If you’re a TransCanada Corporation (TSX:TRP)(NYSE:TRP) shareholder, you should be used to these kinds of stories by now.
On Monday, the Quebec government launched an injunction against the Energy East pipeline in an attempt to ensure the project complies with the province’s environmental laws. The move was quickly condemned by Saskatchewan premier Brad Wall as well as Brian Jean, leader of Alberta’s Wildrose Party. Alberta premier Rachel Notley took a more careful approach, preferring to “keep the gun in the holster.”
So what does this mean for the Energy East pipeline, and what does it mean for TransCanada?
Probably of little consequence
The Energy East pipeline does not fall under Quebec’s jurisdiction, or any other province’s for that matter. Rather, it is up to the National Energy Board (NEB) to recommend whether or not the project goes forward. Then it’s up to the federal cabinet to make the final decision.
And Quebec has not put up any real barriers to the project. Instead, the injunction is only “an attempt to have our laws and regulations respected,” to quote Quebec environment minister David Heurtel. Ms. Notley pointed out that Ontario did something very similar with this project.
How it could make a difference
Quebec’s actions still could have some implications. First of all, while this is a federal matter, provinces certainly can make their voices heard. This is something we’ve seen with Northern Gateway.
Secondly, we cannot forget that the B.C. Supreme Court nullified an agreement that granted the NEB power to review a pipeline proposal. Mr. Heurtel said this played a part in his decision.
Finally, let’s not forget that the Federal Government has the final say, and it will be inevitably swayed by political factors (for example, most people should agree that President Obama’s decision on Keystone XL was swayed at least in part by politics). The province of Quebec was very important to Justin Trudeau’s victory in the last election, and if enough of the province’s population opposes Energy East, then Mr. Trudeau could easily nix the project.
The implications for TransCanada
With a cost of $15.7 billion, Energy East is not insignificant for TransCanada. But the company has plenty of other projects to grow earnings.
In total, the company has over $14 billion of “visible near-term growth projects,” in addition to long-term projects such as Energy East. And even if TransCanada eventually runs out of projects, it can always return more cash to shareholders either through dividends or buybacks.
So it would be very silly to sell TransCanada just based on fears over Energy East. In other words, shareholders will be just fine.
