Radical regulators

Sept. 18, 2017
Radicalization of Canadian energy policy glows ominously under light cast from TransCanada PipeLines Ltd.'s request to delay action on its applications for the important Energy East Pipeline and a smaller project.

Radicalization of Canadian energy policy glows ominously under light cast from TransCanada PipeLines Ltd.'s request to delay action on its applications for the important Energy East Pipeline and a smaller project. The company said it needed to consider the ramifications of expanded environmental review by the National Energy Board.

The NEB on Aug. 23 said it would consider “upstream and downstream greenhouse gas emissions (GHGs)” as well as “the potential market impacts of GHG reduction targets embedded in laws and policies on the economic viability of the projects.” TransCanada on Sept. 7 asked the board for a 30-day suspension of its applications for the 4,500-km Energy East system, which would carry western Canadian crude to refineries and terminals in the East, and the 279-km Eastern Mainline gas pipeline in Ontario. The company said it wanted to review the NEB's move and its “implications to the projects and the respective project applications.”

Extremist tactic

What the NEB tried to portray as benign service to the “public interest” encompassing “a balance of economic, environmental, and social (including health) interests” in fact codifies a legal tactic used by extremists to block energy projects. In a recent example, the US Appeals Court for the District of Columbia last month overturned approval of three gas pipelines in the US Southeast when it agreed with the Sierra Club that the Federal Energy Regulatory Commission should have considered indirect GHG emissions in its environmental assessment (OGJ, Sept. 4, 2017, p. 24). If projects can be stymied because they transport materials that emit carbon dioxide when burned, pipelines can become impossible to build. That outcome would limit development of oil and gas resources in many places and represent a pinnacle achievement of antihydrocarbon activism. But to construe it as good for the public requires an alarmingly narrow accounting of interests at stake.

The NEB's accommodation of an agenda from the political fringe is regrettable but understandable. Its members have been in position only since January and might feel obliged to show independence. Their predecessors resigned after disclosure that two of them had met privately with a former premier of Quebec, who had a contract to consult for TransCanada. And they might believe they're fulfilling wishes of Liberal Prime Minister Justin Trudeau, who revels in the adulation global leaders exchange when they commit citizens' money to management of the climate.

Neither independence nor obedience, however, justifies indefensible decision-making.

The NEB strains Canadian federalism when it claims authority over greenhouse gases at the point of hydrocarbon extraction. Regulation of oil and gas production is a provincial responsibility. The NEB's TransCanada move looks like a power grab.

And the downstream expansion of NEB oversight is fanciful. A permitting authority can estimate the rate of emissions associated with a project with some precision. But those emissions are climatologically consequential only to the tiny extent that they contribute to accumulation of GHGs in the atmosphere. Estimating environmental risk associated with that phenomenon is dauntingly difficult, given complexity of the system and what remains unknown about mechanisms of atmospheric warming.

Two options

Logic therefore affords regulators assessing environmental consequences of GHG emissions from a single project only two options. They can decide that the emissions are so small, in relation to global inputs into an unpredictable system, that their climatological effect is nil. Otherwise, they must adjudge any incremental GHG emissions intolerable, reject the prospective source, and hope, if they care about effectiveness of their work, that many other regulators in many other places act similarly. NEB volunteered for this asymmetric choice. It didn't do so because it expects to find no environmental consequence of the subject pipelines.

When it rules against Energy East and Eastern Mainline, by either denying the applications outright or subjecting them to more costly delay, it will assert policy about energy choice. In such fundamental matters, energy consumers and their elected representatives, not regulators, should have first say and the last word.