
The Energy East cancellation could be an important step along all of those roads. But we’ll miss the opportunity — and fail as a country in our climate obligations — if we don’t have some honest discussions about where the energy economy is going, and why.
Do you have something to say about the article you just read? Be part of the Policy Options discussion, and send in your own submission. Here is a link on how to do it. | Souhaitez-vous réagir à cet article ? Joignez-vous aux débats d’Options politiques et soumettez-nous votre texte en suivant ces directives.