Ontario Energy Board says Energy East pipeline risks outweigh benefits

The Ontario Energy Board says the environmental risksof the $12 billion Energy East pipeline project outweigh the
potential benefits, and warns it will drive up natural gas prices.

"What we have found is there is an imbalance between theeconomic and environmental risks of the project and the expectedbenefits for Ontarians," said OEB vice-president Peter Fraser as hereleased a report on Energy East.

TransCanada Corp. (TSX:TRP) is planning to build the pipeline tobring Alberta crude to refineries in Quebec and to a refinery andmarine terminal in Saint John, N.B. For two-thirds of the way, itplans to convert a natural gas pipeline for oil and then build allnew pipe throughout Quebec and New Brunswick.

After 15 months of consultations with people in communities alongthe route of the pipeline in Ontario, the energy board found peopleare worried about possible polluting of lakes, rivers and drinkingwater supplies.

"The top concern expressed was the risk of an oil spill as thepipeline runs new or across many waterways," said Fraser. "Ouradvice is that for the existing pipeline, when it is too close toenvironmentally sensitive areas, it should be rerouted unless it canbe justified by TransCanada as necessary."

The OEB report also said residents are rightly concerned theproject could drive up natural gas prices when existing pipeline isconverted to carry oil. The OEB's technical experts found there willbe higher natural gas prices as a result of Energy East becausethere will be less supply.

"They estimated that on average, over a 20-year period, in thewinter time, natural gas prices in eastern Ontario will be 11.9 percent higher than if Energy East did not go ahead," said Fraser.

Union Gas Limited said the OEB's conclusions were the same as itsown: Energy East will drive up the price of natural gas in Ontario.

"We want assurance that Ontario natural gas customers will notbear the costs and risks related to the Energy East oil pipeline,and we continue to be open to finding a satisfactory resolution ofthese issues with TransCanada," said Union Gas president SteveBaker.

The energy board said the benefits of construction of the EnergyEast project to Ontario would include a $12 billion to $19 billionimpact on gross domestic product and a full-time equivalent jobimpact of up to 114,000 positions.